The head of private prison operator Serco's Asia Pacific operation has apologised for the company's poor running of Mt Eden remand prison.
Serco will have to fork out $8 million to Corrections after the Government department stepped in to take over the running of Auckland Central Remand Prison in Mt Eden last year.
Minister Judith Collins says the money will also go towards settling their performance notices.
The prison operator faced scrutiny last year with the emergence of cell-block 'fight club' videos and allegations of serious assaults and inappropriate behaviour.
In July last year, Corrections decided to use a clause in the contract with the private operator to step in and take over its day-to-day running.
"An agreement with Serco has also been reached that effectively narrows down the contractual arrangements with Serco to a labour supply agreement with other transition services for the balance of the contract through to 31 March, 2017," Ms Collins says.
Corrections will continue to run the prison, with Serco providing the personnel at cost until the end of its contract.
Serco won't make a profit from the arrangement.
Ms Collins says it's a "pleasing outcome" because it recovers cost and gives more certainty over the prison's future management.
In a joint news conference in Auckland this morning, Corrections boss Ray Smith and Serco Asia Pacific chief executive Mark Irwin said they'd spent the morning discussing the changes with staff.
"It's been quite important for us to be able to talk to the staff today to give them some assurance that we need them on the job. For most of them, today is not different to any other day and tomorrow the same again", Mr Smith said.
Mr Irwin admitted Serco hadn't met the some of the requirements of the contract.
"In the period immediately before the step-in by the department, there were certain aspects of our service delivery which did not meet the standards of the contract and certainly the standards we set for ourselves and for that we are truly sorry," he said.
However, he said during their time in charge of the prison, staff have "delivered meaningful outcomes" for New Zealanders and for Maori and Pacific Island offenders.
This included making sure rates of self-harm among prisoners were at record lows.
"I don't want any of that, I hope, to be lost through what has happened in more recent times."
In December, Mr Smith announced the break point clause which effectively ends the agreement with Serco in March next year.
Corrections will take over the running of the prison from then. Mr Irwin says that is the "least disruptive and most sensible" decision for the prison.
He says the $8M was reached by mutual agreement after mediation -- around $5M was the cost of the step-in, and the performance-related costs were $2.5M.
Ms Collins says today's announcement is separate from the Chief Inspector of Corrections' report into Serco's management of the prison, which is currently before the courts.