Paladin was the only company approached by Home Affairs for the work and was given just six days to lodge its costings with the department after a PNG-run tender process collapsed in mid-2017.
It gained notoriety by having until recently a beach shack on South Australia’s Kangaroo Island as its Australian head office. But Home Affairs officials told a Senate estimates hearing in February that the department had been mostly happy with Paladin’s performance.
Mr Hehir’s audit team will also examine an $82 million contract to politically connected PNG landowner company NKW Holdings to feed and house asylum seekers on Manus Island. This works out to be about $1400 per day for the 209 men at West Lorengau Haus and Hillside Haus.
NKW counts a former PNG Supreme Court judge turned political candidate for the ruling People’s National Congress as a director.
Leaked documents from within PNG’s biggest bank, Bank South Pacific, obtained by The Age and The Sydney Morning Herald raised concerns that its client, NKW, may have been inflating invoices to Home Affairs.
The documents also revealed NKW was on Bank South Pacific’s “watchlist” for unpaid debts and referred to the Home Affairs contract as a “financial lifeline”.
NKW was contracted by Home Affairs just days after it cancelled a similar contract with Toll International at a cost to Australian taxpayers of $9 million.
Another $385 million contract with Brisbane company Canstruct International to provide garrison and welfare services on Nauru could also be captured by the new Auditor General’s probe. Canstruct faced no competition for this contract.
A construction company, Canstruct has sub-contracted Wilson Security to provide security services on Nauru since 2017.
But Canstruct’s contract expires this month and Australian and Nauru government officials have been negotiating a new arrangement which has a Nauru company take responsibility for security services.
Paladin’s former chief executive Craig Coleman has been working with the Nauru government to help it establish its security operation. The funds from Australia for the new security contract will be one of the main sources of revenue for Nauru.
Mr Neumann welcomed Mr Hehir’s decision to agree to his requests for an audit into the offshore processing contracts, saying it demonstrated the transparency and accountability expected by Australian taxpayers.
“This is over half a billion of taxpayers’ dollars that the Liberals called a ‘distraction’ and have tried to sweep under the rug – they now have nowhere to hide,” Mr Neumann said.
Previous Auditor-General reports have been scathing of Home Affairs’ oversight of security contracts for processing centres in PNG and Nauru.
A 2016-17 audit found major contractors were able to write off $112 million a year as “pass through costs” for incidental expenditure without having to provide adequate documentation to the department.
Richard Baker is a multi-award winning investigative reporter for The Age.