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Labour plays Russian roulette w prison contracts

Simon Power MP
National Party Law & Order Spokesman

14 August 2006

Labour plays Russian roulette with prison contracts

National Party Law & Order spokesman Simon Power says a new report confirms that “Labour has been playing Russian roulette with the taxpayer funds set aside for the construction of new prisons.”

The revelations come from a State Services Commission report which outlines how cost blowouts of at least $232 million occurred in the construction of Spring Hill and Otago prisons.

It has been revealed that the Department’s ‘Collaborative Working Arrangements’ (CWA) contracting method did not require a fixed price upfront and Labour didn’t bother to undertake a proper analysis of the risk.

“Labour went into this arrangement blindfolded. They were essentially playing Russian roulette with taxpayer money. Sooner or later they must’ve known they’d be caught out.”

The report reveals that a hybrid version of CWAs and traditional contracting arrangements was first used to finish Northland Prison, with the crucial difference that it placed a cap on construction costs.

“But Corrections then made a fundamental decision to use CWAs for the other prisons, without a maximum price upfront. From reading the report, it appears they didn’t do their homework, and based their decision solely on the verbal advice of external contractors.”

The report says given this ‘fundamental shift in procurement method… we would have expected a first-principles analysis of this, and other procurement options to have been considered and debated at length’, but that ‘we have not, however, sighted papers provided to, or minutes of, the Steering Group that explicitly affirm the choice of CWA ahead of… any other form of contracting method’.

Corrections had ‘very little knowledge and understanding of CWA’ and were ‘heavily dependent’ on the New Zealand expert in CWAs, Stewart Rix, and the Project Director, John Hamilton, both external consultants.

The report goes on to say that ‘our impression is that the benefits of CWA were emphasized to a much greater extent than the potential risks and costs involved.’

The steering group made their decision based on verbal representations from the project director and by the time supporting documentation arrived it had become a ‘no -choice’ decision.

The absence of documentation to support the decision was reportedly of concern to the department’s Internal Audit Unit, as well as Treasury.

“It’s outrageous that many millions of taxpayer funds were committed in this cavalier fashion. How the Minister can claim that this report clears Corrections of negligence is beyond me. Perhaps he should read beyond the executive summary,” says Mr Power.


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