Ordered to be published

VICTORIAN GOVERNMENT PRINTER March 2018

PP No 384, Session 2014–18

The table below lists the contractual improvements or 'negotiation benefits' described by DJR in the contract administration manuals for the new contracts, and our comments on the validity of the claimed improvements and benefits.

Figure D1
Improvements in the new contacts

CV granted concessions to both operators on the measurement of their performance against SDO 23 (prisoner case management) in 2016–17. The circumstances leading to this decision demonstrate the importance for CV to consider any contractual implications for the state and private operators when planning any substantive changes in system-wide standards, initiatives or performance measurement approaches.

SDOs and KPIs are the key measures of prison performance.

SDOs apply to both public and private prisons, although not all SDOs apply to all prisons.

KPIs only apply to the private prisons—18 of the KPIs apply to Port Phillip, and 16 to Fulham.

The SDO and KPI thresholds use various measures:

We have consulted with DJR, DTF, G4S and GEO, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those agencies and asked for their submissions and comments. We also provided a copy of the report to DPC.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.

Responses were received as follows:

The original service contracts for Fulham and Port Phillip were due to expire in 2017. DJR recommended negotiating long-term contract extensions with the incumbent operators, partly because other options would involve significant costs to 'buy out' the site leases held by the operators which extended for many years beyond 2017. DJR maintained alternative options, such as re-tendering the contracts, as a fallback in case the negotiations did not achieve a value‑for‑money outcome.

Achieving sustainable cost savings is one reason governments choose to outsource the operation of prisons to private companies. Demonstrating that prisons can operate at a lower cost while maintaining quality standards can support efforts to improve efficiency in the public prison system.

We have used CV's data on prison costs, including operating costs directly attributable to individual prisons. For public prisons, this includes labour, locally incurred supplies and consumables expenses. For private prisons, this includes contract payments.

Prisons are complex and high-risk environments with constant threats to safety and security. Port Phillip and Fulham are integral to the safe and secure operation of Victoria's prison system—in December 2017, they housed around 26 per cent of the state's male prisoners. The private operators and CV both have responsibilities for maintaining and improving the safety and security of these prisons.

The Act requires DJR to monitor the performance of all correctional services to achieve the safe custody and welfare of prisoners. DJR is accountable to the community for the operation and cost of Fulham and Port Phillip. Contracting private companies to operate prisons does not lessen the state's duty of care to prisoners.