Government quiet on costs, building plan for Waikato prison expansion

The government will not say what its budget is to expand a Waikato prison by 810 extra beds or if they will be built using a public-private partnership (PPP).

The expansion of Waikeria Prison is core to the $1.9 billion the government announced this week it would put into Corrections over the next four years.

The extra beds would take longer than that to deliver, Corrections Minister Mark Mitchell told RNZ.

“The delivery timeframe is four to six years,” he said in a statement.

He would not talk about cost forecasts or how the expansion of Waikeria – the second in a row – would be built.

“Corrections is looking at options to negotiate the best value for taxpayers’ money, so details including budget are commercially sensitive for now.”

The department told RNZ on Wednesday: “The procurement model that will be used for the expansion of the prison has not yet been confirmed.”

Yet just finishing the current 600-bed expansion at Waikeria had been a headache. Due to be completed in 2021, it was still going on, having run into long delays, cost rises and a $430m claim against the government by the contractors.

In 2018, the first expansion’s cost was put at $750m, but it appeared in the government books last June at $916m, 22 percent higher.

Cornerstone Infrastructure Partners – a consortium of Australian builders CPB, Pacific Partnerships for financing, facilities managers Cushman & Wakefield and tech firm Honeywell – got the contract in 2018 to build, then run Waikeria for 25 years. Corrections runs the actual custodial operations.

Cornerstone claimed $430m against Corrections in 2022 for “time and productivity losses” due to Covid-19, the government’s financial statements show.

An independent reviewer “largely dismissed relief sought by the contractor”.

Corrections said today the consortium reduced its claim as part of signing a new project support agreement 13 months ago.

“We are working through the revised claim” so could not comment further, it said.

The agreement required Corrections to pay a maximum of $225m to “achieve the completion of works” – finish the build itself – by 30 November.

More PPPs

The coalition government had pledged to use PPPs to build more infrastructure.

If a second PPP was set up to build and run the second expansion, this raised the possibility of two PPP operators working at Waikeria for years. Mitchell declined to talk about that.

Originally the PPP for Waikeria – set up by the National-led government in 2016 – envisaged 1500 beds, and up to 2000 all-up if needed. Labour dismissed this as a failed “American-style mega prison” approach, and instead finalised the PPP in 2018 for a scaled-down 600 beds.

Piling began in May 2019. In 2021, the government talked about excellent progress, promising the expansion would be complete by 2022.

Two years later it had been hit by “challenges in the construction market including supply chain disruptions”, and the completion aim was late this year, Corrections told RNZ.

Also, “access to sites due to staffing challenges, resource constraints” were mentioned in its latest annual review.

Corrections set up a new agreement with the PPP consortium and main builder last year that “incentivises completion of the facility by 30 November 2024”.

The country’s total prison population fell to a low of 7500 in early 2022, almost 5500 lower than the number projected – 13,200 – when Labour came into government in 2017.

The total was now 9442. Almost 3000 of those were prisoners on remand, who had been accused but not convicted. The time spent on remand had gone up and up. Cutting the soaring remand rate became a top priority of police and the criminal justice system last year.