Simon Power MP National Party Law & Order Spokesman

9 August 2006

Report confirms Govt has no idea of costs until prisons actually built

National's Law & Order spokesman, Simon Power, says today's report from the State Services Commission on the blow-out in prison construction costs confirms that the Government has been wanton and reckless in its use of taxpayers' money.

"You don't start building a house without knowing how much it's going to cost.

"The report backs up the concerns I've already raised that the contracting methods used, known as Collaborative Working Arrangements (CWAs), leave the taxpayer open to enormous risk because, unlike a traditional contract, there is no quoted price at the start.

"As the report states: 'The actual costs are not known until the project is completed, and any pain-share or gain-share payments have been settled.'

"That risk was compounded by the department's inability to establish the indicative Target Outturn Costs - which were supposed to be settled prior to construction - until after construction had already started.

"The problems don't end there. Corrections adopted CWA without giving any reasons why they chose this methodology."

The report says: 'Analysis of the reasons for preferring CWA ahead of other procurement options was not sufficiently documented'.

"CWAs are also less about getting the most competitive price:

"As the report says: 'The way in which the Department has implemented CWA means that there has not been the usual market testing of prices through obtaining competitive quotes'.

"But what mystifies me the most is how the Minister lost control over the prison construction costs.

"The report says Ministers were not kept fully informed about the risks of cost escalation, but what competent Minister would not ask his officials, 'say, how's that multi-million dollar prison construction project going?'

"Then again, the Corrections Minister has referred to CWAs as 'community work agencies' in Parliament, and his Associate has called them 'closer working alliances'.

"While the Government and Corrections may think this is the end of the issue, there are dozens of questions still to be answered," says Mr Power.

ENDS

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