"You get problems if the partners aren't up to speed. Failure to understand the risks and the required outcomes for the client compromises the deal -- and that is fundamental for successful PPPs."
Working under a new model the Government devised for public private partnerships (PPPs) has been a learning process for Fletcher Building. The consortium behind the Wiri Prison project is the first to truly test the new Treasury model, requiring them to take an approach which differs from their previous experience.
"This project was slightly different for us -- in the case of major roading projects, Fletcher have been the ones who tend to lead the consortium," points out Munkowits. "In the case of Wiri we needed an operator led solution given a key outcome for the client was to reduce recidivism.
"We believed that with the right operator generating an appropriate design brief we could design a facility that would align with the operating solution."
Serco -- the private operators presently running Mt Eden prison -- will face stiff financial penalties over the term of the contract if their performance isn't up to scratch. They'll be assessed on criteria like recidivism rates, escape numbers, positive drug tests and prisoner management, and they know full well that the Government means business.
Serco failed to meet 40 per cent of its initial performance targets in their first year of running Mt Eden prison -- resulting in a more than 60 per cent reduction in end of year profit.
Munkowits explains, "The penalty regimes for the operator are significant, although overall the risks are shared with all the participants. We don't take any of the operational risk, but it's no different to any other contract -- you finish it, you generally have a 12-month defects liability period and a 10-year warranty period effectively within the normal building code requirements.
"We're not worried how they look after prisoners, we certainly have to make sure that building stands up to what a prison does, what prisoners do. We've always got that exposed, that's nothing new -- we don't have anything exposed to the operating model.
Carl Munkowits and Donal Lynch.
"A PPP is a commercially sophisticated hard money contract -- so it's a tough environment. But it also promotes collaboration through structured engagement with the client to ensure the right outcomes are achieved."
Fletcher has to ensure the construction of the prison is complete by February 15 next year, initiating a three-month handover period after which Serco will take the reins. That's a quick turnaround time for all parties involved. The signing of the contract only took place in September 2012 -- giving the consortium 2.5 years to deliver on a substantial infrastructural development.
"There's certainly incentive for all parties to be smart about how we deliver the project as efficiently as possible so it's successful for all of us involved," says Donal Lynch, Fletcher's manager for the Wiri Prison project.
"During a traditional tendering process, consultants complete their design, subcontractors then price it and pick the bones out of it before coming back with alternate solutions. The consequence is that the timing can frustrate and delay a project, " he says.
"Doing the Wiri PPP Project, there is a different relationship that is established. We've got the operator, the consultant team and the building contractor on day one to work with the designers, so we've got a deeper understanding of the design from the get-go. We're engaging the designers, the consultants, some of the key primary subcontractors long before we get on site.
"We're all here at the table, our thinking is happening up front and we're running with what is an agreed design."
Getting the right people around the table from the early stages has proved to be a coup for all of the parties involved. This had paved the way for the efficiencies and innovative approaches to delivering infrastructure that were mooted from the outset of the new PPP model.
"Having a bit more up-front foresight and information around how the project is going together and sharing information early can pay dividends later in the game," says Lynch.
"One of the real advantages of the model is the opportunity for subcontractor input in design.
"Some of the usual issues you expect in a traditional contract, where subbies are looking to clarify and rationalise the design, a lot of that can be resolved before we start work. They're working closely with us throughout the process and that's helped in getting a more positive result going forward."
Designed to promote rehabilitation
Standing at the gates of Wiri Prison, you'd be forgiven for thinking a new school campus was under construction. The bright colours and weatherboards form the shell of a modern-looking facility, with the typical dressings required of a prison cleverly disguised in the architecture of the buildings.
"It's an innovative design throughout," says Donal Lynch, project manager at Fletcher. "We want to rehabilitate prisoners so that they can re-enter society as productive citizens. This isn't about locking people up and throwing away the key."
The operation and design of the prison breaks out of the traditional mould. But with an incentive-laden contract for operators Serco, an innovative approach is required if they're to reap the financial rewards from the programme - a significant amount of which is tied to curbing re-offending rates.
Inmates will have computers in their cells, with free-to-air television available in addition to educational resources to complement the various up-skilling programmes on offer. There are a range of health and education centres as well as an industries hall, where Serco hopes to attract private businesses to set up operations and provide new pathways and work programmes for inmates.
The facility's design is intended to mirror a prisoner's journey towards release, with new inmates assigned to one of three medium security housing blocks at the far end of the grounds.
As the inmates make progress they are awarded increased freedoms, working towards a place in the low-security residences.
The residences closely resemble student flats, with prisoners living in small housing units with their own bedrooms, a kitchen and a lounge. Each of the residences is equipped with water and power meters so tasks like paying bills become ingrained as part of an everyday routine.
The inmates will live and cook together and will be allowed a high degree of autonomy. Some of the inmates at this stage will be leaving the prison to take up jobs on the outside before returning to the grounds at night.
"It's about putting the inmates in a position to succeed once they leave Wiri - equipping them with tangible skills that will hopefully see them not returning," says Lynch.
Wiri Prison
• The new Wiri Prison -- a 960 bed facility nearing the end of construction in South Auckland -- will be built and managed over the course of its 25 year life by a private consortium.
• The $900 million project is being led by Serco -- the private operator presently running Mt Eden Prison -- in conjunction with Fletcher Construction, infrastructure investor and developer John Laing, ACC and Spotless.
• The group is responsible for the full design, construction and financing of the prison.We're all here at the table, our thinking is happening up front and we're running with what is an agreed design.
