Serco slapped with $8 million bill from Government

Corrections Minister Judith Collins said today that the total cost of this action, combined with outstanding performance notices, was $8 million. Photo / NZME

The Government has charged Serco $8 million to cover the costs of resuming control of Mt Eden Corrections Facility last year.

The Department of Corrections invoked a "stepping in" clause in Serco's contract in July amid concerns of organised violence and injuries to prisoners at the jail.

Corrections Minister Judith Collins said today that the total cost of this action, combined with outstanding performance notices, was $8 million.

She also confirmed that the Corrections Department would continue to manage the prison until the end of Serco's contract in March 2017.

The British-based company would only provide staff at the jail, Mrs Collins said, and would make no profit during this period.

"This is a pleasing outcome as it both recovers costs and gives more certainty over the future management of the prison," she said.

Corrections chief Ray Smith decided to return the Mt Eden prison into his department's control in response to high rates of violence and drug use among inmates.

Serco received several performance notices for these incidents, which meant it was unable to get its full performance-related bonus.

In December, Mr Smith confirmed that Serco's contract to run the prison would not be renewed at a break point in March 2017.

Ms Collins said Corrections would continue to manage the prison after Serco's contract ended, and a longer-term plan for the prison would be determined at a later date.

Serco signed a $300 million contract to manage the prison for 10 years in 2010.

The contract included a clause which allowed the contract to be reviewed, and potentially ended, after six years.

On top of the contract, the company was entitled to $1.2 million a year in performance-related fees.

In July, $565,000 was deducted from this performance-related payment because the company had failed to reduce serious assaults and provide safe custody to prisoners.

It was fined a further $300,000 during the 2014/15 financial year because of understaffing, mixing accused prisoners with convicted prisoners, and other offences.