Corrections (Contract Management of Prisons) Amendment Bill

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Explanatory note

General policy statement

It is Government policy to allow for the competitive tendering of prison management on a case-by-case basis. Amendments are required to the Corrections Act 2004 to allow this to occur.

Opening up prison management to contractors provides an opportunity for innovation and change in the way in which prisons in New Zealand are operated. Providing for prisons to be run effectively and efficiently by contract managers also enables the Government to look for cost savings in the overall delivery of prison services.

New Zealand already has some experience of contract managed prisons. Auckland Central Remand Prison (ACRP) was managed under contract from 2000 to 2005. During that time ACRP made a number of improvements that were subsequently adopted by the Department of Corrections (the department), and the experience is generally regarded as having been positive.

The Government wants to build on this experience and develop effective working relationships between private and public sector providers which facilitate the exchange of ideas and initiatives and provide for innovation and excellence in penal reform.

During its previous experience with the contract management of ACRP, the department did not experience any difficulty with the law, and found that it facilitated an effective contractual and working relationship. The legislative provisions that governed that relationship therefore provide the basis for this Bill. The Bill has updated the language of the previous legislation that permitted contract management of prisons (namely sections 4A to 4L of the Penal Institutions Act 1954) for consistency with the Corrections Act 2004 and to modernise some of the terminology and drafting.

There are 4 areas in which the Bill makes substantive changes to the previous law.

The Bill is silent as to the duration of the contract period, leaving this to be specified in the contract itself. This approach provides the bargaining parties with more flexibility and enables the chief executive of the department (the chief executive) to negotiate the duration of the contract alongside other contract variables such as cost, provision of programmes, risk management, and return on investment, rather than tying the parties into a legislative time frame that may not meet the Government’s objectives.

The Bill requires the chief executive to impose a contractual obligation on any contractor to comply with all relevant international obligations and standards. This ensures that all New Zealand prisons will continue to meet international standards on the treatment and welfare of prisoners.

The Bill requires contractors to comply with instructions and guidelines issued by the chief executive under section196 of the Corrections Act 2004. This replaces the previous requirement for contractors to comply with operational standards that have been phased out, and have consequently been revoked.

The Bill provides for existing staff who are members of the Government Superannuation Fund (the GSF) to continue their entitlements under that fund if they are required to transfer from a publicly run prison to a prison run by a private-sector provider. Because a small number of long-serving staff are currently members of the GSF, the Bill provides protection for those who transfer to a prison contract manager, and ensures that they are not unduly disadvantaged. This provision will apply only in the event that departmental staff who contribute to the GSF transfer to or between contract prisons.

The Bill also contains a small number of minor amendments that are consequential to the changes described above. No substantive changes to other Acts are proposed.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 provides for the Bill to come into force on the day after the date on which it receives the Royal assent.

Clause 3 states that this Act amends the Corrections Act 2004 (the Act).

Part 1
Amendments to allow contract management of prisons

Clause 4 amends section 3(1) to insert a definition of prison management contract.

Clause 5 repeals sections 198 and 199 (which prohibit the Crown entering into new prison management contracts or extending any existing prison management contracts) and substitutes new sections 198 to 199K. The substituted sections are largely based on equivalent provisions that existed in the Penal Institutions Act 1954 (some of which were carried forward into the principal Act as transitional provisions when that Act was repealed).

New section 198 permits the chief executive, with the prior written consent of the Minister, to enter into a contract with any person for the management of a corrections prison. It also provides that the only persons who may manage prisons are the Crown and any person who has entered into a prison management contract.

New section 199 prescribes details that must be covered in every prison management contract, including—

  • objectives and performance standards (not lower than those applying to the department) for the management of the prison and the care of prisoners; and

  • provisions for the appointment or engagement of a suitable prison manager (with the agreement of the chief executive), and for the appointment or engagement of suitable staff; and

  • the training to be provided to prison staff; and

  • provision for the co-ordination of prison services and processes with the rest of the prison service; and

  • the insurance to be maintained by the contractor; and

  • conflicts of interest avoidance provisions; and

  • the provision of programmes designed to determine and address the causes of prisoners' offending and to assist their reintegration into society; and

  • obligations to any voluntary organisations that work in the prison; and

  • how the prison will be managed pending the resolution of any dispute between the chief executive and the contractor; and

  • provision for the contract to be terminated for breach of contract; and

  • the contractor's obligation to co-operate with the chief executive to ensure a smooth handover of prison management when the contract expires or is terminated; and

  • a duty to comply with the requirements of the Act, regulations made under the Act, the New Zealand Bill of Rights Act 1990, relevant international instruments, and those parts of the State Sector Act 1988 that relate to equal opportunities and being a good employer.

New section 199A applies sections 41 and 42 of the State Sector Act 1988 to a contractor under a prison management contract. Those sections permit the delegation of certain functions and powers.

New section 199B provides that the Crown is entitled to be indemnified by a contractor against claims arising from acts or omissions of the contractor or the contractor's employees and agents.

New section 199C allows a contractor to use subcontractors with the prior written approval of the chief executive.

New section 199D imposes certain reporting responsibilities on a contractor, including duties to report on training, prisoner complaints, acts of violence or self-harm in the prison, programmes provided and attendance at those programmes, the use of force, the exercise of search powers, disciplinary proceedings and their outcomes, the operation of random testing programmes, matters relating to financial management, and any other matters the chief executive considers necessary. It also imposes a duty to promptly provide a written report after any escape or attempted escape by a prisoner, and after the death of a prisoner.

New section 199E requires the chief executive to appoint monitors to be responsible for assessing and reviewing the management of the prison.

New section 199F requires contractors to ensure that suitable accommodation is provided for monitors at the prison, and to ensure that monitors have access to every part of the prison, all prison records (except medical records without consent), all prisoners, and all persons who work at the prison while they are at work.

New section 199G imposes certain reporting requirements on monitors.

New section 199H provides for the control of a contract prison to revert to the chief executive in an emergency.

New section 199I requires all prison management contracts to be presented to the House of Representatives within 12 sitting days after they are entered into or varied.

New section 199J permits staff of contract prisons to have access to information held by the department relating to prisoners for the purposes of enabling the staff member to exercise or perform his or her powers, duties, or functions.

New section 199K allows prison staff to transfer to the employment of a contracted prison manager without ceasing to be members of the Government Superannuation Fund.

Clause 6 repeals sections 209 to 220. With the exception of sections 209 and 211 (which relate to contract prisons established under the Penal Institutions Act 1954, none of which continue to exist), these provisions are all proposed to be substantially re-enacted as the new sections described above. The purpose of re-enacting these provisions is to ensure that they are logically located in the section of the Act that relates to the ongoing management of contract prisons, and not in a Part entitled “Transitional provisions”. The table below sets out the new section numbers that correlate to each repealed section—

Old section number New section number
209: Existing management contracts must not be extended N/A
210: Delegation of powers and functions of contractor New section 199A
211: References in existing management contracts altered N/A
212: Liability of contractor New section 199B
213: Subcontractors New section 199C
214: Reporting responsibilities New section 199D
215: Monitors  New section 199E
216: Accommodation and access  New section 199F
217: Monitors to report on certain matters  New section 199G
218: Control of contract prison in emergency  New section 199H
219: Variation to management contracts to be presented to House of Representatives  New section 199I
220: Release of prisoner information to contract prisons New section 199J

Part 2
Transitional provision and consequential amendments

Clause 7 is a transitional provision that allows matters and proceedings started before the management of a corrections prison is transferred between the department and a contractor to continue unaffected.

Clause 8 and the Schedule make consequential amendments to the principal Act and to the District Courts Act 1947 and Juries Act 1981.

Regulatory impact statement

Executive summary

It is Government policy to allow for the competitive tendering of prison management on a case-by-case basis. Amendments are needed to the Corrections Act 2004 to allow this to occur.

The legislation passed in 1995 that provided the statutory framework for the management of Auckland Central Remand Prison, under contract from 2000 to 2005, worked well. It has been used as the basis for amendments to the Corrections Act 2004, with some updating to reflect changes to drafting terminology and the framework of the Act.

A few substantive changes to the 1995 legislation are needed to—

  • remove the legislative restriction on contract length:

  • ensure that members of the Government Superannuation Fund who transfer to a private contract manager can continue to be members of the Fund:

  • update references to “operational standards” in the 1995 legislation to “instructions and guidelines issued by the chief executive under section 196” of the Corrections Act 2004:

  • ensure that the chief executive of the Department of Corrections imposes a contractual obligation on any contractor to comply with all relevant international obligations and standards.

Adequacy statement

The Department of Corrections has reviewed this Regulatory Impact Statement according to the adequacy criteria and considers it to be adequate for the purposes of this policy.

Status quo and problem

Prior to the Corrections Act 2004, the prison system was governed by the Penal Institutions Act 1954. This was amended in 1995 to enable the Crown to enter into contracts for the management of prisons. In 1999 the Department of Corrections entered into a contract with the GEO Group for the management of Auckland Central Remand Prison (ACRP) for an initial period of 5 years from July 2000 to July 2005.

The 1995 provisions were repealed by the Corrections Act 2004. Sections 198 and 209 of the Corrections Act 2004 explicitly prevent any person from extending the existing contract with the GEO Group, and from entering into any further contracts with the same or other providers. It is currently Government policy to allow for the competitive tendering of prison management.

Some overseas literature on publicly delivered prison services notes that there can be a lack of incentives to innovate, take risks in the delivery of programmes, and be cost-effective. Several jurisdictions have used contract prison management to attempt to improve outcomes and cost-effectiveness.

The Corrections Act 2004 must be amended to implement Government policy and allow the tendering of prison management on a case-by-case basis.

Objectives

The objective of this policy is to allow the Department of Corrections to tender and contract for prison management on a case-by-case basis. This will allow the possibility of a contracted prison manager being able to introduce innovation, improve service performance, and be more cost-effective.

Alternative option

The policy of allowing prison management to be contracted cannot be implemented other than by way of legislation. The only alternative to the measures in the Bill is to take no action, which would be inconsistent with Government policy.

Preferred option

The preferred option is to repeal the provisions of the Corrections Act 2004 that prevent contract management of prisons and amend the Act to include similar provisions to those passed in 1995 to empower this.

The experience of contract managed prisons internationally is varied, and comparisons are complicated by the variety of procurement methods used. In general, it is possible to say that cost savings have been gained from the use of the private sector in managing prisons in other jurisdictions, but empirical support for the service performance of contract prisons is mixed (even within jurisdictions).

Overseas experience suggests that there is a link between the success of the contractor and the quality of the contracting and contract management process. There are a number of lessons from other jurisdictions that will assist in getting good contracting outcomes in New Zealand. In particular:

  • it is important to have contractual performance measures that are clear and target the results wanted and a quality performance management regime; and

  • procurement processes need to concentrate on quality as well as price; and

  • contracts that are too long without being able to be refreshed can prevent new and effective best practice correctional practices from being introduced.

The experience internationally and at ACRP suggests that the ability to obtain benefits from contract prisons will lie in the implementation of the policy. While providing an appropriate legislative framework is important, what will determine the effectiveness of a contract prison policy is the quality of the procurement, contracting, and contract management process.

The department did not experience any difficulty with the previous law and found that it facilitated an effective contractual and working relationship with the contractor. The 1995 provisions, with appropriate transitional and consequential provisions, are therefore largely suitable as the basis for amending the Corrections Act 2004. The use of the 1995 provisions reduces some risks that might arise from legislating in a relatively new area in New Zealand law by using provisions that have worked well in the past.

Other important parts of the regulatory structure for the management of prisons contained in the Corrections Act 2004 will apply to prisons managed under contract, without further legislative change. These include the rights of access and powers of prison inspectors, Visiting Justices, and other statutory officers, and the process by which search and coercive powers are used.

There are some areas where changes from the 1995 legislation are needed. The first is that the 1995 amendment to the Penal Institutions Act 1954 required the contract to run for an initial period of 5 years, with an option to renew for a further 2 years if both parties agreed. This time period reflected a concern that this was the first contract prison in New Zealand and that a degree of care and prudence was needed. Given the experience with contracting between 2000 and 2005 at ACRP, this level of restriction on contract length is no longer needed.

The legislation is silent on contract length, and allows this to be dealt with in the contract itself. The major advantages of this are that—

  • it provides the Crown and potential bidders with greater flexibility in negotiating contract length alongside other contract variables such as cost, staff transfer and management, and programme development:

  • the Crown may receive a wider range of bids if there is seen to be some flexibility in contract length:

  • the prison or prisons that might become contract managed have not yet been identified. At this stage it is not possible to be definitive that a term of 5 years will be sufficient to allow a bidder to address all of the issues that might arise at a given location. This will only become apparent when a greater degree of due diligence is carried out.

Staff transferring to a contract prison manager on the same terms and conditions should, where appropriate, continue to be members of the Government Superannuation Fund. Section 16 of the New Zealand Railways Corporation Restructuring Act 1990 has been used as the basis for a legislative provision to empower this.

The 1995 legislation required the contractor to comply with “operational standards”. These standards were a form of tertiary legislation that were not continued by the Corrections Act 2004. The legislation therefore provides that the contractor must comply with guidelines and instructions issued by the chief executive under section 196 of the Act.

There is one other substantive change from the 1995 legislation. This is to place an obligation on the chief executive of the Department of Corrections to impose a contractual obligation on any contractor to comply with all relevant international obligations and standards. This will ensure that any obligations and standards relating to prisons can be easily incorporated into a contract.

Implementation and review

It is intended that legislation be introduced by the end of March 2009 and passed this year. This would then allow competitive tendering for the management of prisons to be carried out.

The legislation contains provisions that place a requirement on the Department of Corrections to include objectives and performance standards in the management contracts, and to report on the management of every contract prison in the Department’s Annual Report. The legislation also contains a requirement that at least every 3 months the contractor is required to report to the chief executive of the Department of Corrections on a range of matters.

The contract bidding process and the subsequent reporting structure would allow an assessment to be made of the extent to which the contract management of prisons offers advantages over departmental management.

Consultation

The Department of Corrections has consulted on this paper with the Ministry of Justice, State Services Commission, Department of Labour, Ministry of Economic Development, Ministry of Foreign Affairs and Trade, the Treasury, Te Puni Kōkiri, Ministry of Women’s Affairs, New Zealand Police, Ministry of Social Development, Ministry of Health, Ministry of Pacific Island Affairs, and Government Superannuation Fund Authority. The Department of the Prime Minister and Cabinet has been informed.

Consultation has not been carried out with any other group.

The only issue raised during consultation was by Te Puni Kōkiri. Te Puni Kōkiri considered that, given the level of investment by the Government in prison management, explicit and measurable performance objectives and standards relating to the rehabilitation and reduction of recidivism of Māori inmates must be legislated for and regularly reported on.

The Department of Corrections does not consider that this change is necessary. The proposed legislation contains requirements that performance objectives should be specified in the contract, and already imposes significant reporting obligations on the contractor. No change to the legislation is recommended, and Te Puni Kōkiri has been advised of this view.