• What is Corrections hiding over the Wiri PPP?

    by  • May 9, 2013 • Articles, Comment • 0 Comments

    For well over a year now, I’ve been asking the Department of Corrections to give me its two full business cases for building the new public private partnership (PPP) prison at Wiri in South Auckland. And for well over a year, it’s been refusing. So the question is, why’s it holding things back?

    The reason I want to see the business cases it that they set out the key numbers around the prison. In particular, they compare the cost of building the prison under a PPP (in which a private company designs, finances, builds and operates the prison for around 30 years) as against the normal way.

    What often happens with PPPs is that they get delivered to the price that the government agreed … but only after the private company concerned has managed to get the price lifted during or before negotiations.

    PPPs are also more expensive because it costs private companies more money to borrow than it does the government, so they have to make that up with “efficiencies” elsewhere – which can be genuine or they can involve cutting corners.

    So I want to know how much Corrections thought the prisons would cost at the outset. Corrections will give me the business cases – but only with all the numbers blacked out!

    I’ve complained to the Ombudsman, but in the meantime, it’s interesting to ponder what might be in those blacked-out sections.

    My suspicion is that they will, as above, put the numbers on just how much more expensive the PPP will be upfront – and that the department’s initial estimate of how much the prison will cost will prove to be much lower than its final cost.

    The department says the figures are commercially confidential, but that makes little sense. In these business cases, it is just producing an artificial, simulation-based model of how much something would cost. No real company has been anywhere near these figures, or put in a quote, or anything like that. So there’s no commercial confidentiality to protect.

    People sometimes say that this kind of deal increases transparency for the taxpayer. Well, not so much.

    Max Rashbrooke


    Max is an author, academic and journalist working in Wellington, New Zealand, where he writes about politics, finance and social issues. Sign up to Max's mailing list.

    Leave a Reply

    Your email address will not be published. Required fields are marked *