(Image: Zennie/Private Media)

The federal government is negotiating with a US private prison provider to run offshore processing on Nauru while paying it more than $550,000 a day to begin the work in the interim.

The Department of Home Affairs signed a letter of intent with US multinational Management and Training Corporation (MTC) in early August for “facilities, garrison, reception services in Nauru”. The controversial company is set to replace Canstruct in running regional processing services on Nauru, where just over 90 asylum seekers still live in the community. 

While the federal government is continuing to negotiate with MTC, it has already paid it nearly $74 million in less than six months to begin taking over operations on the island. These contracts have now been referred to the auditor-general with concerns surrounding due diligence and lawsuits regarding MTC’s operations in the US.

Canstruct was paid more than $1.8 billion from 2017 to 2022 for garrison and welfare services on Nauru.

MTC runs 21 prisons and immigration detention centres in the US, and operates the Parklea Correctional Centre in NSW. It has been accused of “gross negligence” and “egregious security” failures in civil lawsuits in the US. And a report from the NSW prison inspector also recently found “concerning” rates of incidents and a “deficit” in mental health services at the Parklea prison.

MTC has said many of the Parklea report recommendations were implemented before the report was tabled, and other initiatives have been introduced to reduce assaults.

The company is also being investigated by the Texas state auditor and Texas Department of Criminal Justice for allegedly engaging in fraudulent conduct and pandemic profiteering. MTC has denied the allegations.

The MTC work does not involve detention as no one is in the Nauru detention centre. All asylum seekers live among the community.

Asylum Seeker Resource Centre director of advocacy and campaigns Jana Favero said MTC’s new contract, worth nearly $70 million alone, was “outrageous and unfathomable”.

“This is a rotten policy being held up by a rotten company,” Favero told Crikey. “It’s irresponsible and inappropriate that a company which is shrouded in controversy, without an official contract and with just a letter of intent is given a pot of $69 million to keep people offshore — people who sought safety in Australia.

“The only humane situation would be to evacuate all the remaining refugees rather than pumping tens of millions of dollars to a new provider where there’s no oversight or transparency over what services are being provided.”

Home Affairs originally issued a tender in October 2020 for an “enduring operating model” for regional processing on Nauru. No preferred tenderer was identified from this process, and in December 2021 it issued a limited tender for facilities, garrison, transferee arrivals and reception services.

MTC’s first contract for the Nauru work was worth $4.7 million and ran from early August to the end of September. It then landed a two-month contract worth $47 million for the same work.

Just two days before Christmas, the federal government gave MTC a two-month extension on this contract worth a further $22 million. The total contract, worth just under $70 million over four months, is now being eyed by the auditor-general after Greens Senator Nick McKim referred it to the watchdog.

In referring the contract to the auditor-general, McKim questioned whether Home Affairs had undertaken due diligence on the company, and if procurement guidelines were followed.

“Some or all of these allegations were known to, or should have been known to, the Department of Home Affairs at the time it decided to enter into or extend arrangements with MTC Australia,” he said in a letter to the auditor-general.

The auditor-general is considering whether to launch an inquiry into the contract.

Home Affairs said the procurement process has followed the commonwealth procurement rules and its own “robust governance framework”.

“The Department of Home Affairs is finalising procurement processes for regional processing capability services to support the government of Nauru,” it said.

Favero welcomed the contract’s referral for an audit: “We welcome any investigation into a moral and financial black hole that is pouring money into offshore processing.”

Crikey has approached MTC for comment.

Should all refugees be evacuated from Nauru? Let us know by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.