Government scrutinised over Waikeria Prison PPP deal

Corrections Minister Kelvin Davis.
Corrections Minister Kelvin Davis. Photo credit: Mitchell Alexander/Newshub.

The Labour Party has long been a fierce opponent of public-private partnerships (PPP) when it comes to things like schools and prisons.

So it was with some surprise that the Government announced Waikeria Prison would be constructed under a PPP, with operations run by Corrections.

Justice Minister Andrew Little told the House in June the contract had been signed and cost $34 million.

The claim that the contract had been signed was repeated by Finance Minister Grant Robertson a week later. "What I am aware of is that the PPP contract for Waikeria Prison was in place and that breaking it would've cost significant sums of money to this Government, given that the contract had been earlier signed," he said.

The problem is, Corrections told select committee today a contract is yet to be signed, and a preferred bidder wasn't confirmed until December 2017 - under this Government.

"The only figure that was really maintained as an absolute was a $5m liability" for pulling out of a contract with preferred bidder Cornerstone Infrastructure Partners, Ray Smith, Corrections Chief Executive said.

He wasn't able to say where the $34m figure came from, but said these are "big and expensive projects" with costs rolled into design work and early earthworks.

"The reality is, when you're in a big development like this, you accumulate a large amount of costs as the development proceeds. Everybody understands that, particularly once you indicate a preferred bidder."

When Newshub asked what Mr Smith would have told the Government if it wanted to pull out of the PPP, he said, "It's a decision available to anyone in Government."

Justice Minister Andrew Little told Newshub "a huge amount [of work] had already been done in terms of design, planning, all that sort of stuff."

"At time ministers were dealing with the Waikeria Prison issue, we were told the outfit doing the designs were under a contract [and] that a fair amount of money had gone into it, and if we were to break it, there would be a break fee associated with that," he said.

National's Nick Smith was strident in select committee, asking Corrections Minister Kelvin Davis how he'd gone from opposing PPPs to signing off on one.

"When did you have your conversion at Damascus, such that you have committed to a $750m PPP for the building and maintenance at Waikeria?" Dr Smith asked.

"Yeah, good question," Mr Davis said. "The prison will be built through a public-private partnership. Corrections will be the organisation that runs it."