How Much Does ACM(aka GEO)'s Prison Really Cost

Wednesday, 26 May 2004, 3:21 pm
Article: Kevin List

Phew.

Finally some clarity on the relative costs of the privately run ACM (aka GEO) Auckland Central Remand Prison vs costs of the Public Prison Service. It appears that when a proper comparison is made ACM costs nearly 35% more than the PPS to secure remand inmates.

Among the materials presented to the Law and Order Select Committee last year was a letter dated 15 July 2003 from Minister of Corrections Paul Swain to the Chair of the Committee.

When listening to this afternoon's debate on the final stages of the Corrections Bill (which will abolish the power to contract out prison services legislated by the last National Government) it will be well worth keeping what follows in mind. If recent debates are any indication the Opposition, National, ACT, NZ First and United Future will all be hammering the point that ACM's Auckland prison has not only an exemplary record and good relations with Maori, but also costs less than public prisons.

(ADDENDUM: In tonight's debate on the bill National MP Tony Ryall used some alternate figures on the costs of keeping prison inmates, he said it costs $43,000 per inmate per year at ACRP vs $72,000 per inmate per year for the Public Prison Service to house a maximum security inmate, and $54,000 per minimum security inmate.

These exact figures appear on page 7 of ACM's submission on the bill dated 21st May 2003 - and it was in response to these figures - that have been widely used - that the letter from the Minister of Corrections below was written.)

The letter reads:

* * * * * * ACM Costs

"This note seeks to correct ongoing misunderstandings on the relative costs of Auckland Central Remand Priso….snip….

4. Most of the debate to date has been around the current cost of managing inmates. There are many pitfalls in comparing current prices as I am sure you are aware.

The key points about these comparisions are:

ACM is running as a modern, purpose built facility. It is somewhat unfair to compare this with with, for example, the 130 year [old] Mount Eden Prison next door which was built for a different operating regime, is more expensive to heat, and so forth. Despite this PPS [Public Prison Service] are cheaper.

ACM claim they are a maximum security prison and have made inappropriate comparisons with Auckland East Prison. While ACRP [Auckland Central Remand Prison] is designed to house inmates up to maximum security, they hold the full range of inmates, including minimum security. The appropriate classification is the classification of the majority of inmates (i.e. remand)

ACM have compared their operational costs excluding asset costs such as depreciation and capital charge ($43,000 plus GST) with PPS costs which include the same items. This is clearly wrong. While ACM have said correctly that lease charges are paid to the Crown, depreciation and other asset costs remain a cost to the taxpayer and are also incurred by the public system.

ACRP's asset costs are higher because a new building is being depreciated along with its plants and assets. Much of the rest of the prison system incur lower costs which reflect their age.

The correct comparison for remanded inmates are

2001/02 Actual - Excluding GST

PPS - Excluding Property-Related Overheads $36,000
ACM - Excluding Property-Related Overheads $43,000

PPS Full costs $49,000
ACM Full Costs $66,000"

* * * * * *

In the event the above causes you to read twice or thrice, fear not, we have a translation for people unfamiliar with depreciation speak.

I.E.

When compared with an appropriate prison, another remand facility, ACM's actual costs are more expensive, 17% more expensive than the Public Prison Service in terms of cost per inmate.

Secondly

And when comparied on a like-for-like cost basis with the Public Prison Service( including full depreciation and capital charge) ACM is 35% more expensive than the PPS.

In terms of the detail what the above means in layman's language:

1. The Government built ACM a nice new prison at huge cost.
2. This prison is leased to ACM at a cost of $8 million a year roughly (*see note below).
3. This is not a market rent, and it does not reflect the real costs of either building, owning or maintaining the prison facility.
4. The difference is in effect a subsidy in one sense to the apparent costs of running the prison.
5. As a consequence the claims that ACM is cheaper than the Public Prison service are misleading on two levels.
6. Firstly ACM has publicly compared its costs excluding asset costs with PPS costs including these. This is simply wrong.
7. Secondly, when the builiding asset costs are properly accounted for, i.e. properly depreciated and capital charged, (full provision is made for maintenance and the cost of owning an expensive asset like a prison) the "real" cost per inmate increases substantially.

* NOTE: This makes up the difference between the $11 million that ACM claims it is paid and the $102 million for five year contract price reported in yesterday's Kevin List interview with Matt Robson .

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Scoop has also received the following response from the Department of Corrections to questions lodged in relation to yesterday's interview with Matt Robson. In particular we now know know what GEO stands for and that Corrections does not in any way consider itself chastised by the United Nations Committee against Torture in relation to the detention of Asylum seekers.

Scoop Corrections Questions and Answers

Answers to questions as follows:

Q Why is ACM [Australian Correctional Management] referred to as GEO and what does this stand for? If they have changed their name when did this happen?

A As a result of changes within its US parent company, ACM was required to change its trading name to GEO (Global Expertise in Outsourcing). The change took effect from 16 January 2004.

Q Was the contract between ACM and the NZ Government worth $102 Million dollars (As stated in initial newspaper reports)? If so why has it been stated by a number of publications that ACM only received approximately $11 Million dollars last year

A The contract for the operation and management of the Auckland Central Remand Prison is between GEO and the Chief Executive of the Department of Corrections. The contract is worth $102 million (exclusive of GST) over a five year period. (see above for an explanation of the difference

Q What sections was Corrections referring to regarding asylum seekers in the Correction's Bill and the possibility of segregation of asylum seekers? And given the recent criticism in the UN report (see extract below and here) on this matter how soon will the department be moving on this issue?

* * * * * *
[ Committee Against Torture Thirty-second session -19 May 2004
Unedited Version
Consideration Of Reports Submitted By States Parties Under Article 19 Of The Convention

Conclusions and recommendations of the Committee against Torture
New Zealand

Subjects of Concern

The Committee expresses concern about:

The significant decrease of the proportion of asylum seekers who are immediately released unrestricted into the community upon arrival, and the detention of several asylum seekers in remand prisons, with no segregation from other detainees;]

* * * * * *

A The UN Committee against Torture did not make any recommendations concerning references to asylum seekers or other immigration detainees in Corrections legislation.

The Committee's recommendations on legislative change all related to the Immigration Act.

The Government has already indicated its intention to review the processes of concern to the Committee once Mr Zaoui's situation has been resolved.

The relevant concern of the Committee in relation to Corrections was that the time inmates spent on non-voluntary segregation (NVS), whether they are immigration, sentenced or remand detainees, and their conditions, be enhanced.

The Corrections Bill contains a provision for external review of NVS after 3 months. The Department intends to review the rules and conditions of NVS over the next year. We have not yet determined the scope of that review. In any event, it is rare for immigration detainees to be placed on NVS.

Regards,

Department of Corrections

*** ENDS ***

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