9 August 2006

Report Insights Welcomed

“I am pleased the State Services Commission Report into cost escalation at Spring Hill Corrections Facility and Otago Region Corrections Facility shows there was no cost blow-out in either project,” said Chief Executive Barry Matthews. “The original estimates were always tentative and made prior to design finalisation and increases in the capacity of the prisons.

The Department accepts it did not indicate this clearly enough nor inform Ministers quickly enough when the inevitable changes in the project cost occurred.”
The report states that escalating costs were primarily the result of rising market demand in the construction industry. Other key factors were design finalisation and the impact of the resource consent process.

The report outlines very clearly the governance issues that the Department needed to address to improve the timely estimation of costs at Spring Hill and Otago during a period of rapid expansion of market demand - and rising costs - for materials, contractors and skilled labour. These issues had an impact on the ability of the Department to quickly and accurately report the impact of rising costs on the total cost for each facility.

The Report also notes and supports the series of changes the Department made in 2005 and in 2006 to address these issues. The Department has made significant improvements in the way in which it reports to Ministers and is committed to further improvements in processes throughout the life of the project.

The Report is also very clear that the Collaborative Working Arrangement (CWA) with key contractors was vital in ensuring the Department was able (or will be able) to deliver all four facilities to a very tight timetable determined by projected increases in prison musters.

The RPDP began in 1997 with the aim of constructing four new prisons to meet the expected rise in prison musters. The original plans allowed for just over 1000 beds in the four facilities. Over time, plans were modified to meet new Ministry of Justice projections for prison musters and the total capacity of three of the four prisons was increased by more than 550, making it one of the largest construction projects in New Zealand.

The Northland Region Corrections Facility was opened in 2005, and the Auckland Women’s Corrections Facility in June 2006. Spring Hill and Otago are scheduled to open in 2007.

ENDS

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