WHAT IS THE STORY WITH THE AFR?

WHAT IS THE STORY WITH THE AFR?

Recently the Australian Financial Review (AFR) has written about Paladin based on information released in August 2019 as part of a Senate request for documents held by the Department of Home Affairs.

It is the prerogative of the AFR to interpret public information in any manner they like. However, to provide some much needed balance to the AFR assertions it is important a few more facts are tabled.

Performance Management

The PNG Services Contract held by Paladin incorporates a significant performance management review process. Over the term of the contract more than 730,000 events have been evaluated, of these 3700 alleged non-compliance issues were found (99.50% compliance). To be clear non-compliance does not mean an activity was not undertaken or was not completed satisfactorily. Most instances of non-compliance related to administrative shortfalls in providing the supporting documentation that confirmed the physical delivery of services had occurred.

In some articles the AFR has misinterpreted the facts despite identifying the symptom, never the cause. A range of documents have highlighted challenges in securing visas for expatriate managers to allow specific training to occur, visa issues are not uncommon for companies operating in PNG. The problem of visa access had nothing to do with “experience or expertise” as asserted by the AFR, Paladin was the longest serving sub-contractor on Manus and its training systems were more than sufficient for the task. A more than 99% compliance rate for the full array of services is very good for such an environment and reinforces the competence Paladin brought to the task; but you will never read that in the AFR.

Internal Audit Report

The AFR has focused on an internal review undertaken by Ernst & Young on the Contract processes, the 47 page report is contained within over 2700 pages of documents; publicly available through the Australian Parliamentary website. These points are unlikely to be found in the AFR articles:

  • Based on Internal Audit’s review, no instances of non-compliance were noted in relation to payments made to Paladin Holdings PTE Ltd by the Department (i.e. payments have been made in accordance with the conditions of the Letters of Intent and contract).
  • Internal Audit has assessed that the Department has complied with the Commonwealth Procurement Rules (CPRs), including those sections that relate to value for money; efficient, effective, economical and ethical procurement; procurement method and procurement risk.
  • The Department asked Paladin to participate in a thorough User Acceptance Testing protocol, testing all appropriate clauses within the contract and schedules for the contract with Paladin Holdings PTE Ltd. The level of detail requested is an atypical approach to UAT but, considering the risk profile of the contract, Internal Audit considers this appropriate and was an example of better practice to apply the additional level of scrutiny that the Department did to ensure the services were being appropriately provided.
  • The Department has maintained sufficient and appropriate evidence to demonstrate compliance with its contract management policies, procedures and framework.
  • Internal Audit found that the Department’s procurement team produced a Risk Management Strategy and Plan for its procurement process with Paladin Holdings PTE.
  • The Department undertook a detailed value for money assessment which was approved by the relevant officials in the Department and considered as part of the High Risk/High Value Procurement process that the Department has instituted. Internal Audit notes that this process was undertaken in a very short timeframe with significant time pressures.
  • The Department have managed the sub-contractors in accordance with the Departments guidelines and processes.

Supporting Local Companies

Paladin has worked on Manus Island since 2013. In 2014 Paladin and a customary landowner in East Lorengau, Peren, signed a Memorandum of Understanding (MOU) to work cooperatively. A number of MOUs have been signed with Peren representatives subsequently. The AFR have sought to tarnish the reputation of both parties through innuendo yet these agreements replicate similar undertakings made by Australian companies with indigenous groups throughout Australia on a regular basis. Why shouldn’t Australian companies engage with and employ people from customary landowner groups in PNG?

A number of years after the initial MOU was established Mr Job Pomat, a senior member of the Peren Clan, was elected to the PNG Parliament. Mr. Pomat is a distinguished Manusian and he was not involved in commercial activities. Again, the sequence of establishing the MOU and Mr. Pomat’s subsequent election is not clarified in news reports.

Paladin has worked hard to make sure a number of small to medium PNG businesses have benefited from work on Manus; many unrelated to the customary landowners. 15 smaller, local, sub-contractors provide transport, facilities maintenance and support to the community engagement program. 11 larger, mainly PNG, contractors provide more significant support such as waste management, accommodation and security services.

The AFR conceded in September 2019 that “… the Manus facility provided some local employment…” In reality thousands of Manusians are employed either directly or indirectly supporting the Manus facility. This level of employment is not going to be easily replicated.

Financial Assessment

The AFR has consistently quoted a third party financial assessment of Paladin written before the contract was awarded. It is alleged, by the AFR, that Paladin posed a “moderate to high risk” – which in any sense is a broad assessment of financial capacity; although this is not explicitly stated in the publicly available document.

What is made clear in the publicly available document is this “While this presents a risk, there are a number of potential mitigation strategies that Paladin could use to manage the working capital requirements. For example, Paladin could use a working capital loan facility to manage the working capital requirements”.

The next question in reviewing a commercial risk by experienced managers should centre on mitigation strategies and if implemented, what residual risk exists? Subsequently, what has unfolded given the AFR’s well documented concerns? For Paladin tax obligations have been addressed, dozens of lease and supplier obligations are fully met monthly, and fortnightly wage obligations for more than 1000 employees have been met consistently.

Contract Discussions

On two occasions the AFR have raised questions about the contract negotiation discussions. In a 200+ page contract, 40 clauses were subject to questions of clarification posed by Paladin. In most contract negotiations of a commercial nature it is sensible to lay out concerns and confirm the customers interpretation of clauses and potential outcomes. The AFR has twice focused on one query raised by Paladin concerning unforecast fees that could have been levied. Why not seek advice from a contracting authority, anyone with commercial experience would understand this? Subsequently, the matter was dealt with quickly and both parties finalised the negotiations.

Fact check.

In July 2019, while pursuing the ex-PNG PM, the AFR resurrected a discredited Port Moresby rumour dating back to 2016 that contended the PNG PM had an ownership interest in a local security company. To support this theory the AFR pointed to the fact that the security company in question, now owned by Paladin, had secured the majority of the PNG Government contracts for the 2018 APEC Conference.   To be factually correct the majority of the PNG Government contracts for APEC were undertaken by a different company and in terms of the potential benefit gained – the invoices for the limited work undertaken by the Paladin subsidiary for APEC remain unpaid.

Twice in September 2019, the AFR have published a figure for Paladin abatements for December 2018 of more than AUD2m, the December 2018 abatement was AUD27,000. Over the same period the AFR published a photo of the Paladin office in Canberra, at the time of publication the purported office had been vacated by Paladin four months earlier at the end of the lease.

An AFR Editorial in September 2019 postured that the appointment of Paladin was an own goal for the Australian Government in the Pacific. In an emotive weekend column the AFR neglected to demonstrate any depth of understanding of the services provided by Paladin asserting the facility on Manus was neglected based on one incident – no mention of the work required to maintain a sophisticated waste treatment plant, the maintenance of generators providing continuous power for lighting and air conditioning or the provision of IT services that are well above regional standards.   Of course, making a mockery of the AFR’s assertion is the fact that numerous parties are vying to takeover the same facility after our departure.

WHAT DOES THE PALADIN GROUP DO?

The Paladin Group works with communities, governments, large multinational organisations, not-for-profit and private companies across the Asia Pacific delivering essential support services in complex environments.

Paladin has an outstanding track record in the region as an ethical provider of security, safety, risk management, community engagement and garrison services with significant expertise in working in partnership with local communities.

We have a highly qualified board of directors with a depth of experience in delivering complex projects in challenging environments, both in the government as well as private sectors. We have more than 4,500 employees across the Asia Pacific region and our partnership model is built on the participation, training and mentoring of local staff and landowners to achieve stability and prosperity.

WHO IS ON THE BOARD OF THE PALADIN GROUP?

Paladin is very proud of the experience and expertise we have gathered in the company and our record of integrity and high standards, which is why we have in place a Board that collectively has more than 100 years of experience working across the public sector, military service, police and private business in challenging and complex environments across the globe.

Click here to read more about our board of directors.

HOW DOES PALADIN GROUP WORK WITH LOCAL LANDOWNERS?

Our partnership model is built on the participation, training and mentoring of local staff and landowners to achieve stability and prosperity. We have a long and proud history of creating joint ventures and local partnerships and employ a 1,200 strong majority local workforce who are trained to international standards in security.

For example, in PNG we have a long-running and successful partnership with local landowners Peren Investments. As part of our Build-Operate-Transfer model we recently expanded the share ownership with our joint venture partner in security firm Ponwan Paladin and now proudly have a 50/50 ownership structure, another example of our ongoing commitment to our company values and philosophy.

WHAT IS YOUR COMMUNITY ENGAGEMENT APPROACH ABOUT?

At Paladin we believe in a community engagement approach to implementing projects.

The build-operate-transfer model is a core part of Paladin’s philosophy and involves partnering with local communities to build a project, operating the project in partnership and transferring skills and knowledge followed by transferring ownership to achieve enduring prosperity and positive legacies. For employment this means more national labour, for investment, this means leaving behind companies and skilled workforces after the project has been completed.

HOW DID PALADIN DEVELOP ITS COMMUNITY ENGAGEMENT APPROACH?

A critical aspect of the work we do at Paladin is our unique community security model. We have used expertise from a range of industry experts to develop our community engagement strategy. One of the experts was Dermot Casey a former senior public servant who retired from the Australian Public Service in 2013 and has had an extensive 40 year career in public administration. He subsequently joined Paladin’s Board of Directors in May 2019.

Paladin is very proud of the experience and expertise we have gathered in the company and our record of integrity and high standards, which is why we have in place a Board that collectively has more than 100 years of experience working across the public sector, military service, police and private business in challenging and complex environments across the globe.

WHAT OTHER BUSINESSES MAKE UP THE PALADIN GROUP?

Paladin is a leading provider of project support services in the Asia-Pacific region.

We have an outstanding track record as an ethical service provider in the region delivering across a broad range of complex, remote, large-scale, high-risk projects and operations.

Paladin Group is made up of the following businesses:

  • Black Swan – Security services in PNG
  • ECM – Electrical construction and maintenance support in PNG
  • Sentinel – Security services in Timor Leste
  • Rentlo – Transportation in Timor Leste
  • ECM Greater Monaro

HOW LONG HAS PALADIN BEEN OPERATING ON MANUS ISLAND?

Paladin is the longest serving contractor operating on Manus Island, and has been delivering services relating to this project since 2013. Our approach to working in Manus has been to go above and beyond a compliance mindset and adhere to the highest standards when it comes to security, safety and risk management for residents, staff and the communities we operate in.

WHAT IS THE NATURE OF YOUR WORK ON MANUS ISLAND?

Paladin is not in a position to comment publicly on any matters relating to our work on behalf of the Australian Government in Papua New Guinea due to the terms of our contract. What we can say is that our number one priority is the safety, security and wellbeing of our staff, the communities in which we operate and the people in our care.

WHAT DOES BLACK SWAN DO?

Black Swan is a premier security company that provides services to leading government and corporate clients in PNG. Black Swan prides itself on adhering to the highest possible operating standards and ethical practices and expects its staff to always act in accordance with the highest standards of respect towards staff, residents and the communities in which we serve.