Canstruct has lost the lucrative contract to run Australia’s offshore immigration regime on Nauru with the Brisbane firm to be replaced by a US-headquartered private prisons operator that has a controversial past.
Sources have told the Guardian that Canstruct’s current contract, set to end on 30 September, will not be renewed and from 1 October “facilities, garrison, transferee arrivals and reception services” will be run by Management and Training Corporation (MTC) Australia.
Canstruct’s rolling contracts over five years – worth a total of $1.82bn – have been the subject of intense scrutiny for the high cost of running offshore processing despite a diminishing number of detainees.
No new asylum seeker arrivals have been sent to Nauru since 2014 but the cost of running the regime has remained between $35m and $40m a month. The number of asylum seekers and refugees held on Nauru has fallen from more than 1,000 to about 100.
According to official government figures, the cost to hold a single refugee on Nauru in 2021 was more than $4.3m annually.
Canstruct’s original 2017 contract worth $385m was amended eight times without competitive tender and eventually totalled $1.82bn.
Canstruct declined to comment citing contract confidentiality restrictions. The Guardian understands the company did tender to extend its contract but was not selected.
The company nominated as the “preferred tenderer” to take over – MTC Australia – is the Australian arm of the private prisons company. No contract has yet been signed. MTC did not respond to a series of questions.
The company’s website states it runs 23 job corps centres, 21 correctional facilities, 11 prison and detention medical departments and five detention centres around the world, including Sydney’s Parklea Correctional Centre.
But the company has a controversial record. Three correctional officers were charged over the alleged assault of a detainee at Parklea in July. The three officers are due to face court later this month.
In the US, MTC faces an ongoing lawsuit over the detention of a US citizen held in near-solitary confinement for 14 months. The complaint alleges “solitary confinement is a form of torture” and notes the United Nations prohibits prolonged solitary confinement which can constitute torture.
The lawsuit, filed in California, alleges that MTC was a company that “traffics in human captivity for profit”. The case remains active before the court. MTC did not respond to questions about the case.
In 2015, the Arizona governor Doug Ducey cancelled MTC’s contract after a state department of corrections report into a riot at Kingman prison found the company had “a culture of disorganisation, disengagement and disregard for state policies”.
A 2018 trial in Mississippi, brought by the American Civil Liberties Union and the Southern Poverty Law Center, heard allegations the MTC-operated East Mississippi Correctional Facility was so “violent that it shocks corrections experts”.
The case alleged prisoners were denied mental health treatment, overmedicated using tranquillising anti-psychotic drugs, and held in solitary confinement for “days, and sometimes weeks, without being permitted any out-of-cell time”. MTC denied the claims and the court ultimately found conditions at the East Mississippi prison had improved between the lodging of the case in 2013 and judgment in 2019, ruling in favour of the defendants.
In 2019, MTC paid the state of Mississippi $5.2m to settle a bribery case without admitting wrongdoing. Mississippi alleged MTC defrauded the state by engaging in “a conspiracy scheme” involving “bribery kickbacks, misrepresentations, fraud, concealment, money laundering and other wrongful conduct”. The scheme allegedly involved paying bribes to state officials in exchange for contracts with the department of corrections.
The Australian arm of MTC is wholly owned by two subsidiaries in Utah, where the company is headquartered.
A spokesperson for the Department of Home Affairs said there would be “no degradation of services” provided to asylum seekers and refugees on Nauru who would “continue to receive health, welfare and accommodation support”.
“Regional processing in Nauru continues to stand ready to receive new unauthorised maritime arrivals.”
In March this year, Australia accepted New Zealand’s longstanding offer to resettle refugees from Nauru in New Zealand. Those transfers have not yet started.
Nauru and Australia have signed a memorandum of understanding, committing to an “enduring form of offshore processing” on the Pacific island state. Australia’s other offshore detention centre, on Papua New Guinea’s Manus Island, was illegal and ordered shut by PNG’s supreme court.
Ian Rintoul, a spokesperson for the Refugee Action Coalition, said the new federal government “should be shutting down Nauru”.
“They should take this opportunity to end offshore. It has been a shocking experience, a shocking waste of money, a shocking waste of lives. The mistreatment that has come out of Nauru has been absolutely horrendous and should end.”
• This article was amended on 17 August 2022 to remove Queensland’s Borallon Correctional Centre from the list of facilities operated by MTC. It formerly ran the centre, but no longer does so.
