Prime Minister Scott Morrison and Immigration Minister David Coleman recused themselves from cabinet discussions on the issue because of their long personal and professional relationships with Scott Briggs, who was previously leading one of the bids.
Mr Briggs quietly vacated his role with one of the bidders earlier this year amid ongoing scrutiny of the costly tender.
Mr Briggs was heading the bid by Australian Visa Processing – a consortium consisting of Ellerston Capital, PwC, Qantas Ventures, NAB and Pacific Blue Capital – while the other bid was a joint proposal between Australia Post and Accenture.
The tender process was being managed by the department.
Mr Tudge said the work the department had done in recent years to modernise its visa services would now be extended to other areas.
“The Department of Home Affairs has consequently terminated the Request for Tender process for its proposed Global Digital Platform,” he said.
Mr Tudge said the department would now conduct a market consultation process over the coming months seeking insights into the best way to deliver “large-scale workflow processing capability” for visa and citizenship applications, as well as customs and personnel security clearances.
“While current visa systems continue to function, they are out of date, and processing and decision making in many cases is still undertaken manually, supported by old technology and limited risk assessment capabilities,” he said.
“With this approach, systems and capabilities will be well-placed to meet future demands, enabling the government to respond to emerging global threats and improving service delivery across government.”
Under the government’s visa outsourcing plan, private companies would have been involved in processing certain “low-risk visas” to improve efficiency and reduce costs.
Opponents of the scheme said the changes would have damaged the integrity of Australia’s visa and citizenship system and increase the costs to applicants.
Anthony is foreign affairs and national security correspondent for The Sydney Morning Herald and The Age.