What kind of contractual problem is this?
This looks like a case of incomplete contracts, or what is sometimes known as non-contractibility.



In the principal/agent paradigm, adverse selection arises when an informed agent transacts with an uninformed principal and, in particular, the principal cannot distinguish between desirable and undesirable agent trading partners.

I don't think your example is a good fit for adverse selection: here the principal would be the government and the agent would be the prison company. But the quality uncertainty concerns the guards rather than the agent itself, and the government is not directly interacting with the guards here.

From the world of information asymmetries, this looks more like a situation of moral hazard where the agent is not incentivised to act in the prinipal's interests. Moral hazard is only really a problem when you Cann't write a contract stipulating thet the agent should behave in the principal's interests. This could be for various reasons


the agent's action can't be directly observed;
while the angel't action cab be observed, its badness can't be objectively verified (i.e., it can't be conclusively proven in court that the action was bad, so a court could never enforce the contract);
the number of contingencies is so large that it is impossible to write a contract specifying all of them
there is no relevant authority to enforce the contract (e.g., a drug dealer and his supplier can't write a meaningful contract because they can't exactly expect a court to enforce it)