Work on the new Thornton Hall prison in Dublin will begin later this year.
The project is being split into two phases, the first of which will involve the construction of a new access road and perimeter wall.
The Justice Minister Dermot Ahern says this will proceed in the short term on the basis of separate contracts.
He says while this is underway, he will be examining how best to proceed with phase two, the construction of the main complex, given the changed economic climate.
Yesterday, the minister said the project may proceed "without the bells and whistles" of the original plan.