Love for Life

Jailhouse Rocks, Say Investors
by Adele Ferguson
The Australian
24th September 2007 - Are These Signs Of Things To Come?

[Are These Signs Of Things To Come? - Are They Planning To Cause An Event Leading To A Military Curfew And While The Chaos Rings Very Loud And Clear, The Establishment Will Be Very Busy Locking Up Every Man, Women And Child Who They Perceive Is A Major Threat And Or Nuisance To Them?
I Think So. Arthur Crtistian]

Jailhouse Rocks, Say Investors
by Adele Ferguson
The Australian Newspaper
24th September 2007 06:00am

MANAGING prisons is becoming big business. Just ask investors in the long list of multi-billion-dollar companies in the US which specialise in managing prisons or the property trusts with a correctional services arm and the investment banks that finance the prisons.

The trend is about to sweep Australia. Companies such as Macquarie Bank, Babcock & Brown, Westpac, ABN AMRO and construction group John Holland (a subsidiary of Leighton), are salivating at the prospect of getting deeper into an industry that offers double-digit growth, a long-term lease paid by the state government, cheap labour, a monopoly business and handsome performance bonuses for services rendered.

Australia has dabbled with privatising prisons over the past two decades, with Victoria operating five prisons, or two-thirds of the prison population, with some form of private sector investor.

But with the various state governments in Australia slow to build new prisons, and the inmate population growing at an average of 10 per cent a year, prisons are bursting at the seams.

Indeed, Australia's prison population has increased by almost 50 per cent between 1993 and 2003, placing pressure on governments to procure and deliver new male, female and juvenile detention facilities, as well as remand centres and specialist facilities for the mentally ill.

Infrastructure Partnerships Australia chairman Mark Birrell says governments should be encouraged to look at the private sector in social infrastructure. He said: "The Victorian auditor-general found that privatisation has enabled the Government to achieve significant justice reform.

"Through privatisation, the Victorian Government has transferred significant financial and operational risk on to the private sector through contractual obligations which are backed up with significant sanctions for non-performance."

The grand-daddy of private prisons will come from South Australia, following a decision by the SA Government a few months ago to call on the private sector to build, own, operate and manage a new $517 million-plus prison cluster in Mobilong, near Murray Bridge in SA.

According to the memorandum of understanding put out by the SA Government, the only thing the Rann Government doesn't want the private sector to do is hire the prison warden.

Everything else, from building the complex to feeding and rehabilitating prisoners will be outsourced to private companies.

The decision is part of the Rann Government's grand plan to close down Yatala Prison, which houses terrorist David Hicks, Northfield Women's Prison and the Magill Youth Detention Centre, and get the private sector to relocate the facilities, along with a pre-release centre and a mental health centre, into a one-stop shop owned and run by the private sector at Mobilong, near Murray Bridge in SA.

There is also talk in the private sector that WA is considering a cluster model, similar to that being tendered in SA, Victoria is looking at new prisons, and Queensland is also considering the private sector building a cluster of prisons at Gatton in rural Queensland.

Prison contracting has a long history in the English-speaking world. As head of Serco Institute Gary Sturgess says in a case study on the custodial sector: "Until the late 18th century, the management of local prisons in many parts of England was 'farmed out', and the incarceration of convicts in hulks on the Thames and their transportation to North America and Australia were also undertaken by private contractors."

It is understood that at least four groups are lining up to bid for the public private partnerships (PPPs) project in SA. These include the Torrens Correctional Partnership, comprising investment bank ABN AMRO, Bilfinger Berger Concessions, Baulderstone Hornibrook and United Group Services. Another consortium comprises Macquarie Bank and GEO Group, Westpac is involved in another consortium, and Babcock & Brown, Multiplex, Hansen Yunken and Spotless have joined forces to try and win the public private sector partnership.

Bilfinger development manager Noel Phelan says his company won contracts in Victoria for two PPPs which opened last year: Marngoneet Correctional Centre and a 600-bed men's maximum security metropolitan remand centre, and confirmed his company is in the Torrens Correctional Partnership keen to win the SA project. Phelan says for each consortium partner there is a different commercial lever. He says from a private sector perspective, the focus is on innovation and finding the smartest solution that delivers the lowest whole of life cost, rather than the lowest upfront capital cost.

Tim Cave, senior advisor on project delivery at Sinclair Knight Merz, believes there will be more PPPs throughout Australia as it is a win-win for governments and the private sector.

"The government can get the facilities it wants in a fully maintained state on a leasing arrangement, and the private operators get the certainty of a 20 to 30-year arrangement with a stable client," he says.

Cave says other than the first Victorian PPP, the women's correctional centre, PPPs have had a good track record. "I think the price was quoted too low and the state had to buy it back," he says.

The centre changed its name but it is still privately funded and its operations are provided by the public sector.

In Victoria last year, two private sector prisons opened and last week one of the biggest privately owned prison companies, and more recently, US-based GEO, won a five-year contract to manage and operate Queensland's high security prison, Arthur Gorrie Correctional Centre.

GEO Australia has managed the high-security correctional centre since its opening in 1992. The five-year agreement is effective from January 1, 2008, to December 31, 2012, with the option of a five-year extension. It is expected to generate more than $24 million a year in revenue.

The new contract, and added capacity, will result in a further $3 million contract revenue in the first year.

GEO also has a contract to run Fulham Correctional Centre in West Sale, Victoria, and Junee Correctional Centre in Junee, NSW, and now has both US (mainly in the south) and international operations (13 per cent of revenue comes from Canada, Australia, South Africa and Britain).

It also has a side business, GeoCare, which manages government mental institutions.

Comparing prisons is difficult, and that leaves plenty of ammunition for critics of private jails, who argue that big prison management companies, especially in the US, distort the criminal justice system by lobbying for tougher sentencing. As Stephen Nathan, the editor of Prison Privatisation Report International, says: "It's capitalism 101. You've got to expand your markets. You've got to fill your beds."

Nathan says more than 17 per cent of Australia's inmates are held in private prisons. Next comes Britain, with 10 per cent and America at 7 per cent. These markets are dominated by big prison services firms such as GEO, MTC and Serco, which claim that private jails are better, cheaper and more accountable in both construction and management.

Link to this article: http://www.news.com.au/business/story/0,23636,22468296-462,00.html