Home Affairs rebuked over Paladin's $532m contract

The Auditor-General has rebuked the Department of Home Affairs for handing little-known security company, Paladin, a $532 million refugee services contract on Manus Island, saying taxpayers did not receive "value for money".

In addition it said no explanation was provided as to why Paladin was awarded the contract in Papua New Guinea, ahead of other interested parties.

The Auditor-General was asked to review the federal government's offshore processing contracts by Labor after an investigation by The Australian Financial Review showed Paladin got the contract without an open tender, had no experience with major contracts and was headquartered at a beach shack on Kangaroo Island.

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.

The Auditor-General also noted the financial strength assessment on Paladin was conducted on the wrong entity.

“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 Paladin’s recorded revenue of $6 million.

The contract size was subsequently increased to $229 million, 38 times Paladin’s highest recorded revenue.