Reading the fine print: contract governance in the privatised Victorian Prison Sector 2016-184.1

Since the early 1990s the Australian State of Victoria has been a pacesetter in the privatisation of prison facilities, especially the use of public private partnerships (PPPs). This case examines the governance of PPP prison contracts in the medium-to-long-term operation period of prison facilities. It surveys the privatisation of correctional facilities in Victoria and charts the state’s institutional arrangements in the management of this sector. In particular, the case uses external oversight reports of the Victorian Auditor-General’s Office to examine the contractual reform that Corrections Victoria, a business unit of the Department of Justice, has undertaken to manage service standards and overcome deficiencies in quality standards. It traces the evolution of prison PPP contracts from their relatively underspecified formulation in the mid 1990s (Port Phillip Prison and Fulham Correctional Centre) to more sophisticated ‘payment by results’ arrangements in the 2010s (Ararat Prison and Ravenhall Prison).

This case can be used to illustrate challenges in oversighting the operation of privatised infrastructure, and the specific requirements of prison services. It can be used to explore issues of governance, public private partnership mechanisms, contract design, performance incentives, external review and monitoring, and institutional learning.