Home Affairs Minister Peter Dutton has accused Labor of using a $423 million contract handed to a little-known security company to provide services on Manus Island as a "distraction".
Paladin, whose Australian arm is registered to a beach shack on Kangaroo Island, won the lucrative federal government contract through a restricted tender process.
Mr Dutton said Labor hadn't queried a cent of more than $15 billion of coalition government spending on border protection until it passed a bill making medical transfers easier for asylum seekers in offshore processing.
"This week when they are under pressure for passing a law that's going to bring in people of bad character, all of a sudden they've got an interest in this $400 million," he told Sky News on Tuesday.
The minister, who was not responsible for signing off on the contract, said procurement guidelines had been followed.
"There are probity lawyers all over these decisions and processes, all of that has been followed," he said.
Opposition Leader Bill Shorten has described the awarding of the contract as scandalous.
"Peter Dutton yet again at the centre of an incompetency scandal - handing out $423 million and then saying 'it has nothing to do with me, it's my department'," he told reporters in Canberra on Monday.
The company reportedly won the deal despite not having enough money to start the contract and its founder having a history of bad debts.
Home Affairs secretary Michael Pezzullo said his department had needed to "move quickly" to fill the contract after a detention centre on Manus Island shut down in October 2017.
Mr Dutton backed claims from departmental officials that companies were worried about being associated with offshore processing on Manus Island.
"Many of the companies who would otherwise be interested in these contracts have been hounded out because of the activists here have mounted campaigns online," he said.
Multinational giant Toll Holdings was interested in bidding to provide services on Manus Island, the Australian Financial Review reported on Tuesday
Mr Dutton said Paladin were providing "many services" under the $20-million-a-month agreement.
"This is a major distraction for Labor in their minds, but people see through it."
