The Arizona Department of Corrections retained MAXIMUS, Inc., a nationally recognized professional
services firm for preparing studies that determine the total costs, both direct and indirect, of government
services, to evaluate the department’s preparation and applications of its Per Capita Operating Cost
Report and Private Prison Cost Models and to provide findings and recommendations for improvement.
MAXIMUS’ Report on the Evaluation of Arizona Department of Corrections’ Operating Per Capita Cost
Report and Private Prison Cost Model dated February 2006 concerns three critical ADC financial reports:
1. The Operating Per Capita Cost Report – The Operating Per Capita Cost Report (Cost Report)
delineates the department’s direct and indirect operating costs incurred by ADC to perform its
responsibilities. Annually the department determines the operating per capita costs for each prison and its
units for the prior fiscal year. The department requested MAXIMUS determine whether the methodology
it utilized distributed costs accurately and reasonably reflected the operating costs incurred by ADC to
incarcerate an inmate. MAXIMUS determined that the methodologies utilized in the development of the
Cost Reports resulted in reasonable cost analyses and provided recommendations for improvement.
In prior years, the department also utilized the Operating Per Capita Cost Report as the basis to perform
State versus private prison cost comparisons. MAXIMUS recommended that the department discontinue
using the Cost Report as the basis to perform state versus private prison cost comparisons and instead,
adopt the State Versus Private Prison Cost Comparison for that purpose.
2. State versus Private Prison Cost Comparison – Per ARS 41-1609.01 (L), the department is required
to determine once every five years whether privatization provided a cost savings. As noted above,
MAXIMUS recommended the department discontinue using the Operating Per Capita Cost Report as the
basis to perform State versus private prison cost comparisons as the Cost Report does not enable the
accurate comparison of ADC operated prison costs to private prison costs and instead, adopt the State
Versus Private Prison Cost Comparison (Comparison Report) methodology to appropriately allocate costs
to ADC and private prisons and/or exclude costs not borne by both.
The department employed the State Versus Private Prison Cost Comparison methodology to determine
whether ADC-operated or private prison level-2 male bed facilities operated at less cost to the State in FY
2003 and FY 2004. (The comparisons are currently limited to level-2 male beds only because no beds in
other custody levels were privatized in FY 2003 and FY 2004). The comparisons for FY 2003 and FY
2004 included every recommendation for which detailed data was available. The comparisons established
that ADC-operated level-2 male beds cost was 8.5% to 13.5% less than comparable in-state private beds
and that utilizing ADC-operated beds in FY 2003 and FY 2004 would have resulted in savings of
$3,519,331 to $5,344,331 to state taxpayers. MAXIMUS’ February 7 letters to ADC concerning its
application of the cost comparison methodology are included with the Report.
3. Private Prison Cost Models – Per ARS 41-1609.01 (G) ADC is required to determine whether
privatization provides a cost savings to the department before contracting for permanent private beds.
MAXIMUS recommended ADC discontinue the historical Cost Model and modify its projected Cost
Model to provide a consistent, reasonable cost comparison to ascertain if there are any potential savings
from privatization, developing its costs as a competitive bidder seeking to provide the requested services.
The department concurred with MAXIMUS’ findings and recommendations and agreed to adopt them in
full. The February 8 acceptance letter from ADC to MAXIMUS is also included with the Report.

http://www.azcorrections.gov/reports/maximusnotes.pdf

Range, Unrealized Savings, FY03-FY04, due to Privatization of Level 2 Male Beds
Range, Unrealized Savings FY 2003
FY 2003
Marana
Florence West
Phoenix West

State
Private
Per Diem Annual Cost Per Diem Annual Cost
43.15
7,087,388
47.28
7,765,740
43.15
6,299,900
53.29
7,780,340
43.15
6,299,900
47.51
6,936,460

Total

FY 2003
Marana
Florence West
Phoenix West

19,687,188

20,599,688

x ADP =
450
400
400

Unrealized
Daily
Savings
1,859
4,056
1,744

Unrealized Yearly
Savings (high)
678,353
1,480,440
636,560
2,795,353

22,482,540

State
Private
Per Diem Annual Cost Per Diem Annual Cost
45.15
7,415,888
47.28
7,765,740
45.15
6,591,900
53.29
7,780,340
45.15
6,591,900
47.51
6,936,460

Total

Unrealized
Savings
Per Day
4.13
10.14
4.36

Unrealized
Savings
Per Day
2.13
8.14
2.36

x ADP =
450
400
400

Unrealized
Daily
Savings
959
3,256
944

Unrealized Yearly
Savings (low)
349,853
1,188,440
344,560
1,882,853

22,482,540

Range, Unrealized Savings FY 2004
FY 2004
Marana
Florence West
Phoenix West

State
Private
Per Diem Annual Cost Per Diem Annual Cost
43.56
7,154,730
47.15
7,744,388
43.56
6,359,760
53.16
7,761,360
43.56
6,359,760
47.38
6,917,480

Total

FY 2004
Marana
Florence West
Phoenix West

19,874,250

20,786,750

x ADP =
450
400
400

Unrealized
Daily
Savings
1,616
3,840
1,528

22,423,228

Unrealized Yearly
Savings (high)
589,657
1,401,600
557,720
2,548,978

22,423,228

State
Private
Per Diem Annual Cost Per Diem Annual Cost
45.56
7,483,230
47.15
7,744,388
45.56
6,651,760
53.16
7,761,360
45.56
6,651,760
47.38
6,917,480

Total

Unrealized
Savings
Per Day
3.59
9.60
3.82

Unrealized
Savings
Per Day
1.59
7.60
1.82

x ADP =
450
400
400

Unrealized
Daily
Savings
715
3,040
728

Unrealized Yearly
Savings (low)
261,157
1,109,600
265,720
1,636,478

ADP=Average Daily Population

In FY03 and FY04, the cost comparison only includes costs appropriated to ADC. Central support services costs provided by other
Arizona state agencies to support ADC operations and asset depreciation on ADC facilities and equipment will be included effective
FY07. Also inmate intake and transportation costs, currently included in ADC costs, will be tracked as separate cost centers and
excluded from ADC costs effective FY07. The inclusion of central support and asset depreciation costs and the exclusion of inmate
intake and transportation costs attributable to Level 2 male beds would increase ADC average daily costs by less than $2.00, an
increase of less than 5 percent.

http://www.azcorrections.gov/reports/maximusnotes.pdf