Watchdog criticises procurement around detention centres

8 June 2020

Australia’s Department of Home Affairs (DHA) has been accused of failing to secure value for money for taxpayers in the procurement of garrison support and welfare services for an offshore immigrant detention centre in Papua New Guinea.

A report by the Australian National Audit Office (ANAO) said DHA’s procurement of services for the controversial Nauru and Manus Island facilities mostly complied with Commonwealth Procurement Rules.

But the report said the DHA had failed to fully document reasons for requesting quotations from three of its potential suppliers via a limited tender.

A full tender process could have attracted 11 potential providers capable of supplying many of the same services.

In 2017 DHA signed contracts with Paladin, JDA Wokman, NKW Holdings, and Canstruct International Pty, for garrison support and welfare services for the offshore immigration centres.

Canstruct was paid $1.1bn, Paladin received $532m, NKW received $136m, and JDA received $77m.

Garrison support includes security, cleaning and catering services while welfare services include recreational and educational activities.

The audit found the DHA received value for money for the Nauru procurement but it took issue with the Manus Island contracts.

“Although the department had limited options for comparing tender costs, most of the benchmarks it used were not appropriate,” said the report.

“The effectiveness of negotiation for Paladin was unclear as savings achieved for some items were offset by increases to others, the addition of a mobilisation payment and the department’s substantial expansion of the services required during the negotiation process.”

A probity management framework had not been effectively applied in all instances, contractor performance reporting and monitoring was described as “partly adequate”, and there was a failure to manage or acknowledge an existing conflict of interest.

“A departmental officer had multiple roles during the procurement process and the conflict of interest resulting from this was not acknowledged or addressed,” said the ANAO.

DHA needed to develop policy guidance to ensure that where a limited tender procurement is undertaken, decisions to receive requests for quotation are properly documented.

It also needed to ensure that where letters of intent are issued to contractors pending the finalisation of contracts, interim performance reports are prepared when necessary.

While the department accepted these recommendations it rejected criticism of its negotiation processes.

“In relation to the PNG procurements, the department is of the view that negotiation processes were appropriate, in light of the changed sovereign nation’s operating model, the significantly restricted timeframe and the constantly changing operating environment,” it said.

“As part of the procurement process, a probity management framework was developed for these procurements requiring each departmental officer involved in the procurements to complete a conflict of interest declaration at the outset of the procurement and declare any further real or perceived conflicts of interest that eventuate during the procurement process.”

In 2017 the ANAO criticised Australia’s detention centres after it found the government spent $1bn on the regime without any authorisation.

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