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Business welcomes prison PPPs, wants more projects

Fuseworks Media
Fuseworks Media

by Pam Graham of NZPA

Wellington, April 14 NZPA - The Government's move to build and operate a new prison at Wiri under a public-private partnership (PPP) is seen as bold, but the business community would like to see a pipeline of projects for hospitals, schools and housing.

Infrastructure Minister Bill English and Corrections Minister Judith Collins said today that a 1000-bed male prison on land owned by the Department of Corrections in South Auckland would be the first PPP by this Government.

The move was applauded by the business community where New Zealand is regarded as a late adopter of PPPs for social infrastructure.

It is seen as bold because the Government has opted for a custodial PPP, which includes the operation of the prison. The model is common in the United Kingdom but less so in Australia.

"The Government's shown some guts and gone for the more aggressive option," said a businessman who declined to be named. "A non-custodial PPP would have been easier but would not have been as good value for money," he said.

Australian PPP company Plenary Group is not expected to be interested in a custodial PPP and Morrison & Co PIP Ltd has not been set up to participate in custodial PPPs. The PIP Fund could only be involved if there was a two pronged tender process, one to design and build the prison and another to operate it.

PIP Fund and Craigs Investment Partners Ltd are currently marketing an initial public offer of $125 million worth of shares in New Zealand Social Infrastructure Fund Ltd to fund social infrastructure PPPs.

PIP Fund managing director Peter Coman said: "We look forward to seeing this opportunity come to market and participating in further government PPP opportunities such as the schools PPP that is currently being evaluated by the Department of Education."

Ms Collins told the Trans-Tasman Business Circle in February that subject to a successful pilot project, the Ministry of Education would review the applicability of PPPs for new school property projects.

As with Corrections, the goals would be to inject new thinking, free up resources, and deliver better value to the taxpayers.

Companies that may be interested in the Wiri project are expected to include Serco Group Plc, Kalyx, Group 4 Prison Services Ltd, and GEO Group Inc. The project is expected to be worth more than $400 million.

Around the world the private sector has partnered with governments to build hospitals, schools, courts, public housing, convention centres, water and sewage infrastructure and roads.

Plenary Group, which built the Melbourne Convention Centre, has said it is interested in operating in New Zealand but would like to see a pipeline of projects.

Adrian Wimmers, director infrastructure at KPMG, also said last month that to attract new entrants the government needed a pipeline of projects.

He said there needed to be more certainty about projects and small projects could be bundled, or staged, to increase market appetite.

"More clarity is needed on the Government's plan around sustainable infrastructure construction," he said.

New Zealand Council for Infrastructure Development chief executive Stephen Selwood said the Wiri project provided an opportunity to promote innovation in the prison service.

"The inclusion of custodial care into the PPP proposal means that successful bidders will have to optimise building design and construction to provide the best custodial services for the least cost over the long-term of the contract," he said.

"International experience suggests that building a new prison at Wiri using a public-private partnership will offer savings of between 10 and 20 percent over conventional methods over the 25 to 35-year life of the proposed contract," Mr English said.

Ms Collins said an additional 2270 prison beds were needed by 2019 to cope with forecast growth in prisoner numbers and the need to replace ageing existing prisons.

The Auckland Central Remand Prison was under private management between 1999 and 2004 and changing the Corrections Act to allow private management of prisons in New Zealand was one of the government's key election promises.

The previous Labour-led government prohibited private management of prisons.

Ms Collins has said that PPPs are not radical and are simply another form of procurement.

In the UK no new prison has been built by the public sector since 1992.

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