The tender is for the design, construction, financing and ongoing maintenance over a 25 year term for the 350-bed expansion of the facility.

Corrections Minister, Bob Cameron said the development would be a positive boost for the local area creating an additional 245 ongoing jobs in the region.

''The Brumby Labor Government is helping to protect the community and at the same time ensure that the economic benefits of our record infrastructure investments flow through to regional Victoria,'' Mr Cameron said.

The three shortlisted bidders are:

* Aegis Correctional Partnership comprising Bilfinger Berger, Commonwealth Bank, St Hilliers Contracting, Hawkins Construction and Programmed Facility Management.

* Secure Environments Consortium comprising Brookfield Multiplex Infrastructure, Brookfield Multiplex Construction and Brookfield Multiplex Services.

* Plenary Justice Consortium comprising Plenary Group, John Holland and Honeywell.

Treasurer, John Lenders said the shortlist had been decided following a stringent process to evaluate the bidding consortia who responded to an Expression of Interest (EOI) process.

''This prison upgrade will be the first project to be delivered in line with the new National Public-Private Partnership (PPP) guidelines in Victoria. This will ensure Victorian taxpayers get the best value for money on the project.

''The three consortia selected have strong construction, financial, technology, environmental management and architectural experience particularly in designing and building specialised facilities such as a prison.

''We have successfully worked with private sector consortia through Public Private Partnership (PPP) arrangements on several prison projects and this new project will build on these.

"We know there are more than 80 local suppliers to the Ararat Prison across a wide range of industries and the outcome of this project will provide a significant economic and jobs boost for the region,'' Mr Lenders said.

The three shortlisted proponents will now develop competitive bids as part of the Request for Proposal process and submit them to the Victorian Government's Ararat Prison Project Team. These submissions are due in November 2009.