Mr Grant Hehir
Auditor-General
Australian National Audit Office
Urgent via email: grant.hehir@anao.gov.au

Dear Auditor-General,

I write regarding my letter dated 19 February 2019 for an urgent audit into the circumstances surrounding the Department of Home Affairs' procurement of garrison support and welfare services in Papua New Guinea.

My initial request was in light of significant concerns related to the companies contracted to provide these services - particularly letters of intent with Paladin Solutions Group and a subsequent contract with Paladin Holding Pte Ltd.

The letters of intent and contract has resulted in the expenditure of $423 million of taxpayers' money.

I note media reports from today that the Department of Home Affairs has instigated their own external audit to be undertaken by Ernst & Young – with the seven-week audit that commenced on 4 March set to cost the Australian taxpayer some $125,000. This of course should in no way obviate the need for the ANAO to conduct a full and independent audit around the awarding and management of the Paladin contract.

I now draw your attention to further concerning reports today by The Age, regarding the company NKW Holdings, which can be found here. These highly concerning reports relate to an $82 million contract between the Department of Home Affairs to the politically connected Papua New Guinea company NKW Holdings - with the company reportedly inflating invoices, while making millions of dollars in profits.

According to these reports, the contract to feed and house some 209 asylum seekers at the West Lorengau Haus and Hillside Haus in PNG equates to $1400 per person per day and appears to have exposed Australian taxpayers to huge unnecessary costs imposed by a company that was on Bank South Pacific's 'watch list' for unpaid debts.

I also bring to your attention a cancelled contract with Toll to extend the East Lorengau Transit Centre resulting in a payout of $9 million of taxpayers' money.

As part of my referral, I have attached a series of emails on which these reports were based and draw particular attention to the following portions including:

• - "Appears the Australian Government has thrown our Watchlist Client, NKW Holdings Ltd, a much needed lifeline";
• - "I assume you'll be approaching cautiously in light of what happened last time in Manus";
• - "Australian Department of Immigration and Border Protection are paying every invoice - I suspect there are some inflated quotations & invoices."

Given these developments, I ask that my initial request for an urgent audit regarding procurement of garrison support and welfare services in Papua New Guinea be expanded to ensure any contracts with NKW Holdings or affiliated bodies be included in any such audit, in addition to the Department's cancelled $9 million contract with Toll.

Labor is acutely aware of the current Government's abysmal management of Australian-funded regional processing centres and their failure to negotiate other third country resettlement options, leaving vulnerable people languishing in indefinite detention.

In light of what appear to now be numerous and serious shortcomings in procurement processes that point to the potential systemic mismanagement of contracts related to offshore processing under Home Affairs Minister Peter Dutton and his department, I have also copied this correspondence to the Secretary of the Department of the Prime Minister and Cabinet, Dr Martin Parkinson.

I am concerned that consistent examples of serious maladministration in this area – combined with the Minister's refusal to address these matters – will impact more broadly on community confidence in the APS's capability to manage public monies with due diligence and probity.

Yours sincerely,

Shayne Neumann MP
Shadow Minister for Immigration and Border Protection
Federal Member for Blair
14 March 2019

Cc           Dr Martin Parkinson, Secretary, Department of the Prime Minister and Cabinet

Mr Grant Hehir
Auditor-General
Australian National Audit Office
Urgent via email: grant.hehir@anao.gov.au

Dear Auditor-General

I am writing to request an urgent audit into the circumstances surrounding the Department of Home Affairs' procurement of garrison support and welfare services in Papua New Guinea.

In the course of the past week, the Australian Financial Review has highlighted significant concerns related to the companies contracted to provide these services — particularly letters of intent with Paladin Solutions Group and a subsequent contract with Paladin Holding Pte Ltd.

The letters of intent and contract has resulted in the expenditure of $423 million of taxpayers' money.

The original letters of intent with Paladin Solutions Group were undertaken under section 2.6 of the Commonwealth Procurement Rules  — with the Department of Home Affairs using these provisions to approach Paladin Solutions Group directly — and Paladin Solutions Group only.

At Senate Estimates yesterday, Department of Home Affairs officials claimed that they were "dealing with an urgent situation" when they signed an initial letter of intent with Paladin Solutions Group in September 2017 —  with letters totalling $89 million.

The Secretary of the Department of Home Affairs told the Senate Estimates committee, "my very strong preference would have been to have a long lead time, an open tender, a global search, assisted by specialised consultants and advisers."

Despite this preference, a subsequent contract worth $333 million awarded to Paladin Holding Pte Ltd was signed on 28 February 2018 with no other providers considered — despite reports today indicating that other companies, such as Toll Holdings, were considering bidding.

The ANAO's report 32 of 2016-2017 titled Offshore Processing Centres in Nauru and Papua New Guinea: Contract Management of Garrison Support and Welfare Services concluded that the Department had "fallen well short of effective contract management practice."

This report was a damning indictment of the Department's management of these contracts and stated:

• contracts "were established in circumstances of great haste to give effect to government policy decisions";
• "the Department did not put in place effective mechanisms to manage the contracts"; and
• "contract variations totalling over $1 billion were made without a documented assessment of value for money."

Labor is acutely aware of the current Government's abysmal management of Australian-funded regional processing centres and their failure to negotiate other third country resettlement options, leaving vulnerable people languishing in indefinite detention.

Given the level of expenditure associated with these contracts, the Government's poor track-record, and the concerning reports and allegations related to the entities involved, I seek your urgent investigation of the circumstances surrounding these contract arrangements.

I would be happy to discuss this issue at your earliest convenience.

Yours sincerely

Shayne Neumann MP
Shadow Minister for Immigration and Border Protection
Federal Member for Blair
19 February 2019