Public Policy: Using Market-Based Approaches - Department for ...

Public Policy: Using Market-Based Approaches
(NOMS) also has direct responsibility for private prisons, including the
assessment of their performance and the review of contracts. 70
Policy history and timetable
The introduction of private provision of prison services has been achieved
through two Acts of Parliament governing private sector prisons in England and
Wales: the Criminal Justice Act 1991 and the Criminal Justice and Public Order
Act 1994. The 1991 Criminal Justice Act allows for private firms to be involved in
the provision of prison services, and led to the contracting-out of the
management of newly constructed prisons. In the same year invitations to
tender were issued to potential contractors for the new Wolds prison. The fiveyear
MO contract was won by Group 4, and the prison opened in 1992.
The Private Finance Initiative (PFI) was proposed in 1993 as an alternative means
of raising capital to invest in the provision of public services. In 1994 the Criminal
Justice and Public Order Act enabled prisons to be provided under the PFI,
extending the role of the private sector to include the design, construction and
financing of new prisons. The PFI coincided with a need for a programme of
prison building due to increasing conviction rates and changing sentencing
practices, for which no government capital was available. As a result, the first
DCMF contract was offered for tender by the Prison Service in 1995.
The first three MO contracts were for the management of new-build prisons only.
Early plans to market test prisons led to a tender for the management of the
newly rebuilt HMP Manchester, won by the in-house bid in 1994. The in-house
team was awarded the first example of a Service Level Agreement (SLA), which
is an agreement between what was formerly the Prison Service (now the Office
of Contracted Prisons. or OCP) and an individual public sector prison stating the
number of prisoners the prison will hold and specifying the standard of
performance expected in return for a fixed budget. The Manchester SLA was
designed to operate in a similar manner to a private sector contract.
Market testing plans were suspended following a challenge by the Prison
Officers’ Association, and legal concerns regarding underlying lease
arrangements, but reintroduced in 1998 at the expiry of four MO contracts. Of
the contracts subject to market testing, two were won by the in-house team
leading to allegations of discrimination in favour of the public sector. These
claims were investigated by the NAO but not upheld. However, as a result of the
aborted Brixton prison market test (described below) the Prison Service
introduced performance testing of publicly-run prisons. Performance testing
gives underperforming prisons six months to produce an improvement plan
without the involvement of external bidders. If the plan is accepted, the prison is
awarded an SLA and if not, the prison is contracted out without an in-house bid.
70 The National Offender Management Service (NOMS) oversees the management of offenders and is responsible
for market testing and competitive tendering in prisons.
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