10 March 2006

Corrections says misconceptions bizarre

Corrections Chief Executive Barry Matthews says “it is bizarre for anyone to suggest Corrections didn’t know that prisons need more steel than other commercial buildings or that they have to be built stronger than other buildings”.

“There are a number of misconceptions currently in the public arena regarding the new prisons building programme,” says Mr Matthews.

“First there is a clear misunderstanding as to what role Corrections’ management has in the programme. At all times Corrections has been acting on the advice and technical expertise of its quantity surveyors and other professional advisors. Estimates, costings and other relevant information have been supplied by the private sector. This is a private sector build and Corrections has employed the best contractors and consultants to do the job. We have been in partnership with them from the outset of the project.

“There has and remains a high level of private sector involvement including major and well respected New Zealand and Australasian construction and related companies. Some of which have been involved in building prisons here and overseas for a number of years. And very successfully.

“It is hard to understand how anyone reading the Cabinet paper in its entirety could not have come to the proper understanding of what the paper actually said. That is, the issue is with the Index used to calculate possible cost escalation in construction over the period of the project.

“The Index used to measure the growth of inflation is the Capital Goods Pricing Index for Non-residential buildings put out by New Zealand Institute of Economic Research.

“Unfortunately over the construction period the cost of steel, which is a major component, has risen 26 % and this has been greater than the Index allowed. As the paper states the Index, which was applied to initial cost estimates in 2002/03, had forecast average annual change (growth) at 2.5% in 2003, 2.1% in 2004 and 1.9% in 2005 and beyond.

“It is hard to see how public understanding of cost pressures facing Corrections could have been enhanced without reference to these facts.”

ENDS

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