Serco, which will operate New Zealand's first prison to be run as a public-private partnership says it takes the responsibility seriously.

"We recognise the trust placed in us", Serco managing director Paul Mahoney said at a sod-turning ceremony for the new prison at Wiri in south Auckland.

The 960-bed prison will be located next to Auckland Region Women's Corrections Facility.

The partnership heralded a "culture shift" for Corrections, Minister Anne Tolley said.

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It will be owned by the SecureFuture consortium and largely run by Britain's Serco Group - the private prison operator which has had to improve its operations at Mt Eden prison after failing to meet almost half its performance targets in its first year.

SecureFuture will face financial penalties if it fails to meet custodial, rehabilitation and reintegration measures.

"SecureFuture must perform at least 10 per cent better than Corrections," Ms Tolley said.

Fletcher Building has signed a $300 million deal with the Government to design and build the prison, which is due to be finished by mid-2015.

The SecureFuture consortium is made up of Serco, John Laing Investments, InfraRed Infrastructure and ACC.

The 25-year contract to run the prison is worth $840m, which Ms Tolley has said will save the Government $170 million.

Ms Tolley said the prison was a welcome boost for the local economy during difficult economic times.

1000 staff will be involved in the construction of the prison, which when completed will be the largest men's correctional facility in the country.

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An additional 300 people will be employed in the day-to-day operation of the prison.

Having two prisons side by side made sense, as many of the offenders the new prison would house were from the surrounding area, Ms Tolley said.

"There's good links with the local community."

Privately run prisons have had a patchy run here so far.

The first, the Serco-operated Mt Eden Correctional Facility, was told to lift its game in April after a series of mistakes, including two escapes from custody.

A report this week on Serco's first year in charge of the facility found it did not reach 18 of 37 targets in the year to June.

Corrections noted the company was showing improvement, failing only three of its 37 targets last month.

Ms Tolley hoped any operational issues with Serco would be resolved by the time the prison opened in two years' time.

"I think we all recognise that the first year of operation for a prison is a shake-down period.''