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BFCSA: Morrison WASTING Money. Government paid $9m after scrapping Manus project

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Money for nothing: government paid $9m after scrapping Manus project

Australian Financial Review Mar 10, 2019 11.45pm

Lisa Murray, Angus Grigg, Jonathan Shapiro


The federal government abruptly cancelled a building project on Manus Island costing taxpayers almost $9 million just three weeks before the Home Affairs Department awarded the little-known Paladin group a controversial security contract now worth $423 million.

In a decision described as "bizarre" by one person involved, Toll Group was contracted to build extra accommodation at the East Lorengau Refugee Transit centre on Manus but the project was suddenly abandoned on September 4, 2017, just as staff were preparing to fly to the island.

The decision came around the same time as Home Affairs was conducting a closed tender for the garrison services contract at the refugee centre, which was awarded to Paladin. The department said the commercial arrangement with Toll was not linked to Paladin, but both contracts have raised concerns about the effectiveness of its procurement practices.

Two people who made preparations for the Toll project said the day it was cancelled, two planes were on standby to take three dozen staff, construction equipment, portable toilets and kitchenettes to the island. An accommodation barge was also en route to Manus as there was nowhere else to house staff.

One source said Home Affairs officials had been insistent the project go ahead as quickly as possible. However, a "high-level meeting" a few days before staff were due fly out resulted in the project being cancelled. Suppliers and subcontractors were told to submit invoices for the work. According to two suppliers, these were paid in full.

A spokesperson from Home Affairs said the arrangement with Toll "was terminated, as there was no further need for the services". They said "the Department paid costs consistent with the commercial arrangement" without giving further details.

The AusTender websites shows the contract was worth $8.99 million and was awarded under a closed or "limited tender" process.

Government filings shows "limited" or closed tenders are becoming increasingly common at Home Affairs, even though such arrangements are designed to only be used in exceptional circumstances.

Sarah Percy, an associate professor at the University of Queensland, said there had been a "huge swing towards secrecy" within the department particularly for any policies or information regarding asylum seekers arriving by boat.

"They are operating in a culture where it's OK to keep the details secret," she said.

While Home Affairs said the Toll commercial arrangement was not related to the Paladin contract, sources with direct knowledge of the matters said the logistics company was preparing a bid for the garrison services work.

In March 2017, one source said, Toll had been collecting information to help with its bid. That was just six months before Home Affairs engaged Paladin without seeking any other bids.

The department has used limited tenders on at least six occasions totalling $1.17 billion for contracts to provide services for refugees on Manus Island and Nauru.

The most controversial of these was the $423 million awarded to Paladin, but similarly large contracts have been handed to other service providers.

Privately owned Queensland firm Canstruct International has won $591 million worth of contracts for refugee services on Nauru since October 2017. Home Affairs said the limited tender was justified as "no submissions met minimum content and format requirements".

It also awarded an $82 million contract, under limited tender, to PNG land holder company NKW Holdings.

Home Affairs told The Australian NKW was awarded the contract "due to their experience in the industry in delivering site management and facilities management services".

A limited tender worth $44 million was also given to JDA Wokman for "provision of settlement services in PNG", while $21.5 million was paid to Pacific International Hospital under a similar arrangement.

A limited tender is typically used when the government is buying advanced technology and there is only one supplier in the market or when there is not sufficient time to conduct an open process.

"Open contracting processes exist for a reason," said Ms Percy from the University of Queensland.

"I don't think those should change when dealing with politically delicate contracts. Indeed they need to be even more above board and available for scrutiny.

"[The Home Affairs Department] doesn't want to draw attention to the problems they are having administering Manus Island so they have driven the process underground."

Home Affairs officials said during Senate Estimates hearings last month there was a lack of time to conduct an open tender for the Paladin contract, as the PNG government in early July reversed its decision to take over the centre and run the tender process.

The Department said it was therefore scrambling to ensure services were in place when Broadspectrum (previously Transfield) finished their contract on Manus in October 2017.

Broadspectrum had told the federal government more than a year in advance that it did not wish to continue as the main service provider for refugees on Manus and Nauru.

A spokesperson for Toll declined to answer questions about the cancelled contract.

"Toll Group is a global provider of logistics solutions to government and Defence and we have a number of contracts in place to service the Department of Home Affairs," they said in an emailed response. "It is company policy that we do not comment on specific contractual matters."



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