A new prison planned for South Auckland will be built and run in conjunction with the private sector, the Government has announced.
The Government says there is continued pressure as the number of prisoners is growing and an extra 2,270 beds are needed by 2019.
The 1000-bed prison in Wiri is due to be operational by the end of 2014, with construction work beginning in the second half of 2012.
Infrastructure Minister Bill English says by using private companies, estimated savings of between 10% and 20% can be made over the 25 to 35-year life of the proposed contract.
Mr English says at present, it costs an average of $91,000 to keep a prisoner for a year and the Government needs to look at ways of getting that cost down.
There will be an open tender process, which will begin in the latter part of this year, and a Request for Proposal issued before mid-2011.
Mr English says it will not be clear what savings can be made until the project has gone out to tender. If the tender does not come up with a cheaper private option, the Government will build and run the prison itself.
If the private consortium fails to deliver against the requirements of the contract, it will incur financial penalties.
Mr English says any company involved will have to comply with New Zealand laws and regulations, and prisoners will remain the responsibility of the Department of Corrections' chief executive.
Mr English says the chief executive will drive what he calls a "rigourous performance regime", with a number of measures to ensure that standards are being maintained.
These include prison monitors as the chief executive's "eyes and ears", ombudsmen continuing to investigate complaints, and prison inspectors ensuring the humane and safe treatment of inmates.
Corrections Minister Judith Collins on Wednesday gave an assurance that the prison at Wiri will still come under government control.
Ms Collins says overseas experience shows private prisons are not just cheaper to run, but also more innovative in the way they deal with inmates.
Meanwhile, official papers obtained by Radio New Zealand News make it clear the Treasury's infrastructure unit has been putting pressure on Corrections. The unit complained in October last year that the department was not moving fast enough in developing privately-run prisons.
Union sceptical private prison will be cheaper
The Corrections Association says the experience with the private management of the Auckland Central remand prison proves privately-run prisons are not cheaper than those run by the state.
President Beven Hanlon told Checkpoint the costs for the remand prison, which was run privately from 2000 to 2005, were higher than when the facility was state-run.
Mr Hanlon says that was even after staff numbers were increased and prison guards given a pay rise after management of the prison returned to state control.
