Corrections spends $1.3m on Collaborative Working Arrangement methodology

The Labour Government has paid $1.3 million plus expenses to a private company to establish and manage a controversial contracting method for the prisons construction project, says National's Law & Order spokesman, Simon Power.

He is releasing answers to questions which show that Corrections has paid Collaborative Management Services $1,316,710 since December 2003, at a daily rate of $320 to $1,500, to establish Collaborative Working Arrangements (CWAs).

"Labour has been gambling on this contracting methodology with substantial amounts of taxpayer money.

"A State Services Commission report, which outlined how cost blowouts of at least $232 million occurred in the construction of Spring Hill and Otago prisons, found Labour did not bother to do a proper analysis of the risk before using CWAs.

The report said that 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'.

"It also said Corrections had 'very little knowledge and understanding of CWA' and were 'heavily dependent' on the New Zealand expert in CWAs, who is the sole director of Collaborative Management Services.

"A CWA does not require a fixed price up front, but simply an indicative cost. If costs blow out then taxpayers carry the can.

"That exposes the taxpayer to plenty of risk. But to make matters much worse, the whole CWA process was not executed properly because the indicative cost for Spring Hill was not known till 20 months after work began, and 17 months in the case of Otago.

“Let’s hope the Treasury report sorts this mess out once and for all, because Corrections Minister Damien O’Connor doesn’t seem to understand what is going on, even referring to CWAs in Parliament at one point as ‘community work agencies’,” says Mr Power.

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