When Prisons, Inmates and Detention Policies Become Investment Products


by Rachel Knaebel

More than a third of prisons in France are partly run by private companies. The trend towards privatising the prison system, which began three decades ago, is gaining in momentum. A handful of companies are capitalising on this very lucrative market, providing services that include catering, receiving visitors, building detention facilities and organising prison labour. The French state spends almost six billion euros a year on these services even though the benefits of private management are highly questionable. This rampant privatization trend raises another thorny question: do private companies not have an interest in keeping prisons full?

Initially published in french, in february 2016. Translated by Susanna Gendall.

It is set to become the biggest prison in Belgium. Nearly 1,200 inmates in a detention “village” near Brussels, with three units for men and two units for women, a psychiatric confinement facility, and a facility for young offenders. Oversized, overpriced, and built on precious agricultural land, the mega project has many critics. It is also controversial because it will be built and managed under a public-private partnership (PPP). The contract was awarded to a consortium of two construction companies and an Australian investment bank, Macquarie. It represents just another business venture for the bank, which has investments in transportation, water infrastructure, hospitals and now . . . prison cells.

The Belgian privatised prison project is just the latest manifestation of a trend that began in the early 1980s in the United States. Now, the private prison management model is increasingly widespread in Europe. In France, privatisation began in 1987, with the intention of replicating the US model: full privatisation, from the building of premises to the monitoring of inmates. But French MPs decided otherwise: prison management, prison surveillance and prisoners’ registration cannot be outsourced to private companies; everything else can [1].

Privatisation of prison labour and handling visits

Even with this restriction, the number of privately managed prisons has been steadily increasing. On 1 January 2016, of the 188 prisons in France, 68 were run in part by private companies. More than half of the 77,000 inmates in the country serve their time in a semi-privatised establishment. The situation in France is still nothing like the US, where more than 130,000 inmates are detained in private prisons [2]. But prison privatisation is expanding, as it is in the US, and the outsourcing of prison management is proving a bonanza for business.

“In the US, prisons can be entirely privatised,” says Marie Crétenot, a legal adviser at the International Prison Observatory (OIP). “The situation in France is different. But the private providers that run some prison services obviously have no interest whatsoever in any public policy that would reduce the number of prisoners, because they would essentially lose out on lucrative markets.” The introduction of private prison management began with the outsourcing of maintenance tasks such as administration and logistics, catering, laundry, prison shops (sale of goods and services to inmates), cleaning and transport. Today, prisoner labour and vocational training are also controlled by private companies. Healthcare services for prisoners, which used to be outsourced, was eventually brought back under public management in 2001. But receiving families and visitors was added to the list of “outsourceable” services in 2010, which had previously been managed by volunteers. The outsourcing contracts for these “services” run over periods of six to ten years.

2008 saw the emergence of a second generation of privatised prison management: public-private partnerships or PPPs [3] – between the state and businesses – for the design, construction and maintenance of detention facilities. PPP contracts are signed for a minimum of 25 years as of the prison’s opening date. They include all the traditional services that shorter outsourcing contracts used to cover. The state commits to pay the companies that own the prisons for more than a quarter century – i.e., until 2041 for the most recent prison built under a public-private partnership.

5.9 billion in rent every year

“The French government has become heavily indebted due to PPPs,” according to the International Prisons Observatory which raised the alarm last year. Interest and charges for the maintenance of buildings are paid annually in addition to the amounts paid out by the state. The “rent” it pays to private prison managers every year currently hovers around €5.9 billion, according to the organisation’s calculations [4]. “This will weigh on future budgets in an exponential way,” says IPO. And force the prison administration to cut costs elsewhere. In the words of an official report by the French Senate on “PPP time bombs”: “In order to find the resources to pay the rent of PPP contracts, public authorities are often forced to readjust their budget lines or even to cut back on operating or capital expenditure earmarked for other projects. The example of the prison administration’s budget is particularly illuminating in this respect.”

Most threatened by these new financial arrangements are building maintenance and prisoner rehabilitation and probation services. Yet the latter services are in charge of supervising sentence reduction programmes, preparing inmates to be released, helping maintain family ties, following up on inmates once released . . . in short, of all non-repressive aspects of detention policies. “PPPs and deregulated prison management will weigh on the budget of the prison and justice administrations for decades, for no good reason”, says Olivier Caquineau, prison probation counsellor and Secretary General of Snepap-FSU union.

“The prison administration budget has been under pressure for years. The annual budget of many prisons is already exhausted, and it’s only July!” Early in 2016, water was cut off in a prison in South-eastern France due to unpaid bills. And the travel costs of prison workers are no longer reimbursed. “In publicly managed prisons, the first victim of cost-cutting is building renovation,” adds the union representative. “We are increasingly in a two-tier prison system.”

Meet the handful of companies sharing the prison market

The prison business is controlled by a handful of companies. At the Le Havre penitentiary centre, Themis-FM, a subsidiary of Bouygues, owns the premises and is in charge of maintenance. The French government has been paying it a monthly rent of one million euros since 2011 [5]. In addition to this amount is the 350,000 euros per month paid to Gepsa, the company in charge of personal services in the prison. Created by the first privatization law, Gepsa, a subsidiary of Engie (GDF-Suez), is now present in thirteen prisons in France.

Sodexo has contracts in 34 French prisons. The French collective services corporation is also expanding internationally in the prison sector. Sodexo won management contracts for 42 prisons in the Netherlands, five in the United Kingdom, five in Chile, two in Spain and one in Belgium. The company says it works to “prevent recidivism and promote the rehabilitation of prisoners”. In its annual report Sodexo even specifies, that it "conducts justice activities only in democratic countries that have banned the death penalty and whose prison policy is focussed on prisoner rehabilitation” [6]. But in 2013, at least one case has lifted the veil on shadier aspects of private prison management: a female inmate in the UK, where prison healthcare is largely privatised, sued the French company for having left her without any treatment after a miscarriage.

Prisoners and prisons as an “investment strategy”

Building and maintenance contracts are the remit of large construction groups. Bouygues owns and operates six prisons; Spie Batignolles has three; Eiffage has four in France and one in Belgium. Eiffage in fact decided a few years ago to sell 80% of its prison subsidiary to a Belgian investment fund. “This transaction vindicates Eiffage’s investment strategy in PPPs, while reducing our company’s debt”, Eiffage commented at the time. The inmates of Eiffage’s French prisons will be happy to hear that they are the subject of an “investment” and “debt reduction” strategy of a construction company.

In the US, two companies dominate the private prison market: Corrections Corporation of America, with some 70 prisons in its portfolio; and Geo, which manages more than 100 facilities across the country. Geo also operates prisons in South Africa and Australia, as well as a migrant detention centres in the UK. In Great Britain, Sodexo is in competition with the British company Serco, which is also active in migrant detention centres, and even in providing accommodation for asylum seekers. The third key player in the British private prison business is G4S, a global group active in the prison, oil and gas, port and airport sectors. G4S has subsidiaries all across the world, including many in tax havens such as Jersey, Guernsey and the Isle of Man.

Little evaluation since privatisation began

Is the money spent by the state used effectively? Public authorities claim that privatising prison services is cheaper, more efficient, and innovative. Does private management live up to its promises? It remains difficult to answer this question, since the French prison administration has made no comparative assessment of the cost and quality of management since it began privatising prison services. A failure that has been lamented by the French Court of Auditors itself: “The few studies available suggest that it remains, at this stage, difficult to reach certainty as to the efficiency of the private sector, in the absence of any collection, consolidation and analysis of the comparative costs of public and private management methods,” it concluded five years ago [7]. The auditors went as far as to declare that, “it does not appear that resorting to the private sector is less costly, especially since the prison administration is unable to accurately measure and compare costs” [8].

“Resorting to private companies is justified with the argument that the services they provide require special skills that the prison administration does not necessarily have, such as soliciting clients to source work in prisons, or catering,” says Marie Crétenot of OIP. “But no assessment has ever been made.” The organisation also laments the fact that privatisation contracts are not made public. This lack of transparency makes it impossible to know how much the French state actually pays these companies for the services they provide. Only two reports by the Court of Auditors (2006 and 2011) and one report by the General Inspectorate of Finances (2009) have been able to draw some conclusions. “None of these reports really concluded in favour of private providers, because they cost money without any real added value,” says Marie Crétenot. Yet outsourcing to private companies continues unabated.

Penalties for non-compliance

The firms responsible for the management of prisons do, however, pay penalties if they do not comply with the terms of their contracts. In 2010, the company Gepsa paid 400,000 euros in penalties for failing to comply with its contractual obligation to provide work for all prisoners who wished it in the Béziers penitentiary centre [9]. But penalties are often challenged by private companies. “No one disputes the legitimacy of the penalty system, which is part of our contract, but it would be counter-productive to enforce it in a way that is too mechanical, since it would be detrimental to our teams’ motivation,” argued the head of Themis, a subsidiary of Bouygues, before the Court of Auditors.

Government control is often more quantitative than qualitative. What the administration wants to know is whether providers have put in a certain number of training hours. They’re less interested in analysing how useful these are. On the other hand, vocational training under public management is not necessarily better at complying with the rules. “In contracted-out prisons, vocational education budgets, or those for hygiene and safety, are guaranteed by the state”, says Marie Crétenot. “Whereas public prison administrations can cut back these budgets. Prisons under public management thus become dilapidated.”

Government paying compensation to businesses

Is the expansion of privatisation in the prison sector inevitable? In Germany, where partial private management in prisons has existed since the 2000s, authorities have already reversed their stance on one of the four prisons in question. In 2011, the new Green and Social Democratic political coalition that came to power in the state of Baden-Württemberg decided to terminate the privatisation agreement that had been signed a few years earlier for the Offenburg prison. The prison is now under full public management.

Could the French Government potentially do the same? “Outsourcing contracts can be renegotiated, but that would require paying a penalty,” says the IPO legal adviser. By signing contracts for 6, 9 or even 25 years, the French state is committing not to change anything in its prison policy without paying compensation to private companies. A very persuasive threat at a time of budget austerity. “In 2011, the Ministry of Justice considered lowering the rental price of television sets for inmates, and standardizing this price between public management and private management [10]. However, since most outsourcing contracts did not expire before 2016 or 2017, applying the price cut in 2011 would have involved paying compensation to providers. So the Ministry backed down.”

This example may seem trivial, but it is actually emblematic of how the privatisation of prisons weighs on public policies in the justice and corrections sectors. “Something similar happened on the issue of remunerating inmates’ labour”, adds Marie Crétenot. “The principle of a fixed hourly rate was included in the 2009 law on prisons. But this involved modifying contracts with providers.” So the law is not enforced. What point is there any more in changing official public policies on prisons? During her four years at the Ministry of Justice, Christiane Taubira has not challenged the current trend towards the privatisation of prisons. And that is just the way private companies like it.

Rachel Knaebel

Photo: CC Pixabay