Corrections Department chief executive Barry Matthews has threatened guards that existing prisons will be fast-tracked into private management unless they agree to cram in extra offenders by "double-bunking".
The threat comes as the rising prison population reaches crisis point.
The Government is putting the armed forces on standby to take over the jails should the guards not agree to double-bunking.
Forecasts show the jails will be full and unable to take any more offenders by February.
The problem is so bad that officials have also proposed letting more offenders out on parole or to finish their sentences on home detention.
The best solution within the February deadline is putting prisoners two-to-a-cell by double-bunking - which the prison officer's union is refusing to do for safety reasons.
Under the present contract, the guards in the Corrections Association must agree to double-bunking before it can be introduced.
In an email to guards, Mr Matthews said there no money was available for wage increases and if they did not agree to double-bunking he would have no choice but to get the Government to introduce "private management [to] some established prisons".
Corrections Association president Beven Hanlon said this would mean guards would lose their jobs, and the new private managers would hire only those who agreed to double-bunking.
The Government has previously said the private management of prisons would initially start with newly built prisons, although the bill introduced to Parliament does not prevent the takeover of an existing prison. It is due to come back to Parliament for its final reading shortly.
Details of Corrections' strategy to deal with the prison population crisis emerged yesterday in the Employment Court, where the union is fighting the introduction of double-bunking in four prisons.
Senior Corrections manager Vincent Arbuckle said the department had briefed Corrections Minister Judith Collins on introducing private management, using the armed forces, or introducing legislation that would override the union contract.
Under questioning from Judge Graeme Colgan, Mr Arbuckle also said options put to the Government to alleviate the overcrowding crisis included home detention in the final stages of a sentence, or changes to parole.
Justice Minister Simon Power declined to comment on this yesterday.
Ms Collins said she had no intention of fast-tracking private management into prisons as Mr Matthews suggested.
She also did not want a lock-out of guards, and said the armed forces were in place only as a contingency.
Ms Collins would not comment when asked if a pay rise for guards in exchange for them agreeing to double-bunking was possible.
Labour law and order spokesman Clayton Cosgrove said Ms Collins was presiding over a department "at war with itself" and she needed to ease the tension between management and staff.
The contract for the Corrections Association's 3000 members runs out at the end of the year, meaning a lock-out or strike will coincide with the prisons reaching maximum capacity.
There are a record 8509 prisoners in jails, and a total of 9131 beds available.
The prison population is increasing by 500 to 1000 a year.
Prisons given two-to-a-cell ultimatum
Barry Matthews says he has no choice. Photo / Mark Mitchell
