Prison bidders insured if Nats lose

Up to $5 million has been set aside to recompense companies bidding for the contract to build and run a private prison at Wiri, Auckland, should National lose the November election.

The money, which has yet to be approved by the Cabinet, is to instil confidence in public private partnerships (PPPs) and acknowledge the political risk of the project not proceeding if Labour wins, said Jeremy Lightfoot, PPP director for the Corrections Department.

Bid costs can run into the millions of dollars and the compensation package "could be two, four, five million" dollars, said Mr Lightfoot, who was headhunted from Britain, where he has significant private-sector experience in PPPs, to lead the project.

The compensation package, should the project not proceed, would be split between the three shortlisted consortiums: GLM, Secure Future and NZCS.

The consortiums will receive a request for proposal next month, a preferred bidder is likely to be identified by the time of the election on November and 26 a contract signed by July next year.

Mr Lightfoot said he was very pleased with the quality of the bidders.

GLM's bid is headed by G4S Australia, a subsidiary of a British-based firm, which is the biggest supplier in revenue terms of security services in the world. It operates in Afghanistan and Iraq and, Mr Lightfoot conceded, its record would likely come under scrutiny as a result.

GEO Group Australia, part of the NZCS consortium, was backed by a United States firm with "international reach" and was a specialist provider of private prisons in the US and Australia, he said.

Secure Future was backed by Serco, the British company that had won the contract to run Auckland's remand prison, although Mr Lightfoot warned that it should not be considered a front-runner just because it was already operating in New Zealand.

He said Serco had teamed with John Laing Investments, owned by Henderson Equity Partners, which had a strong record in PPPs and other long-term infrastructure investments.

People could take it as read, said Mr Lightfoot, that the contract would ensure compliance with the key criteria of a secure and safe prison. Public safety would be paramount.