Cost of new Waikeria Prison swells as public-private partnership falls out over big Covid claim

Construction of the new Waikeria Prison in Te Awamutu as of January this year. Photo / Brett Phibbs

A dispute over a claim that could add more than $200 million to the estimated $890m cost of the Waikato Waikeria Prison redevelopment could be headed for court if the public-private project partners can’t resolve it.

The issue dates back to 2022, when the private contractor for the Department of Corrections’ new 500-bed prison and dedicated 100-bed mental health and addiction facility claimed $430m for the alleged effects of Covid on progress.

The claim by the contractor, international firm Cornerstone Infrastructure Partners and its Australian subcontractor CPB, sought an extra 793 calendar days, or two years and 63 days, to finish the project and monetary relief to offset delays caused by the pandemic and its effects on the supply chain.

The expansion project for the Te Awamutu prison, estimated in 2022 to cost $890m, was announced in 2018 and had been due to be completed in 2022.

Herald inquiries show the project’s independent reviewer Aecom “largely dismissed” relief sought by the contractor.

However, in April 2023, Corrections and CIP and the construction subcontractor entered into a project support agreement (PSA) “to enable the completion of the facility in a timely and cost-effective manner”.

The PSA had a maximum value of $225m.

“The PSA includes gainshare arrangements that incentivise the completion of the facility by November 30, 2024 and has resulted in the consortium submitting a reduced claim on a without-prejudice basis which replaces the $430m claim,” Corrections said in a statement to the Herald.

“Through the PSA, we agreed to pay up to a maximum amount of $225m to achieve the completion of the works. Corrections is working through the revised claim with the consortium, and as these discussions are ongoing and without prejudice, we are unable to provide further information at this time.

“As there is a significant difference in the respective party’s positions on the value of the claim, both parties are actively engaged in an attempt to resolve the matter as soon as possible to avoid it being escalated through formal dispute and litigation.”

Corrections deputy chief executive of infrastructure and digital assets Alastair Turrell, in a response to a Herald Official Information Act request, said “the aggregate of the [two] elements [the PSA and the Covid claim] will form the final capital construction cost”.

“Construction of the initial redevelopment of 600 beds is scheduled to be completed by November 30, 2024 and will be followed by a commissioning phase where systems, facilities and staff will be tested to ensure the prison is ready to open safely,” Turrell said.

“It will take up to a further six months before this capacity becomes operational.”

Subcontractor CPB has been approached for comment.

A record of payments to the “main contractor” provided by Corrections under the OIA shows between March 25, 2022 and March 18 this year, a total of $5.46m has been paid as “Covid settlement payment 2022″.

The response shows the new prison includes a large sports area comprising a gym, multi-purpose classroom, inside court, outdoor sports field, running track and outside courted areas. Prisoners would be encouraged to use this facility to improve their basic health and fitness and “develop interpersonal relationship skills”, the papers say.

A “programmes facility” for large numbers of staff, partner agencies and contracted providers involved in treatment and learning and reintegration activities is also included in the development, along with a health service facility for prisoners.

The dedicated mental health precinct offers 96 beds across two buildings for prisoners with mental health and addiction issues. This facility has external activities track with fitness stations and seating at regular intervals within a secure zone.

A central kitchen, bakery and staff cafe and laundry facility will provide prisoners with employment, work experience and qualification training opportunities.

The coalition Government this year announced plans for a further 810-bed extension at Waikeria Prison, which will eventually have the capacity for 1865 beds.

Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.