Paladin, whose Australian arm is registered to a beach shack on Kangaroo Island, won the lucrative federal government contract through a restricted tender process.

The global 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 needed to "move quickly" to fill the contract after a detention centre on Manus Island shut down in October 2017.

The PNG government had indicated they could not provide security for asylum seekers and refugees who remained on the island, so it fell to Australia to find a contractor.

"When we needed to move quickly, they were a company we approached," Mr Pezzullo told a Senate estimates hearing in Canberra on Monday.

"We were dealing with an urgent situation, but were never desperate in doing so."

Home Affairs officials said the number of tenders was limited because a handful of major companies approached were not interested in applying.

The companies were worried about the "noise" of being associated with offshore processing on Manus Island.

Instead, the department asked Paladin for a quote.

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."

The value of the contract is comparable to previous agreements.

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.

Meanwhile, Mr Thomas confirmed the visa of one Paladin director was cancelled because the company was not adhering to the PNG government's position on hiring local labourers and security staff.

Home Affairs Minister Peter Dutton has previously said he had no line-of-sight over the tender process.

Mr Pezzullo backed this up, saying the minister had no power to choose providers, particularly given the Paladin contract was granted using "special measures" due to a lack of applicants.

Even still, Opposition Leader Bill Shorten says the contract is 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?"

Australian Associated Press