Billion-dollar buffer in case the boats come back

The Abbott government has given itself a $900 million buffer against a "worst-case scenario" budget blowout if asylum seeker boats restart as the monsoon season ends.

Documents updated on the federal government’s contracts website Austender on Friday showed Transfield Services had secured a $2.11 billion contract covering a period of 19 months to provide “operational, maintenance and welfare support services for the Manus and Nauru RPCs [regional processing centres]”.

But on February 24, Transfield notified the Australian Stock Exchange it had been awarded a 20-month contract worth $1.22 billion to provide “garrison and welfare services” on Nauru and Manus Island.

It is understood the near doubling of estimated costs in the Austender entry is based on a theoretical "worst case" level of asylum seeker arrivals. Given recent experience of boats being turned back, it is unlikely Transfield will earn the extra $900 million from the government for its offshore detention centres.

Transfield has taken over services that had been provided by the Salvation Army and defence contractor G4S, the company involved in the Manus Island detention centre riot that resulted in the death of 23-year-old Iranian asylum seeker Reza Barati on February 17.

A Transfield spokesman said the company stood by its February estimate of $1.22 billion, which was based on current occupancy rates at the centres. After Transfield announced its contract to the market, shares in the company soared 21 per cent by noon, lifting Transfield’s market capitalisation by about $80 million.

“The value we released to the ASX [in February] is correct,” the Transfield spokesman said. “If you contact the Minister's office, they will be able to explain the difference.”

Immigration Minister Scott Morrison said: “The anticipated cost of these services, together with all other costs associated with offshore processing, will be included in the forthcoming budget.

“The posted contract sum represents a theoretical contract value. The company's estimate and figures to be contained in the forthcoming budget will provide a realistic estimate of the anticipated expenditure.”

Transfield was forced to withdraw as a sponsor of the Sydney Biennale arts festival last month due to its involvement in offshore processing of asylum seekers. Artists threatened to boycott the event because of Transfield’s involvement, forcing the company to sever its 40-year link with the arts festival.

Federal Arts Minister George Brandis promoted moves to block government funding for organisations that refused corporate sponsorship following the ''preposterously unreasonable'' termination of Transfield's sponsorship of the Sydney Biennale.

with Ben Butler, Lisa Cox

This story Billion-dollar buffer in case the boats come back first appeared on The Sydney Morning Herald.