The Auditor General said taxpayers did not get “value for money” on the multimillion-dollar Manus Island contracts by a company with $6 million revenue.

The 77-page report found Australia had spent $7.1 billion on its offshore processing centres in Nauru and PNG since 2012. In PNG the cost per refugee was about $450,000 each year, based on calculations by the Financial Review.
While the report found the departments overall management of garrison services was largely appropriate, it singled out the Paladin contract for criticism.
It noted Paladin was able to significantly bump up the size of its contract, after increasing the scope of services to include two additional locations and said the value for money benchmarks were “not appropriate”.
Following the completion of negotiations, the parties agreed to a revised [initial] contract value of $229.5 million, representing an overall increase of $77.4 million, the Auditor-General said.
It said Paladin had initially proposed a profit margin of 40 per cent, four times larger than the industry average identified by the department as part of the Nauru procurement process. This was reduced to 22.5 per cent.
“The Auditor-Generals report paints a much different picture of Paladin than Peter Dutton and the Government has tried to claim,” said Kristina Keneally, Labor’s spokeswoman on home affairs.
The Auditor-General also noted the financial strength assessment on Paladin was conducted on the wrong entity. It said the letter of intent was signed with Paladin Solutions PNG but the final contract was signed with a Singapore-registered entity Paladin Holdings PTE Ltd.
That meant for the entity which held the actual contract, an assessment was not carried out.
The report revealed the departments chief financial officer had raised concerns about Paladin’s financial strength.
This contract represents a significant step up in size for Paladin which represents a high risk for the Commonwealth, the CFO said noting the proposed $152 million contract was 25 times larger than Paladins recorded revenue of $6 million.
This, the CFO said, highlighted the significance of the upscale required to fulfil the contract, pointing out that the reported $2 million line of credit looks to be insufficient under the circumstances.
The contract size was subsequently increased to $229 million, 38 times Paladins highest recorded revenue. It would eventually total $532 million.
The department could not provide evidence on how, or if, the CFOs concerns were addressed,” the Auditor-General said.
The Auditor-General said the department did not explain why it requested quotes from just three selected providers for the contracts on Manus Island.
It said Home Affairs was aware of 11 providers that could have offered the required services. Paladin was awarded its contract without a competitive tender.
The Auditor-General also said it was not clear if the contracts were effectively negotiated and raised concerns about a conflict of interest that was not properly managed as well as a failure to benchmark costs.
Documents previously released to the Senate suggested Paladin was fined more than a 1000 times for “performance failures” on Manus Island.
Paladin was fined 5484 times for total penalties of $5.8 million between May 2018 and October 2019, the Auditor-General’s report said.