No guarantee Serco's Mt Eden contract will be renewed, minister says

Corrections Minister Sam Lotu-Iiga says there's no guarantee Serco NZ will have the second half of its contract renewed to manage Auckland's remand prison, Mt Eden, after he put the company on notice in a meeting with senior executives today over claims of organised fights, drinking, illicit drug use, access to smartphones and allegations of a prisoner injury by inmates causing death.

Mr Lotu-Iiga has already launched a departmental inquiry, including the Office of the Ombudsman, into the allegations, and today told Parliament Serco "needs to improve its performance" based on the claims that have emerged. The prison operator is in the period where it can renegotiate the terms of its 10-year $300 million contract with the Crown, including whether to extend the deal beyond its 2016 breakdate. When asked whether he would renew the contract, Lotu-Iiga said: "I can't guarantee that that will happen."

"We will get the findings of the review in terms of the incidents that were reported and we will make decisions, going forward, that will be based on their performance," he said.

Serco was tracking well in the nine months through to March 31, meeting 31 out of 37 performance measures, and hitting 13 of 14 key performance indicator targets that grant it access to performance bonuses.

Mr Lotu-Iiga told Parliament Serco faced deductions totalling $300,000 for the 2014/15 financial year relating to incidents including insufficient staffing levels, mixing accused prisoners with other prisoners, minimum entitlements and incident notification. He said Serco management hadn't told him of any new incidents in his meeting with them today.

The New Zealand unit of the prison manager lifted annual revenue 9.7% to $37.4 million in calendar 2014 but that increase was smaller than its 10% increase in direct employment costs to $20.1 million and a 21% rise in indirect employment costs to $5 million. It reported an annual loss of $2.6 million, including a $1.5 million impairment charge on mobilisation and bid costs.

Serco began managing the newly-built Wiri prison in May this year and is expected to operate the facility for the next 25 years.

(BusinessDesk)