Chief Executive Barry Matthews welcomed the release of the State Services Commission (SSC) report into cost escalation of the Regional Prisons Development Programme, which was released earlier this month.
A review was undertaken by the SSC following the announcement of the capital costs of the four new corrections facilities at $890 million, an increase of $140 million from earlier estimates.
Barry says the $140 million increase was attributable to an escalation of construction costs at the Otago Region Corrections Facility and the Spring Hill Corrections Facility.
“The SSC reviewed the processes, systems and contracting methods for these two sites in order to learn lessons for future capital projects and to determine reasons for the increase in costs,” says Barry.
“The report found the escalating costs were primarily the result of a heated construction market which drove up the price of materials and labour. Other key factors were consent and regulatory changes, design finalisation and infrastructure costs,” says Barry.
Barry says the report acknowledges the pressure Corrections was under because of the increasing prison population.
“Delaying the new facilities was not an option because Corrections was under immense pressure to find accommodation for a rapidly increasing population. For example, in 1999 the prison population forecast for 2008 was 6,800. The prisoner population is currently about 7,600 and is now forecast to reach 8,600 by 2008,” explains Barry.
“This has required the Regional Prisons Development Project to have considerable flexibility. The original plans allowed for just over 1000 beds in the new facilities, however, given the increasing number of prisoners, plans were modified to increase the number of beds to more than 1600.”
The report compliments Corrections for the progress it has made in the construction of the new facilities. The Northland Region Corrections Facility and the Auckland Region Women’s Corrections Facility have opened on time and to budget and Spring Hill and Otago are on track to open next year as scheduled.
“The report makes it very clear that the Collaborative Working Arrangement (CWA) with key contractors was vital in delivering all four facilities to a very tight timetable.”
Barry says while the report recognised Corrections’ achievements, it did outline a number of governance issues that impacted on Corrections’ ability to provide a timely estimation of costs at Spring Hill and Otago.
“The report was critical about the amount of information provided to Ministers in the 2005 Budget process, in particular the need for more information about the indicative nature of the cost estimates and the fiscal risks to the Crown.
“The original estimates provided to Government were always tentative and made prior to design finalisation. I accept we did not indicate this clearly enough, or inform Ministers fully enough, when the inevitable changes in the project cost occurred,” explains Barry.
Significant improvements have been made and the report notes and supports the series of changes made in 2005 and 2006 to address governance issues and how Corrections reports to Ministers.
“Corrections is committed to further improving its processes throughout the life of the programme,” says Barry. “Despite some criticism, the review shows that Corrections has carried out the project with both skill and integrity and this is something we can take pride in.”
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