Home Affairs says it had no option but to award a contentious $423 million contract for services for refugees on Manus Island – partly because other companies didn’t want the “noise”.

Senate estimates on Monday heard the department has no concerns about its contract with Paladin, despite serious allegations published against the company in The Australian Financial Review.

Allegations include that Paladin is registered to a beach shack on Kangaroo Island and that the founder has a string of bad debts.

“What is reported in the media is in some parts not consistent with the reality of our records and what we understand to be our engagement with Paladin as a global group,” Home Affairs Secretary Mike Pezzullo said.

He said the department approached Paladin directly to urgently ask for a quote to deliver services.

Former contractor Broadspectrum was exiting the island in October 2017 with the closure of the processing site, when hundreds of refugees and asylum seekers were moved into three different centres on the island.

Estimates heard PNG was expected to take responsibility for procurement but pulled out, leaving the department with just months to find a new contractor to provide security and garrison services.

A normal tender process would take about 12 months, and the department used special measures to contact Paladin directly.

Mr Pezzullo described that as “the least desirable option”.

The department had previously run a tender process, but few companies were interested because of the damage associating with the Manus Island centre could cause to their reputation.

“The number of people that replied to those tenders was limited, and primarily the people who decided not to tender who expressed some interest early on and then decided they wouldn’t tender gave us the reason there was too much noise for their organisations and companies, international companies, around regional processing,” said Home Affairs deputy secretary of corporate and enabling group Cheryl-Anne Moy.

She said the department was satisfied with Paladin’s performance.

Allegations include that the Paladin company director is facing money laundering charges in PNG.

Estimates heard that director is from PNG-based Paladin Solutions – the company the government signed four letters of intent with worth $89 million – not the Singapore-registered Paladin Holdings, which signed the final contract with Australia.

Home Affairs said it became aware of the criminal charges through media reporting in PNG.

The contract itself is worth $333.55 million, plus the $89 million paid with letters of intent that take it to a total of $423 million.

So far $242 million has been paid, with the contract lasting until June.

The department said it is the Australian subsidiary registered to the Kangaroo Island beach shack as opposed to the contracted company.

Paladin’s head office was reportedly relocated to a serviced office in Canberra last week.

Paladin had never previously been contracted by Home Affairs, but had been a subcontractor at the Manus Island centre since 2013.

Home Affairs said Paladin had provided services in the Asia-Pacific region since 2007 and PNG since 2009.

Papua New Guinea responded to the reports in a statement on Monday, with the country’s Immigration Minister Petrus Thomas saying contracts have always been Australia’s responsibility and fall under Australian rules.

#PNG’s Immigration Minister has issued a statement on Paladin. #auspol pic.twitter.com/0IV5zxqg6a

— Natalie Whiting (@Nat_Whiting) February 18, 2019

“PNG has no say over who is awarded these contracts and subcontracts and the value of these contracts,” Mr Thomas said in a statement supplied to the ABC.

“The PNG has maintained its position that as long as there is one person remaining in PNG under the RRA [regional resettlement arrangement], the Australian government will continue to provide the financial and other necessary support until the last person is resettled or returns home. This position has not changed.”

The minister confirmed the visa of one of the company’s directors was cancelled because the company was not adhering to the government’s position on recruiting local labour.

Senate estimates also heard the total value of the contract at $423 million over 18 months is comparable to the previous contract with Broadspectrum of about $342 million for 12 months.

Home Affairs Minister Peter Dutton has said he had no line of sight over the tender process, which was backed up in estimates by the department.