Mike Pezzullo home affairs Paladin Manus Island scandal
Secretary of the Home Affairs Department Mike Pezzullo (Image: AAP/Lukas Coch)

Home Affairs secretary Mike Pezzullo and the bureaucrats responsible for administering Australia’s offshore detention regime would have been hoping yesterday’s defence of the Paladin contract at Senate estimates would have been enough to ward off the stench of scandal.

Instead, more questions have arisen about a department that seems unwilling to accept that there are any problems around its at-best slipshod approach to huge contracts.

This morning the The Australian Financial Review — whose coverage, led by Angus Grigg, has been excellent — provided a forensic fact check of the department’s claims yesterday. It noted, inter alia, that the bureaucrats expanded and contracted the Paladin group to suit their own purposes — when they wanted to portray it as experienced in providing services, the whole group was lumped into one organisation, but when they wanted to dissociate the department from a questionable individual, fine distinctions were made between subsidiaries and directorships.

The bureaucrats’ broader rationale for handing the contract to Paladin in the first place was that the PNG government had left them in the lurch by dropping plans to take over the provision of support services on Manus Island for asylum seekers and refugees. With no one to replace outgoing service provider Transfield, Home Affairs had to find a service provider urgently, when they would have preferred to have conducted a proper, and lengthy, open tender process.

Problems quickly emerged around that explanation when they later admitted that five firms had previously expressed interest in providing services — and Paladin may not have been one of them (that piece of information was conveniently taken on notice). This morning the AFR reported that Toll had expressed interest in providing services. The choice of Paladin now looks even more bizarre than before yesterday’s hearing.

But the problem with the broader explanation about the PNG government is one that reflects persistent problems within the department. The analysis by the Australian National Audit Office — at whom Pezzullo directed a snarky aside while being grilled yesterday — of the department’s bungling of previous offshore detention contracts has a recurring theme of poor risk management.

The issue might sound arcane to non-public servants, but risk management, along with evaluation, is supposed to be built into government programs and projects from the very outset, even before a dollar is spent. 

And Home Affairs is terrible at risk management. Time and again the ANAO pinged the department for not doing proper risk management for the Nauru and Manus Island offshore detention programs, or when they developed “risk management plans” the plans existed on paper only — the actual tasks associated with anticipating and dealing with risks weren’t carried out.

That’s partly understandable given the extreme haste with which the then-immigration department had to re-establish offshore processing. The Gillard government, in a panic about the asylum seeker issue, wanted the centres re-opened ASAP, and didn’t much care how it was done. It’s hard to blame the bureaucrats for not following every little aspect of best practice in procurement when the government is demanding the tents be set up yesterday.

But 2017 was not 2012. Home Affairs knew that Ferrovial, which had acquired Transfield, wanted out from the offshore processing contracts. It knew it had options to extend the Transfield contract to, at the very latest, October 2017 (which ended up coinciding with the closure of the detention centre on Manus). It also knew — or should have known — that PNG was due for an election in mid-2017, and that the election could drag on, or be the subject of a constitutional dispute, as it had in 2012.

From a risk management perspective, it was a no-brainer — there needed to be a strategy to mitigate the risk that PNG would not be able to take over services.  The strategy turned out to be a combination of asking Transfield to stay as long as it could be contractually forced to, and hoping something would turn up if the foreseeable risk that the PNG government couldn’t appoint a services provider eventuated.

And while Pezzullo was yesterday expressing his wish that they could have had time to conduct an open tender process, his department did conduct a full-blown open tender process for offshore detention services across 2015. They managed to bungle it so badly that the department’s own probity adviser intervened at the very end in December of that year to point out that the awarding of a contract to Transfield would be a major breach of the Commonwealth Procurement Rules.

A few months later, in 2016, the whole process was killed off. Pezzullo might have preferred a proper tender process than the one that delivered Paladin. There’s no evidence his department is capable of running one.