Home Affairs faced questions over the controversial deal at a Senate estimates hearing on Monday.
Home Affairs officials have defended awarding a contentious $423 million Manus Island security contract to a little-known company called Paladin.
Paladin, whose Australian arm was registered to a beach shack on Kangaroo Island, won the lucrative federal government contract through a restricted tender process.
The company was reportedly given the tender 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 needed to "move quickly" to fill the contract after a detention centre on Manus Island shut down in October 2017.
Asylum seekers and refugees were shifted to alternative accommodation sites on the island.
"When we needed to move quickly, they were a company we approached," Mr Pezzullo told a Senate estimates hearing in Canberra on Monday.
Home Affairs officials said the number of tenders were limited because companies approached were worried about the "noise" of being associated with the Manus Island contract.
Instead, the department essentially asked Paladin for a quote.
Mr Pezzullo said the various allegations levelled against Paladin were "in some parts not consistent" with information available to his department.
Before winning the contract, Paladin had sub-contracted on Manus Island since 2013, and has been involved in other federal government work.
Home Affairs deputy secretary Cheryl-anne Moy said the department was looking for somebody with experience in PNG and remote service delivery, as well as an understanding of regional processing.
Paladin had sub-contracted on Manus Island since 2013 and were involved in other federal government work.
"They understood the environment and we asked if they would be able to undertake these services," Ms Moy said.
"To date, we're quite happy with the services that they're undertaking."
PNG's Immigration Minister Petrus Thomas said the contract was entirely a matter for Australia.
"PNG has no say over who is awarded these contracts and sub-contracts and the value of these contracts," he said in a statement.
Earlier, Labor senator Murray Watt said the department had serious questions to answer.
"I think the very biggest question to be answered is how on earth this tiny, unknown company with no track record ever gets $423 million in contracts from the Australian taxpayer," he told ABC radio.
Immigration Minister David Coleman said the contract was a matter for the Department of Home Affairs.
"They (tenders) are run by the department and not by ministers," he told reporters in Canberra.
"My understanding is that is the case for all of these sorts of contracts and they are subject to the usual rules, including audit rules of the commonwealth and so on, and the department has stated quite clearly that it's followed all of those correct rules."
Home Affairs Minister Peter Dutton has previously said he had no line-of-sight over the tender process.
However, Opposition Leader Bill Shorten said the contract was 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.
"Well, hello, Peter, you are the minister. If it's not your department, whose is it?"