If The Business Lobby Wants To Fix The Budget It Can Start With Its Own In The Detention Industry


A national audit office review of offshore detention spending continues to highlight the lunacy – and cost – of locking up men, women and children on faraway islands. Max Chalmers explains.

In the age of the on-again, off-again “budget emergency”, not everyone benefitting from the state’s largesse is asked to live within their means when the time comes for spending cuts. Just ask Tony Shepherd.

Two weeks after releasing its investigation into the supply of medical services in onshore detention centres, the Australian National Audit Office has followed up with a second document poking into the contracts awarded to manage garrison and welfare services in Australia’s offshore centres on Manus and Nauru.

The Office’s first effort revealed that the confidence senior Coalition Ministers have projected about the state of healthcare in detention doesn’t hold up to closer scrutiny. It depicted a network of detention centres in which those incarcerated are caught between a bureaucracy set on finding savings and a private contractor with a profit imperative.

In such a setting, real life health outcomes appear to have become a secondary concern.

On first reading, the second instalment is a somewhat drier affair, delving into whether the Department received value for money when contracting companies to run the centres on Nauru and Manus.

new matilda, nauru
Final approach, flying into Nauru. (IMAGE: Tatters ❀, Flickr)

Compare that to the harrowing scenes of abuse unearthed in the Nauru Files and it’s tempting to ask who really cares. The central moral question when grappling with allegations of torturing children is not ‘how much does it cost’.

And yet the document fleshes out an interesting example of the style in which this government has gone about fixing the supposed emergency that helped push reluctant Australians to hold their noses and vote for Tony Abbott in 2013.

Tasked with chairing Abbott’s 2014 Commission of Audit, former Business Council head Tony Shepherd led a team that recommended a serious winding-back of the country’s safety net in ways that would have increased health-costs for low income earners, upped education costs for university students, frozen schools funding, pushed back the age of retirement, dumped thousands of public employees from the workforce, and forced the unemployed to move in order to find work.

Extraordinarily, and indicative of its business slant, the Commission of Audit not only argued that the poor should have to move for the sin of not being able to find work, it also suggested the minimum wage be constrained. This at a time when workers are being left behind by wage stagnation while even some conservative thinkers are changing their minds about the need for government intervention in the economy.

Four days before the Audit’s release, Shepherd gave his final address as the President of the Business Council of Australia. He said he was proud of the Audit, and bemoaned the lack of “education” among the broader public about the task at hand.

“Perhaps the biggest challenge right upfront is having the community come to terms with the seriousness of our situation and accept the need for reform,” he said.

The Manus Island refugee camp.
The Manus Island refugee camp.

Despite the outcome of his Audit, Shepherd does not quite fit the mould of the ideologically driven razor-gang austerity chief. Last year he backed changes to super and capital gains concessions, a move that would close loopholes for wealthy and put money back into the budget by an effective tax increase. He also told the Herald in 2014 that he believes in a strong public education system and does not want Australia to follow the US’s lead.

But for all the talk of efficiencies and tough choices in government spending, Shepherd’s former company, Transfield, has done very well off generous government contracts, not least of which have been those involving offshore detention.

While Shepherd was still Chairman of Transfield, the company was awarded the contract to provide services to the hastily re-established Nauru detention centre in 2012. In a mad fit of disastrous on-the-run policy making, Transfield managed to score a sweet deal as Labor and the Department of Immigration dashed to re-establish the island camp.

“The available evidence indicated that potential suppliers were not always treated fairly or equitably — in engaging Transfield to undertake services in Nauru, the department set aside an earlier approach to Serco without an opportunity to negotiate. The department did not require Transfield to provide a proposal which specified the services delivered and costs, prior to offering Transfield the work,” according to the National Audit Office report.

As that line indicates, the Office puts much blame at the feet of the Department, recommending it tighten its processes.

For their part, the Department and Minister Peter Dutton went through the usual motions after the report’s release, trying to pin the blame on Labor. It’s true that there is plenty to go around, but the effort to pass the buck is becoming more and more absurd every year, not least because the report has detailed criticisms right up to the present. At some point, you would presume, the Coalition is going to have to admit that it won government in 2013 and come up with a slightly better response.

Minister for Immigration, Peter Dutton.
Minister for Immigration, Peter Dutton.

The upshot for Transfield was that it was awarded lucrative contracts without having to fully compete with other, potentially cheaper, competitors. Shepherd departed Transfield on October 23 in 2013, but the company’s good fortune in bidding for offshore contracts continued.

When the Department of Immigration decided to consolidate the contracts for Nauru and Manus Island into a single agreement, Transfield was the big winner, engaged through a “limited tender procurement” that, according to the Office of Audit, “placed the department in a position where it removed competition from the process at the outset.”

Transfield put forward a price higher than expected, and far beyond that charged by rival G4S.

This drew the attention of the National Audit Office as the Department had in fact been asked to reduce the per-head cost of detaining people offshore – what with the budget emergency and all. Yet under the consolidated contract, the cost of detaining each person increased from $201,000 to $573,111 per year. There’s never been a more expensive time to lock people up on tropical islands.

In a subsequently botched tendering process, the Department named Transfield as the preferred tenderer in an open process, only for it to back away after the company’s initial bid turned out to be $1.1 billion less than its final price.

This record looks all the more uncomfortable when you consider that Shepherd’s Commission of Audit recommended offshore processing contracts be renegotiated to find efficiencies – a renegotiation from which Transfield won big again.

There’s no way Shepherd could have known that would happen. The Department of Immigration had planned to consolidate the contracts before Shepherd’s Commission of Audit was released, and tightening the contracts could have just as easily squeezed Transfield as helped it prosper. Shepherd had divested himself of his Transfield Services shares before joining the Commission of Audit and notified the government of his previous position at Transfield (which, of course, they would have been well aware of anyway).

While there is no suggestion of impropriety, Shepherd’s leap from the side profiting from detention to the side fighting to curtail government spending highlights the absurdity and shortcomings of the latter endeavour.

In spite of its deficit dilemma, the Turnbull government has opted to cut corporate tax rates in an economic gamble certain to help business, but with questionable outcomes for everybody else, and only a distant benefit in the best case scenario.

Prime Minister Malcolm Turnbull.
Prime Minister Malcolm Turnbull.

That means more spending cuts now, and the Business Council responded enthusiastically to the news the government had reached a deal with Labor to pass an omnibus $6.3 billion saving deal this week. Business Council chief executive Jennifer Westacott urged the government to continue in the same fashion.

“This will require all parties to engage constructively on significant re-design of major expenditure programs,” she said.

This is the same group that crowed at the repeal of the carbon tax and the resource rent tax, measures that would have helped plug the deficit without cutting the safety net.

Under its new owner Ferrovial, Transfield – now rebranded as Broadspectrum – is moving away from offshore detention. But if those like Westacott and Shepherd really want to help the government balance its books, they could do worse than looking a little closer to home, at the companies happy to join calls for government spending cuts while living off the largesse of the state.

Until then, the detention of refugees will remain cruel, expensive, and highly profitable.


Max Chalmers is a former New Matilda journalist and editorial staff member. His main areas of interest are asylum seekers, higher education and politics.