The benefits of private operators

The left wing moans endlessly about privatising the operation of things like prisons and hospitals but they over look the benefits of the system….like penalising them when things go wrong.

The operator of Mt Eden prison has been fined $150,000 after a prisoner escaped.

The company, Serco, and the Corrections Department have carried out a review of security after notorious inmate Aaron Forden escaped from the prison in the early hours of October 10 last year.

The two groups say both operational security and the physical security of the building infrastructure have now been enhanced.

Department of Corrections Chief Executive Ray Smith says a portion of the payment to Serco for the management of Mount Eden prison is performance-related.

He says it’s appropriate to levy a financial penalty for the escape.

If the state was still operating the prison there would be no penalty and no corresponding incentive to conduct a review and improve security as a result. The problem with the astate operating anything is a complete lack of accountability. Serco has now found out what accountability in the private sector looks like.

There is nothing like a short sharp shock to the bottom line to improve performance.


THANK YOU for being a subscriber. Because of you Whaleoil is going from strength to strength. It is a little known fact that Whaleoil subscribers are better in bed, good looking and highly intelligent. Sometimes all at once! Please Click Here Now to subscribe to an ad-free Whaleoil.

  • Pingback: An excellent incentive | Kiwiblog()

  • Guest

    I completely agree that this is a good thing, though wonder how much this $150k fine is vs. the costs associated with his re-capture?

    Ideally the provider should have to pay both.

    • Sarrs

      At least in this case the Government gets some contribution towards the recapture costs – it’s no longer being paid out of the same pair of pants, but a different pocket. 

    • peterwn

       No. A ‘penalty’ as such is not enforceable under contract law. Corrections and the prison contractor can always agree to have a ‘liquidated damages’ clause covering escapes – this being a pre-agreed quantum of damages if a certain adverse event occurs. Theoretically maximum economic efficiency occurs when the damages equate to the costs of re-capture plus the cost of keeping the escaper in custody for another few months. The contractor will factor this into his tender price and hence stand to make extra profit if there are no escapes. The contractor similarly would give bonuses to senior staff if there are no escapes. It is unlikely that this would occur in the public sector since unions, left wingers, etc would call ‘foul’ if a manager collected too much in the way of bonuses.

      Any ‘double dipping’ by the Government would be inappropriate. It would also ‘over-signal’ custody needs to the detriment of rehabilitation – chaining prisoners to the wall is just not acceptable in the 21st century.

      Incidentally Serco is a multi-faceted contracting organisation who seem to specialise in the management of large workforces who may be driving buses or cablecars (eg Adelaide, and Wellington until a few years ago), running prisons (UK and Auckland), support operations at military bases, etc.

  • Euan Rt

    How about the gummint offers prisoners a kickback on successful escapes. Then when they go to claim it, they could be captured again. 

  • Richard B. (formally poorman)

    You would also say that SERCO has now plugged the hole that allowed the escape.
    It would be a 5 year review with recommendations to improve if the state was still running it.
    A WIN-WIN if you ask me.

  • Sweetd

    Makes me think that if this had been a state prision, or anything state run anything it would have been a systemic problem that has now been fixed….until the next time.

    • Gazzaw

      Yep. Internal enquiry. Statement from Corrections that the staff had learnt from the experience, measures in place but unable to expand on that for security reasons.

  • jay cee

    privately run prisons maybe well run, but its a bit of a stretch to say that private enterprise is the panacea for all public services. national got rid of all those “form fillers” in our hospitals the main story in this mornings herald showed the upshot of that idea.