Australia's Decmil preferred contractor for $60m 'modular prison cells' in Rolleston, Tongariro

Contract negotiations are about to start and are expected to be completed by the end of the month.

The Department of Corrections has made Australian construction firm Decmil Group its preferred contractor for a $60 million deal to build modular prison cells at two existing prisons.

Contract negotiations are about to start and are expected to be completed by the end of the month, Decmil said in a statement to the ASX. The project covers the "design, procurement and on-site installation of rapidly deployable modular prison cells".

The government's tender for the contract, run in March this year, said Corrections wanted three sets of 126-bed units, intended for lower security prisoners. Two units are set for Rolleston Prison and one for Tongariro Prison.

The national prison population has increased faster than forecasts, rising to around 10,200 earlier this year, the highest it has ever been and a surge of 20 percent since 2014. The government last year announced $1 billion would be spent on another 1,800 beds, with Waikeria Prison, a new facility with 1,500 beds, set to open in 2020.

Decmil's biggest corrections project in Australia is the A$415 million Manus Island offshore processing centre, which it finished building in October 2015. In New Zealand, it had the contract to build the new $8.4 million South Hornby primary school in Christchurch, which was completed earlier this year.

Managing director and chief executive Scott Criddle said the company has already developed "an innovative and high quality product" during an extensive design period for the project.

"Correctional services is a key target market for Decmil as we already have an established presence in defence in both Australia and New Zealand, and in immigration," Criddle said. "We look forward to finalising contract negotiations and establishing a working relationship with NZ Corrections."

The ASX-listed shares last traded at 85 Australian cents and have dropped 18 percent so far this year.