PricewaterhouseCoopers will look into cost blowouts in the building of two new prisons which together are $140 million over budget.
Corrections Minister Damien O'Connor ordered a review in January as he revealed that Springhill Prison in North Waikato cost $380.3 million - $97.7 million over estimate - and Otago's new prison at Milton was costing $217.9 million, $43.1 million more than the Department of Corrections had forecast.
He called in the Treasury and the State Services Commission (SSC) to carry out an independent review.
The SSC yesterday released the inquiry's terms of reference and announced it had appointed Murray Coppersmith to come up with answers.
State Services Commissioner Mark Prebble said Mr Coppersmith had been asked to report and make recommendations on:
* The key reasons for the cost escalations, identify lessons learned and recommend systems to ensure problems were not repeated;
* The Department of Corrections' processes used to design, cost, procure and schedule the projects and assess these against good practice;
* What reporting to ministers was appropriate for capital projects of this size and how the reporting on these projects met the criteria.
Mr Coppersmith's report was expected at the end of June, Dr Prebble said.
The Springhill and Otago prisons were two of four prisons for which the Cabinet approved construction in 2000. Both of the prisons are due to be opened next year.
The other two prisons were one in Northland, which opened in March last year, and a women's facility at Auckland. These two prisons are not part of the review.
Mr O'Connor said yesterday that the review would provide an excellent opportunity for an independent person to scrutinise the prison project, which he said was one of the biggest construction jobs in New Zealand.
"This is a transparent process. I'm confident Mr Coppersmith and his team will do a thorough job and highlight if there were any flaws in the way the project was managed."
However, National law and order spokesman Simon Power said a full review of the prisons system was needed.
"I am not convinced that an inquiry into the construction costs of two prisons is going to restore the public's confidence in the management of our prisons," Mr Power said.
Other issues such as overcrowding, transportation of prisoners, escapes, low staff morale, and the availability of drugs, cellphones and R-rated movies in prisons were among issues he also wanted looked at.