New Zealand Gov't Blames Consultants for Ferry Program's Cost Blowout

 

The controversy that has surrounded the procurement of two interisland ferries in New Zealand appears to have come to an end after the government announced that a new design will be built at a fixed price of US$335 million and will enter service in 2029.

In what has been described as a “no-nonsense solution” to the Cook Strait ferry replacement program, authorities are hailing the decision to do away with expensive consultants who - they claim - had “hijacked” the project, resulting in skyrocketing costs. Construction of the two ferries is now set to commence following the securing of the fixed price agreement with China’s Guangzhou Shipyard International (GSI).

Rail Minister Winston Peters said that the ferry deal, along with infrastructure upgrades that are being undertaken in Picton and Wellington to fit the new ferries, will cost about US$1.1 billion with taxpayers’ contribution in the range of US$950 million.

Considering that the country’s Treasury had warned that total cost for the entire project risked ballooning to US$2.2 billion, the government contends that it has managed to save US$1.2 billion after dismissing its consultants.

Early this year, the government established Ferry Holdings to oversee the project with the main aim of reducing costs and ensuring the timely delivery of the new ferries, following the cancellation of project iReX, which was responsible for the rising costs.

KiwiRail decided to terminate the contract for two large ferries that had been awarded to Korea’s Hyundai Mipo Shipyard in 2021 after the government decided not to provide funding to the iReX project. That cancellation was finalized in August 2025 at a total cost of about US$125 million. When including consulting fees and other expenses, the sunk cost for the iReX program came to a total of US$375 million.

Since its establishment in March, the new Ferry Holdings has been working closely with KiwiRail, CentrePort, Port Marlborough, and government agencies to ensure the program delivers better value for money.

The new ferries will transport passengers, cars, trucks and rail wagons across the Cook Strait for the next 30 years. They will be 200 metres long and will have a capacity for 1,530 passengers and 70 crews each, and 2,400 meters on each ferry of lanes for trucks, cars and 40 railcars.

The new ferries will be operated by KiwiRail and will replace aging vessels, including the retired Aratere. The ferry was removed from service in August and has since been sold for scrap.

“Spending less than NZ$1.7 billion means the taxpayer has saved NZ$2.3 billion while still getting the ferries and infrastructure they want, because we have done away with the expensive consultants who hijacked the project by adding more and more infrastructure until Treasury warned the project would cost NZ$4 billion,” said Peters.

Apart from the two ferries, the government is also determined to deliver “fit-for-purpose” infrastructure upgrades that include the building of new wharves and linkspans in Picton and modifying and strengthening the existing wharf in Wellington to suit the new ferries.

“We are delivering the infrastructure New Zealand needs—by reusing what works and upgrading only what’s essential. It’s a smart, sustainable approach that puts public value first,” said Chris Mackenzie, Ferry Holdings Chair.