Operator accused of ‘gross negligence’ wins $420m contract to manage Australia’s offshore processing on Nauru

The controversial US private prisons operator running Australia's offshore processing regime on Nauru has been handed a $420m Australian government contract to run 'garrison and welfare' on the island for three years, managing fewer than 70 people.

The Australian arm of Management and Training Corporation (MTC) was awarded the contract despite a string of scandals in the US.

A Guardian investigation revealed that MTC has been accused of "gross negligence" and "egregious" security failures in its operation of private prisons, including failings alleged to have allowed the gang-rape of a woman in detention, the murder of two retirees by escaped prisoners, and the months-long solitary confinement of a US citizen wrongfully held in immigration detention.

Separately, it has paid millions to settle lawsuits in which it has been accused of bribing US state officials for contracts.

The company is also facing a fresh complaint in Texas - made just one month after it struck a preliminary deal with Australia - that alleges it engaged in fraud and "pandemic profiteering". MTC strenuously denies the allegation.

MTC has been responsible for 'garrison and welfare' for asylum seekers and refugees held by Australia on Nauru since October last year, but began work before a final contract was signed with the government.

The contract was publicly posted to the government's Austender website on Friday, detailing a three-year deal for $421,830,424.60, which will run until 30 September 2025.

The contract states the company is responsible for "facilities, garrison, and reception services in Nauru" as part of Australia's offshore processing regime for asylum seekers who arrive in Australia by boat.

There are between 65 and 70 people immured on Nauru at present, down from a peak of 1,200. The current cohort lives in the Nauru community, but cannot leave the island. The Australian-controlled detention centre is empty but on standby for future arrivals.

And the number of asylum seekers and refugees held by Australia on Nauru continues to decline significantly, with people brought to Australia for medical treatment, while others have been resettled in the US and New Zealand.

At the current rate - based on 65 people - it is costing Australian taxpayers more than $2.1m each year to hold a single person on the island. That 'per person rate' will increase dramatically as more people leave. No new asylum seekers have been sent to Nauru since 2014.

The home affairs department did not answer a question from the Guardian asking whether MTC's contract would be altered if the number of people under its aegis reduced substantially, or if every asylum seeker and refugee was moved off the island.

The previous contractor on Nauru, Canstruct, earned $1.8bn over five years working on Nauru.

The total cost of Australia's offshore processing regime - on Nauru and in PNG - since it was reinstated in 2012, is estimated at nearly $10bn.

The auditor-general is considering launching a formal inquiry into MTC's contract after Greens senator Nick McKim requested an investigation, arguing "some or all of the allegations [against MTC] 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".

McKim described the $422m contract as "obscene".

"Offshore detention has been a decade-long humanitarian calamity which has wasted of billions of dollars of public money, and this new contract just adds to the unnecessary expense and suffering," McKim said.

Jana Favero, director of advocacy and campaigns with the Asylum Seeker Resource Centre, said Australia's offshore processing regime was a "moral and financial black hole".

"The economic cost of offshore detention, while appalling, is not comparable to the mental and physical costs. Since 2013 there have been 14 deaths as a result of offshore detention and a series of serious abuses, including child sexual abuse, medical negligence and high levels of self-harm.

"Keeping someone in these conditions for one day would be a national shame. Yet the government has chosen to burn through billions of dollars to keep thousands of people who came to Australia to seek safety in these conditions."

Graham Thom, Amnesty International Australia's refugee coordinator, questioned why MTC was selected, given its track record, and what its role on the island was.

"Is it there to provide some type of assistance for the few asylum seekers and refugees who will remain? And if so, why do you need $422m to do that? It's an extraordinary amount of money to do that."

"On what basis does the company have the skills and experience in dealing with vulnerable people who have been held on the island for 10 years, to look after them in the community. We haven't seen any evidence that they have those skills."

MTC declined to comment, directing questions to the department of home affairs. A spokesperson for the department said the Australian government had finalised its procurement process in signing the three-year contract with MTC.

"The procurement was undertaken in accordance with the Commonwealth procurement rules and the department's robust governance framework. Value for money has been achieved in selecting MTC Australia, noting price is not the only factor when assessing value for money."

The spokesperson said MTC Australia was "required to deliver services consistent with Nauru legislative requirements and in a manner that preserves individual human rights, dignity and the well-being of transitory persons".

MTC has previously issued a statement strenuously denying the latest allegation against it in the US, which is being investigated by the Texas state auditor.

That complaint alleges the company defrauded Texas by making prisoners sign falsified documents signalling they participated in treatment programs during the pandemic, when they had not done so.

"We look forward to cooperation with the [Texas state department of corrections] and Texas State Auditor to disprove the allegations and affirm the consistent quality of MTC programming across our facilities, including during the pandemic," a spokesperson said.

Nauru remains Australia's sole offshore processing centre, after the detention centre on PNG's Manus Island was ruled unlawful and ordered to be shut down by that country's supreme court, costing Australia $70m in compensation paid to those illegally detained.

Nauru and Australia signed a memorandum of understanding in 2021, committing to an "enduring form of offshore processing" on the Pacific island state, and the Labor government has committed to maintaining an offshore processing capability.