Private prison operator Serco has been dumped from running the troubled Mt Eden remand prison, with Corrections saying it gives them a "chance for a fresh start".
After a turbulent year including jailhouse fight clubs, drug use and massive fines for underperformance, Corrections Minister Sam Lotu-Iiga announced the company's contract won't be renewed.
In a joint press conference this afternoon with Corrections boss Ray Smith, Mr Smith said staff at the prison were informed of the decision earlier today.
He said "for some time" he has been considering whether the current contract is "the best way to deliver services for this prison".
"I have decided that it is not and so I have invoked a break point of March 2017 contained in the current contract that allows non-renewal after six years," he says.
Serco had a contract to run the prison for 10 years.
Corrections used a clause in the contract to step in and manage the prison in July following the emergence of the fight club videos.
All costs related to the decision are recoverable in the contract.
Corrections Minister Peseta Sam Lotu-Iiga says he supports the decision.
"This decision… will allow the department to consider changes to the management contract that will ensure it is run safely and effectively."
Mr Smith said they'd been in charge of Mt Eden for around five months and they'd expect to be there for longer.
It provides the Corrections for a clean break; a "fresh vision and potentially a change in operating model for running the prison".
Options will be considered for the future management of the prison and advice will be given to incoming Corrections Minister Judith Collins early next year.
Mr Lotu-Iiga says one of the options could be for another private provider to step in.
The company will still run the newly opened Auckland South Corrections Facility in Wiri in south Auckland.
Mr Smith says there will be lessons learned about privatisation for both parties.
He said the south Auckland prison was different in that it was run by a board who had a stake in the prison's success.
"South Auckland has come as a second generation [from Mt Eden]."
Serco has gone to the High Court to challenge a draft report on the organised fights and other violent incidents at the prison.
Neither would comment further because of the pending court case.
Mr Smith said Corrections would be helping Serco transition through to the end of its contract.
"Serco employ a lot of people. It'll be a tough day for them. They'll be worried about what's next. The prison is still going to be there, it needs people."
Despite the axing of Serco, Prime Minister John Key says privatisation programme was kind of a success.
"In a funny kind of way, it showed it worked because we got a contract and the contract allowed us to do something we could never actually do with a government department and that is to say 'we're not going to renew that contract' and certainly not under the conditions that were negotiated."
The Green Party says Serco's contract should be cancelled immediately.
"Not extending Serco's contract is the first sensible thing that the Government has done in relation to Serco's management of Mt Eden Prison," corrections spokesman David Clendon says.
Labour's Kelvin Davis says the decision is a "humiliation" for the Government and proof privatisation doesn't work.
"We knew this back when it all started off. Judith Collins brought them in and now she has to sort the mess out that she started."
He believes Serco's contract to run the Wiri prison should be cancelled as well.
"There's going to be no difference to what is happening in Mt Eden to what is happening in Wiri."
The announcement comes the same week as Prime Minister John Key dumped Mr Lotu-Iiga, who had been criticised for his handling of the Serco saga was replaced by Ms Collins.
Ms Collins will be sworn in as Corrections and Police Minister on Monday.