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Brisbane company worth just $8 when awarded $385m Nauru offshore processing contract

A Brisbane construction company had $8 in assets and had not commenced trading, when it was awarded a government contract – ultimately worth $1.6bn – to run Australia’s offshore processing on .

The contract was awarded after the government ordered a “financial strength assessment” that was actually done on a different company.

Canstruct International Pty Ltd had eight $1 shares in assets in 2017, company filings show, when the department of home affairs asked accountants KPMG to assess it for its ability to “provide garrison and services” for more than 1000 refugees and asylum seekers on Nauru.

Since then the contract – originally worth $385m – has been amended seven times without competitive tender. The contract now totals $1.6bn. With just over 100 asylum seekers and refugees still held on the island after eight years, it now costs more than $4.3m each year – more than $350,000 a month – for each person held.

KPMG reported its pre-contract financial strength assessment was conducted on Canstruct International Pty Ltd: but the government, after twice having to correct its evidence to the Senate, has since confirmed the assessment was actually undertaken on another company, Canstruct Pty Ltd.

Both companies are associated with Queensland’s Murphy , however the minister for home affairs has confirmed its contract provided no recourse to Canstruct Pty Ltd should Canstruct International fail to meet its obligations under the contract.

In 2016, the previous manager of the Nauru offshore processing facility, Broadspectrum (formerly Transfield), was taken over by Spanish company, Ferrovial, which announced it did not want to continue working on the island beyond its contract expiring in October 2017.

Canstruct Pty Ltd had previously been involved in building the detention centre on Nauru and was invited to provide the department of home affairs with a quote to take over the running of the offshore operation.

In August 2017, at the request of the federal department, accounting firm KPMG undertook a financial strength assessment of Canstruct International Pty Ltd.

While the document produced by KPMG states it is an assessment of Canstruct International Pty Ltd – rating it a “moderate-high financial risk” to take on the contract – the department of home affairs has confirmed the financial documents KPMG assessed were those of Canstruct Pty Ltd. Canstruct International Pty Ltd had not commenced trading at that time.

“The financial strength assessment of Canstruct was undertaken for Canstruct Pty Ltd for the years ending 31 December 2014, 2015 and 2016 and not across all Canstruct company holdings, or Canstruct International,” the minister for home affairs, , said last month in answers to Senate questions on notice.

“The department would not have recourse against entities other than Canstruct International,” Andrews said when asked what the government could do if Canstruct International defaulted on its contract.

“A contingency plan was not developed. However, if the department had found Canstruct unsuitable at any point during the procurement process, it would have reviewed its options.”

Shadow home affairs minister said the Morrison government and the department of home affairs had questions to answer over its handling of the Canstruct contract.

“No matter how you look at it, the government handed a $1.6bn contract without a competitive tender to a shelf company – after the department of home affairs paid KPMG to conduct due diligence on the wrong company.

“It looks like this company got the deal of the century from the Liberal government: its owners risked $8 of their own money and, in return, they have now received over $1bn of taxpayers’ money.”

A spokesperson for home affairs told Guardian Australia: “the department does not have any concerns regarding the financial capacity of Canstruct International Pty Ltd. The department continues to be satisfied with Canstruct’s performance and its ability to deliver key services in a dynamic and complex operating environment”.

The spokesperson said the department had cooperated fully with an Australian National Audit Office assessment which found the procurement and management of garrison and welfare services on Nauru was “largely appropriate”.

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KPMG and the Canstruct group both declined to answer detailed questions about the contract’s provisions, why an unrelated company was assessed, or why KPMG’s report stated it was an assessment of Canstruct International Pty Ltd. Both cited contractual restrictions.

“We are unable to comment on contractual matters with the Australian government,” a spokesperson for Canstruct said. “The Canstruct Group has been operating successfully in Nauru since 2012 and continues to provide a high quality of service under the contract.”

Canstruct’s contract on Nauru has attracted public attention, and forensic questioning in the Senate.

Canstruct was first hired to help construct the Nauru detention centre under the Gillard Labor government. Under the Turnbull Coalition government it won its initial contract to run offshore operations on the island.

The Canstruct group, or entities associated with it, have made 11 donations to the Liberal National party in Queensland.

The cost to Australian taxpayers per month to hold a single refugee or asylum seeker on Nauru

No refugees and asylum seekers have been sent to Nauru since 2014. It remains Australia’s only offshore processing island, after the centre on Papua New Guinea’s Manus Island was ruled illegal by that country’s supreme court.

In September, the Australian government signed an agreement with the government of Nauru for an “enduring” offshore processing regime on the island.