Is Transfield Services' $1.22 billion contract value for our money?

Is Transfield Services' $1.22 billion contract value for our money?

Hard questions need to be asked about the costs behind Transfield Services asylum seeker contract.

The recent news that Transfield Services has been awarded a $1.22 billion contract to manage the Manus Island and Nauru detention centres for a period of 20 months raises a number of interesting and important questions which will almost certainly not be answered by the Immigration Minister Scott Morrison or his department. The questions are, nevertheless, worth asking.

Transfield won the contract over G4S, the company that managed these facilities until March 1 this year. Other companies competing for such contracts are Serco, which has the contract to run the Christmas Island detention centre, and Toll Holdings, a global company which describes itself as "an integrated logistics provider" and is contracted to provide kitchen services at the Manus Island centre.

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Credit:Nick Moir

These four private companies have together been awarded more than $5.6 billion worth of work by the Department of Immigration in recent years. The contract of present interest, however, is that awarded to Transfield.

Contracts for the private management of prisons or detention centres are nearly always clothed in secrecy under the rubric of "commercial in confidence" and therefore it is somewhat surprising that the basic facts of this contract have been made available to the public.


However, the details of what Transfield is required to do for the $1.22 billion have not been made known.

It would be useful to know, for example, whether the contract is based on the known numbers of detainees or whether it will be varied when (the almost inevitable) increases in numbers occur. I assume that Transfield is not expected to participate in the processing of asylum seekers as their central task is to provide "garrison and welfare services" to both detention centres.

It is relatively easy to find out the actual numbers of detainees being held in each of the detention centres. At the end of January this year, there were 1353 detainees in the centre at Manus Island, all of whom were men, while at Nauru there were 1012 detainees, comprising 621 men, 259 women and 132 children. The overall total for both centres therefore was 2365.

If one assumes a steady state with no increases in the numbers of detainees over the 20-month period, the cost per detainee per day can be readily calculated as approximately $846, a figure which is considerably higher than the daily costs of a prisoner in either private or public prisons in Australia.

It equates to more than $300,000 per year per detainee. Clearly, more information will be needed if one is to understand the basis for this remarkably high and seemingly excessive figure.

One possibility is that the government officials at the federal level have not acquired the skills and experience that are to be found in the state officials who have responsibility for drawing up contacts for private prisons. At the state level it is not widely recognised that Australia has proportionately more of its prisoners in private prisons than any other country in the world.

One consequence of this is that obtaining contracts to run private prisons is highly competitive, and successful bids are always lower than the equivalent costs of prisons run by governments. I know that occasionally government officials have been faced with the dilemma of whether or not to accept bids that are so low that they may not be viable over the contract period.

The central issue is not only money, but is the detailed statement of the requirements of the contracts themselves. All contracts for the management of private prisons in recent years have included penalty clauses for failure to meet required standards.

For example any death in a private prison (other than a death which is determined by a coroner to be the result of natural causes) will result in an automatic financial penalty of $100,000.

Similar penalties will also be incurred for escapes and discharges which have been found to be the result of error. Lesser penalties are also specified for failure to provide adequate work and education opportunities, medical care, hours out of cells, excessive drug use, and food standards. Private prison managers expose themselves to a higher standard of accountability than could possibly be required of the managers of government prisons.

It seems clear that contracts for the management of detention centres at the federal level do not impose such stringent requirements. I believe that Department of Immigration officials would benefit from seeking the advice and assistance of state bureaucrats responsible for preparing contracts for the management of private prisons.

An ironic aspect of all of this is that the same security companies are bidding for contracts at both levels. All are there to make money, but all of them can be professional in their work practices. The key to their work practices as well as their ethical behaviour can be found in the fine print of the contracts they have signed.

The underlying question here is whether or not Australian taxpayers are getting value for money with contracts like that awarded to Transfield Services. I would also be interested to know if the Australian government has a Plan B that it could implement if the Papua New Guinea Supreme Court rules in the next few weeks that the Manus Island detention centre must close as it is violating the PNG constitution.

I expect that at least some of my readers will react to what I have written here by asking what I would do to solve the problem. That's a fair question, but it will take at least another opinion piece for me to spell out the beginnings of an answer.

David Biles is a semi-retired criminologist who lives in Canberra. For 15 years he was retained as an adviser to one of the largest private prisons companies in Australia -

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