In March this year the government introduced to the House a Bill (the Corrections Bill) that will end New Zealand 's sole contract with the private sector to run a prison. [1]

A private prison management company, Australasian Correctional Management (ACM), has had a contract to run Auckland Central Remand Prison (ACRP) since July 2000. ACM is actively involved in the management of a variety of prisons in Australia . ACM's contract to provide services to run ACRP expires in 2005. Under the proposed legislation, it will be illegal for the private sector to run prison services once the ACM contract expires. The state provider, the Department of Corrections, will become (once again) the monopoly provider of prison services. [2]

The rationale for the outlawing of private prison management services is unclear. There do not appear to be any claims that ACM has done a poor job. In fact the evidence indicates the contrary. ACM's performance is monitored quarterly by the Department of Corrections. Performance-linked fees are payable to ACM if it meets all key performance indicators. ACM has received such a performance-linked fee in every quarter since it started operations. [3]

On a cost-comparison basis, ACM appears to perform well. The cost of keeping an inmate in a high-security prison run by the Corrections Department is $72,000 per year. The cost for a minimum-security prison is $54,000. In comparison, the cost for keeping inmates in Auckland 's high security ACRP is $43,000 per year.

The Department of Corrections has advised Cabinet that it could in the future manage ACRP for a comparable or marginally lower level of costs than the private provider. However, Treasury's advice was the "ongoing costs for the (state) providers of services …. are expected to exceed the current level of payment to the contract providers". [4]

The move to ban private prison services in New Zealand runs counter to the international evidence that private prisons provide both lower costs and better service overall. There are numerous empirical studies comparing public to private prisons. One review of the evidence concludes that "virtually all of the studies find private prison costs to be lower … on average between 5 and 15%". [5] Another reports that a number of studies "find savings of 20 percent for private prison construction and 5 to 15% for private management of prison units". [6] A further insight from many of these studies is that privately run prison services can offer increased innovation, access to expertise, improved quality and enhanced accountability.

That is not to suggest that all privately run prisons perform well or that all publicly managed prisons perform poorly. The UK National Audit Office (NAO), in a recent comprehensive assessment of the operational performance of private prisons, found the best private prisons outperforming most public prisons but also found that one private prison was amongst the worst group in the prison estate. [7] Overall, the private prisons rated well, accounting for 60 percent of the top-ranked group of prisons and less than 20 percent of the bottom-ranked group.

Further, and most importantly, the NAO found that opening up the publicly managed prisons to competition in the United Kingdom has encouraged the publicly managed prisons to operate better. [8] A recent US study on the effect of private prisons on public prisons drew similar conclusions. The study noted that "benefits (from competition) can arise from a learning effect on public prisons, an incentive effect for public prisons to operate efficiently and a "yardstick" or "benchmark" effect that allows public prisons to compare themselves against a standard". [9]

Quality of service also can be better in privately managed prisons. A study of New Mexico prisons found the overall quality of service was higher in private than in federal or state prisons, with the privately run prison rating particularly highly on security, safety, order and management (refer to figure one below). [10]

Figure One

With the rapid increase in numbers imprisoned in New Zealand , the cost of prison services is growing rapidly. As figure two below illustrates, total public expenditure on corrections services has doubled over the last seven years. Five new prisons are planned to be built to meet the projected growth in offender numbers to 2008.  The capital costs and ongoing operating costs are considerable.  It is a puzzle why, when costs are increasing so rapidly, the government has chosen to exclude companies that could deliver a cheaper service.

Figure Two

Maori groups are particularly supportive of ACM and private involvement in prison management. According to Te Warena Taua, who chairs a group representing six iwi in a formal relationship with the management of ACM, "under the ACRP contract with a private provider, we have seen more progress and innovation in a prison that we have seen in decades from the public prison service". [11] He considers that "the ACM is universally recognized as the most innovative, progressive and successful prison in the country". [12]

Maori make up over half the prison population. As Jack Hodder of Chapman Tripp Sheffield Young has noted, the handing of an exclusive monopoly to the public prison service to manage all prisons will leave only a peripheral role for Maori service providers in relation to prison management and operations. [13] Mr Hodder has also confirmed that although the administration of law and order, including the power to deprive convicted offenders of their freedom, is properly a responsibility of the state, there are no constitutional or other barriers to outsourcing custodial or prison services to the private sector.

The direction of the New Zealand government's policy towards the private provision of prison services is contrary to that of the countries with which we have most in common, including the United Kingdom , Australia , Canada and the United States . About 50 percent of Australian prisons are now privately managed, while in the United States private prisons are dominant and their share is growing. In Britain, all new prisons are required to be designed, built, financed and operated by private firms (with no in-house bid by the Prison Service allowed). [14] In Canada and South Africa private sector management of prisons has been in place for some time.

In conclusion, there do not appear to be good grounds for re-establishing a monopoly for the public prison service. New Zealand 's track record with prisons is far from a success. Our imprisonment rate is amongst the highest in the world. Of the inmates who are released from prison, more than 80 percent are reconvicted of another offence within five years. To shelter the public prison service from competition is contrary to the available evidence and is likely to mean New Zealand settles for a second-best service, to the detriment of inmates and the community.

Phil Barry

Taylor Duigan Barry Ltd

phil.barry.tdb.co.nz

14 November, 2003

Endnotes

[1]   The government originally decided to ban the private provisioning of prisoner escort and courtroom custodial (PECC) services also. Currently a private company, Chubb, provides PECC services in Auckland and Northland on contract, while the Department of Corrections and the police provide the services elsewhere. We understand that the decision to ban private provisioning has now been reversed and the scope of the tender for PECC services will in fact be widened, possibly extending to a national service.

[2]   The public prison service had a monopoly until 1994 when an amendment to the Penal Institutions Act 1954 allowed private service providers.

[3]   A review of papers provided by the Department of Corrections under the Official Information Act (OIA) does not reveal any systematic assessment having been undertaken of the relative efficiency of the public and private sectors in providing prison services. A September 2001 Cabinet paper states "it would be premature to assess the impact of the contract with the private service provider, ACM." No subsequent overall assessment appears to have been undertaken.

[4]   'Corrections Law Reform – Overview', a report from the office of the minister of corrections to the Cabinet Social Equity Committee, September 2001 (released under the OIA). The paper notes that transitional operating costs of $3.6 million are expected to be incurred with the transfer of management of ACRP back to the Department of Corrections.

[5]   Geoffrey F Segal and Adrian T Moore, 'Weighing the watchmen: evaluating the costs and benefits of outsourcing correctional services, Part I: employing a best-value approach to procurement', Reason Foundation Report No 289, January 2002, p 2.

[6]   'Using the private sector to deter crime', National Center for Policy Analysis, Study 181.

[7]   'The Operational Performance of PFI Prisons', report by the Comptroller and Auditor General, National Audit Office, June 2003.

[8]   The UK National Audit Office ( op cit ) concluded that "the private sector has brought benefits to the public sector" (p7). It found that "competition has been important within the prison service for improving both management and conditions for prisoners" (p 7). For example, "A key innovation by the private sector has been in promoting a more constructive staff/prisoner relationship … The senior management of the Prison Service has been able to use the success of the private sector in nurturing better staff/prisoner relationships to encourage their own staff to adopt a similar approach" (p8).

[9]   'The interrelationships between public and private prisons: Does the existence of prisons under private management affect the rate of growth in expenditures on prisoners under public management?', James F Blumstein and Mark A Cohen, April 2003: http://www.apcto.org/logos/Study.pdf

[10]   C H Logan, 'Well kept: Comparing quality of confinement in a public and private prison', a report to the National Institute of Justice, October 5, 1996 .

[11]   'Corrections Bill axes Maori participation in prison', media statement from Iwi Whanui O Tamaki Makaurau.

[12]   'Remand jail the best in the land', by Te Warena Taua, New Zealand Herald , September 10, 2003 .

[13]   'Corrections Bill – private prison management – consistency with constitutional principles', memorandum of 20 May 2003 from Jack Hodder, Chapman Tripp Sheffield Young.

[14]   Refer Gary Sturgess, 'Private Risk, Public Service", Policy, 2002, vol 18, No 1, Centre for Independent Studies, Sydney, pp 3-7.

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