The original service contracts for Fulham and Port Phillip were due to expire in 2017. DJR recommended negotiating long-term contract extensions with the incumbent operators, partly because other options would involve significant costs to 'buy out' the site leases held by the operators which extended for many years beyond 2017. DJR maintained alternative options, such as re-tendering the contracts, as a fallback in case the negotiations did not achieve a value‑for‑money outcome.

Achieving sustainable cost savings is one reason governments choose to outsource the operation of prisons to private companies. Demonstrating that prisons can operate at a lower cost while maintaining quality standards can support efforts to improve efficiency in the public prison system.

We have used CV's data on prison costs, including operating costs directly attributable to individual prisons. For public prisons, this includes labour, locally incurred supplies and consumables expenses. For private prisons, this includes contract payments.

Prisons are complex and high-risk environments with constant threats to safety and security. Port Phillip and Fulham are integral to the safe and secure operation of Victoria's prison system—in December 2017, they housed around 26 per cent of the state's male prisoners. The private operators and CV both have responsibilities for maintaining and improving the safety and security of these prisons.

The Act requires DJR to monitor the performance of all correctional services to achieve the safe custody and welfare of prisoners. DJR is accountable to the community for the operation and cost of Fulham and Port Phillip. Contracting private companies to operate prisons does not lessen the state's duty of care to prisoners.

The Victorian adult corrections system includes more than 50 community correctional facilities, 14 prisons and a transition centre. Figure 1A shows the prisons and transition centre, along with their operational capacity, at December 2017.

Figure 1A
Victoria's prison system

Victoria's prison system faces significant challenges and risks:

Figure B1
Legislation impacting the sale and management of surplus land

We have consulted with DTF, DELWP, DET, DHHS and VicTrack, and we considered their views when reaching our audit conclusions. As required by section 16(3) of the Audit Act 1994, we gave a draft copy of this report, or relevant extracts, to those agencies and asked for their submissions and comments. We also provided a copy of this report to the Department of Premier and Cabinet.

Responsibility for the accuracy, fairness and balance of those comments rests solely with the agency head.

Responses were received as follows:

DTF

Each year, the government sets targets for the sale of surplus land. If agencies meet their targets, they can access up to 10 per cent of the proceeds. This system aims to provide an incentive for agencies to release land for sale in a timely manner.

The sale of surplus government land provides a range of possible benefits, including: