In a report criticising the way the first contracts to design, construct, finance and run private prisons were drawn up and awarded, MPs said it was wrong that some of the costs had fallen on the Prison Service when difficulties emerged at Parc Prison, Bridgend.

Davis: "The cost of such difficulties must be borne by the contractor"

The Securicor/Costain consortium has had more than £100,000 deducted from its payment after a catalogue of disturbances, rioting and technological breakdowns which led to extra staff being drafted in from other prisons.

But David Davis, chairman of the Commons Committee of Public Accounts, said a 5%-of-the-contract-price limit put on penalties for failing to meet the specifications was insufficient.

He said: "Private Finance Initiative (PFI) is about the transfer of risk. One risk is that the new service provider will have insufficient experience of providing the specialist services required and operational difficulties will result.

"The cost of such difficulties must be borne by the contractor."

Securicor had no previous experience of running a prison when it was awarded the contract for one of the two first prisons to be designed, built, constructed and run in the private sector.

The report, covering the PFI contracts for Parc and Fazakerley prisons, at Bridgend and Merseyside respectively, said the Cardiff and Swansea prisons should be reimbursed for the £18,400 cost of sending staff in to help at Parc, when trouble flared.

Other problems have included the breakdown of technology which was meant to replace keys with swipecards and reduce the number of staff needed, prison staff being taken hostage, two apparent suicides and the release on one occasion of the wrong prisoner.

The report also criticised the Prison Service for failing to spot the likely difficulties given that it was well aware that Securicor had never run a jail before.