• Prison costs reach $21m before start

    by  • September 13, 2011 • News, The NZ Herald • 0 Comments

    The Government will spend $11 million on consultants and $10 million on internal costs before they start building a new prison in Auckland.

    Department of Corrections documents released under the Official Information Act show it is already employing 18 companies, including accounting firm PricewaterhouseCoopers and British lawyers Allen & Overy, to help oversee the deal.

    The 960-bed prison will be a public private partnership (PPP), in which a private company pays for, builds and runs the facility.

    The Corrections Department’s own analysis say this may cost more than a publicly owned prison.

    Corrections deputy chief executive Christine Stevenson said costs were high because it was New Zealand’s first PPP prison.

    The consultants would provide “specialist technical advice” and outside scrutiny.

    But the Corrections Association, which represents prison officers, said the consultants were “hired guns” who offered little value.

    “They quickly work out what the payer wants them to say and they research to that,” said the union’s president, Beven Hanlon.

    Ms Stevenson refused to say how much a public prison would have cost to set up, or put a figure on the prison’s total construction cost. Internal Corrections documents suggest it could be about $300 million.

    PPP schemes overseas have been criticised for employing large numbers of lawyers, accountants and consultants.

    The Haringey local council in London spent £24 million ($46 million) on consultants before it started its school-building programme.

    Conservative MP Richard Bacon told the Financial Times this year: “It is clear that [PPP] has spawned an entire industry of advisers who have done extremely well out of it.”

    Corrections’ business case says the costs of a PPP “will be higher” than those of a public prison, because private companies pay more to borrow money and need to make “commercial returns”.

    The deal will be cheaper only if the company can run the prison 10 to 15 per cent cheaper than the department.

    The Corrections Association said a private firm would “most definitely” make savings by cutting staff and wages, putting prison safety at risk.

    Three consortiums, all headed by Australian security firms, have been shortlisted for the contract, expected to be signed by July.

    The numbers:

    • $11 million sum the Government will spend on consultants for the new men’s prison at Wiri
    • $10 million sum spent on internal costs before the prison is built
    • 18 companies employed by Department of Corrections on the project
    • 960 number of beds proposed new prison will have

    First published in The New Zealand Herald

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