Imagine you are a capital budget analyst for the State of Arizona Department of Corrections. You are helping develop the capital budget plan for the agency and are tasked with analyzing the option to deal with a growing prison population.

Option :Contract with a private prison company to rent 1,000 prison beds.

No construction costs are needed with this option. The private prison company will charge $30 per day per bed. The contract will guarantee 90 percent capacity for the private prison company. This means if there is a drop in inmates below 90 percent capacity of the 1,000 beds, the State Department of Corrections must pay them a minimum of the 90 percent capacity (900 beds). Every five years the total cost can be adjusted based on the consumer price index (CPI). The private prison company can take inmates to any of their facilities throughout the United States where they have bed space. If inmates are sent to other states, this is at no cost to the State Department of Corrections. The term of contract with the private prison provider is 10 years with an option for a 10-year renewal.

Private Prison Contract Costs Data

Cost per day rate	$30
Total annual cost for each bed	$10,950
Total annual cost for 1,000 beds	$10,950,000*
Total annual cost for 900 beds (90% capacity)	$9,855,000*

*Total costs can increase based on CPI (inflation adjustment).

PLEASE CHOOSE ONE ONLY

Write word recommendation on which option you recommend, including in the capital budget, and provide a detailed explanation of why you recommend this option. Be sure to include the following-

Recommended Option with the rationale behind your decision

Estimated Capital budget costs

Discuss the benefits and drawbacks of each option, including political considerations.

Identify short- and long-term cost considerations for both options.

Cite Reference sapa