Corrections Minister says Government shouldn't have pay for substandard Chinese-made prison beds as contract terminated Collette Devlin20:40, Feb 25 2020
Corrections has terminated a contract with a company that was building Chinese-made prison cells. The department now looks set to fork out more than $30m to find a new contractor and deal with legal disputes as Australian company Decmil claims it was an "unlawful termination". A Corrections briefing prepared for the Justice Select Committee states there was also the possibility of further funding being required under worst-case scenarios.
Corrections Minister Kelvin Davis said if it was not up to standard – the Government shouldn’t be paying for it.
In 2017 Decmil won the tender to supply "rapid build" prison units that have been mired in delay and saw deficiencies in construction.
Corrections Finance, Property and Technology deputy chief executive Andrew Robertson confirmed to Stuff that the contract was terminated on Tuesday. Unfortunately, Decmil failed to meet schedule and quality requirements, mainly due to how they have organised and managed their work in New Zealand, he said. Decmil also encountered quality issues with the Manus Island refugee processing and detention centre it delivered to Papua New Guinea for the Australian government.
espite significant assistance from Corrections, the programme was running 12 months late and work delivered to date was not yet fully fit for purpose. "Before coming to the decision to terminate the contract, we attempted to negotiate an end to the agreement with significant concessions offered to Decmil in order to find a solution that was workable to both parties, however, this was unsuccessful." Corrections Minister Kelvin Davis told Stuff, if it was not up to standard – the Government shouldn't be paying for it.
"The modular units must be built to the highest safety standards, and we cannot continue to accept anything less than the high standards we have put in place for their construction, safety and security requirements." Corrections had kept him informed of the ongoing issues and every attempt had been made to negotiate an end to the agreement with significant concessions offered to Decmil, in order to find a solution, he said. Despite further delays in the delivery of the modular units, he believed the right decision was made to ensure that the highest standards of security were maintained and public safety would not be put at risk. DECMIL TOLD TO DEMOBILISE Corrections says Decmil was now required to demobilise at all five prison sites in the programme. Each site would be secured and protected until work resumes under one or more new main contractors. A spokesman for Decmil told Stuff the company 'stood strong' to complete the project and honour its obligations with the supply chain. He said taxpayers were now likely to face a higher cost. New lead construction contractors were yet to be sourced and appointed but Corrections expected that it may take three months to start work. Initial indications were that completion of the first units could be expected in the middle of this year, with completion final units in June 2021. A Department of Corrections briefing states funding of $406.1m, plus a tagged capital contingency of $30m and an operating contingency of $12.5m, has been approved to deliver these units and the site-specific enhancements required to support the capacity increase. Decmil subcontracted the manufacture and fit-out to the Chinese-based company CIMC. The project was in response to a rapid and unexpected increase in the prison population. Decmil were engaged by Corrections in 2017 to deliver three modular prisoner accommodation units with a total of 366 beds at Rolleston and Tongariro prisons. Their contract was varied in 2018 to provide an additional five units at Christchurch Men's, Christchurch Women's and Rimutaka prisons. The briefing, published this week, states that during quality assurance trips to manufacturing facilities in China, Corrections staff identified a number of issues relating to the manufacture of its modular units. It says that since February 2018, officials made 31 trips to the manufacturing site at a total cost of $133,403. It also explains how 14 modules sustained damage during transport, when lashings holding them in place on the ship came loose at sea, damage to one module when a truck overturned during delivery, and minor surface rust to another module resulting from a weather-proof cover coming off in transit. Corrections said all damage was the responsibility of Decmil and it needed to be remedied at its expense, in order to achieve practical completion under the contract. "There have been elements of unsatisfactory performance in New Zealand, which has now resulted in Decmil failing to meet contractual completion dates .... the key deficiencies have been in programming, design, consenting, construction methodology, management of subcontractors, and quality assurance," the report says. The deficiency in construction methodology had resulted in damage to imported modules in New Zealand, which in turn had required significant remedial work. Despite providing extensive support, Corrections said it had "low confidence" around Decmil's ability to meet the required quality standards, and to deliver. "It has been noted that Decmil has an increasing focus on cost recovery, which appears to be to the detriment of its work on site," the report says. It was considering ending the contract in December when the report was complied and had briefed the Ministry of Business, Innovation and Employment, the Ministry of Education and the New Zealand Infrastructure Commission on the challenges with Decmil and asked to consider alternative delivery options. "Unless there is a significant and sustained improvement in Decmil's performance, levels of certainty around delivery timeframes and the cost to complete will remain low. Terminating the contract is likely to result in an initial impact on time and cost to engage a replacement." Should the contract be terminated, Decmil would be required to transfer all materials, rights and benefits to Corrections, the report says. The contract allowed Corrections to continue working with Decmil's subcontractors to complete the works, and where Decmil had failed to make payment to subcontractors, Corrections may pay subcontractors directly and deduct such sums from any money owing to Decmil. Provisions within the contract also allowed Corrections to pursue various avenues for the recovery of costs relating to the contract termination and completion of works.
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