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In December my colleague Amy Remeikis revealed that the Department of Home Affairs extended a contract for civil maritime surveillance for six years, just months after a critical report found it had paid for flight time when no planes were in the air.

The auditor general in October 2021 found the department’s management of the contract with Surveillance Australia was “not effective” and “as a result, while surveillance services have been provided, the quantum and range of those services has fallen short of the contractual requirements”.

That included not having actual planes in the air for billed surveillance flight times, which the audit office estimated cost taxpayers up to $87m.

The contract was extended for another six years with very little variation just three months after the auditor general’s report. The contract, now worth $2.6bn to the company, has not been put to tender since it was first awarded in 2006.

Today the department’s secretary, Michael Pezzullo, fronted the audit committee to discuss the issue, conceding that he does not think it is acceptable there had been no competitive tender in 20 years for the contract.

Instead, there had been “market sweeps” to survey whether other providers could give the same capability before the contract was extended.

Pezzullo said the “best practice” would be an investment approach in which the department had guaranteed funds for capital, allowing it sufficient certainty to run a full tender process.

Pezzullo said the department is “faced with the devil’s choice” of losing operational capability or rolling over existing contracts.

He said:

When there’s no competitive process for 21 years we’re in a loop … there’s no competitive process because there’s no capital program.

Pezzullo said without more capital investment, the government would be forced to deal with a “monopoly provider” of an “outsourced capability” or it would face the “darker” possibility of not flying surveillance aircraft.

Surveillance Australia acted within the terms of its contract, and Guardian Australia is not suggesting it acted improperly.

Pezzullo said the department does not “necessarily agree” with the ANAO’s conclusion, arguing the report’s criticism related mainly to 2008 to 2017 and procurement has improved since then.

He said the report “ does not adequately consider the outcomes based nature of the contract, or the complex and dynamics, civil maritime security operating environment in which the contract itself operates”.