ARCHIVE - 4. Operating costs assumptions

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4.1 Sources

The review of the operating costs assumptions was supported by the information provided by CSC (names are those provided on the documentation received):

4.2 Key Assumptions

As discussed in Section 3, the functional areas were identified as those that currently exist in the status quo facilities or would reasonably be needed at the new complex. Furthermore, CSC practice is to allocate regional and national costs on a pro-rata basis to each institution. The following categories of costs are assumed:

Costs are in 2006 / 07 figures and inflation is not considered. It is also assumed that people can be found to work in the complex. Depending on the location of the facility, this has proved not to be the case in some instances. This is a significant risk which should be considered further in the analysis.

Social trends, such as the requirement to separate rival gangs, have been considered in the proposed cost estimates.

As mentioned earlier, no estimates have been made for the savings that might result from the more efficient transportation of inmates or goods between differing institutions within the complex. Having 6 facilities co-located may reduce the need for capital investment and certain operating costs in transportation equipment or human resources and also reduce the associated operating costs such as drivers, fuel, maintenance, etc. In Millhaven alone, the annual admission and discharge activity is 1300 inmates.

4.3 Breakdown of Estimated Per Offender Cost

Salaries represent $59,112 or 62% of the total costs of $94,584 for each offender. Thus, the estimates are particularly sensitive to the FTE standards that are assumed within each unit in addition to the underlying salaries assumed for these FTEs. In addition, Institutional Security Salaries and Operating and Maintenance Offender Related Costs represent 21.9% and 26.3% of the total operating cost of $94,584 per offender.

Given the significance of the underlying assumptions to these operational expenditures, a more detailed analysis should be conducted in any further analysis to support these assumptions. A review of alternative institutional design models may be helpful confirming or identifying refinements to the assumed cost per offender.

Notes to figure:

Overtime is represented as an estimate of a total of 6% of the total salaries (i.e. $95,533,577 x 6%).

Salary adjustments are a combination of additional allowances paid to FTE's for additional services such as bilingualism, penological factor allowance, shift premium and premium pay. The adjustments are calculated by multiplying a defined rate/allowance by the number of FTE's entitled to the allowance.

Total Employee Benefit Plan is represented as 18% of the estimated salaries, including overtime (i.e. ($95,533,577 +$5,732,015) x 18%)).

Total Common Services, otherwise known as Contingency is estimated to be 5% of salaries, including overtime, operations and maintenance costs (i.e. $95,533,577+ $5,732,015+$70,035,598) x 5%)).

4.4 Resource Indicators: Efficiencies

CSC employs operating standards to determine the number and level of employees required for its status quo facilities. These standards form the basis of estimated the FTEs for the proposed complex. This method biases the complex estimate to the business model of the status quo facilities. Thus, truly innovative and transformative ways of operating the facility may not be captured. As with the capital costs, it might prove useful for CSC to compare the proposed operating standards to those used in other jurisdictions.

Notwithstanding this, CSC has used the existing operating standards as the basis for estimating the required FTEs in the complex, and as such, has determined that some efficiencies exist. Figure 4.2 summarizes the standard number of FTEs under the proposed model. From this, it can be seen that the majority of the FTE's are within the security unit.

Figure 4.2 Proposed FTE's

Functional Group Proposed FTE Requirements Notes with respect to Efficiencies
Internal Services 117.61 Resource indicators have largely moved from one FTE per facility to one FTE per complex, thus creating efficiencies.
Institutional Case Management 100.6 The resource indicators have been adjusted for the Case Management Coordinator from one per institution to one for every 400 inmates, thus creating incremental costs.
Security 647.91

Significant consideration was made to tailor the security requirements to the size of the complex and the complexity of securing a mixed population.

Security levels are assumed to be higher than for status quo facilities.

Institutional Health Services 64.21 A net efficiency in health personnel has been assumed.
Institutional & Accommodation Services 128.31 The original resource indicators required an FTE per institution. This has been consolidated to an FTE per complex.
Correctional Interventions 81.25 FTEs assumptions are close to resource indicators.
Regional Populations 228.95

Although the review of the information has identified varying levels of efficiencies, it is important to note that the potential for cost savings is dependent on whether the FTEs are at the appropriate salary grades. Further analysis should review whether the salary grades for the FTEs are appropriate.

4.5 Comparable Institutions for Operating and Maintenance Costs

Similar to the use of operating standards (or resource indicators) for the estimate of FTEs, CSC estimates the O&M costs for the complex by using the O&M costs of comparable facilities. However, the estimate is developed from the average of all facilities at each security level, rather than the facilities that would be consolidated into the complex. Figures 4.3, 4.4 and 4.5 represent the average operating and maintenance costs per offender for each security level. Identifiers, labelled as "status quo institutions" in these figures, show the actual O&M costs of the status quo facilities. One might expect that the O&M estimates for the complex should approximate that for the status quo institutions.

As illustrated in Figures 4.3, 4.4 and 4.5, there is a large degree of variability between the different facilities. Deloitte understands that the variability is partially attributable to location, for example higher heating costs for northern locations.

However, it is noted that the average of all the institutions approximates the actual O&M costs associated with the six status quo facilities. Therefore, the effect of having different sets of comparable institutions is not considered to be material at this stage of the analysis.

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