The New Zealand Government has launched a new initiative to procure two modern Cook Strait ferries, inviting private sector proposals for alternative solutions. This move follows the cancellation of KiwiRail’s Inter-Island Resilient Connection (iReX) project, which was scrapped in December 2023 due to massive cost overruns.
A New Procurement Approach
Announced by Finance Minister Nicola Willis and Minister for Rail Winston Peters, the new plan aims to replace the ageing Interislander fleet with two medium-sized ferries, expected to be operational by 2029. Unlike the iReX project, which was estimated to have cost up to $4 billion, the Government expects the new approach to be significantly more cost-effective. While the precise budget remains confidential until negotiations are finalised, Willis has assured that a “funding envelope” has been established.
“The quadrupling of the cost of Project iReX from $775 million to more than $3 billion and possibly as much as $4 billion is testament to what happens when a project is mismanaged,” Peters stated.
To oversee the procurement and operations of the new ferries, the Government is establishing a dedicated entity, Ferry Holdings Limited. The company, which will be listed under Schedule 4A of the Public Finance Act 1989, will work closely with ports, KiwiRail, and other stakeholders to ensure landside infrastructure is ready in time for the new vessels.
Open Call for Private Sector Proposals
As part of the procurement process, the Government is actively seeking private sector involvement, encouraging alternative proposals that could offer viable ferry solutions at a lower cost to taxpayers. Interested parties must submit their proposals by February 28, 2025, via the Government Electronic Tenders Service (GETS).
Proposals must meet several key criteria, including:
- The ability to deliver ferries by 2029 with adequate freight and passenger capacity
- Supporting infrastructure readiness to ensure seamless operations
- Proven expertise in maritime transport infrastructure, financing, and operations
- Risk management strategies to transition from the existing fleet
- Cost-effectiveness and economic viability compared to government-led procurement
Peters emphasised that the Government is committed to exploring all viable solutions. “We announced in December that any better ideas than direct procurement of new ferries and port agreements for the enabling infrastructure will be heard. Interested parties should put their best foot forward now,” he said.
Global Search for Shipbuilders
While private sector proposals are being considered, the Government is also pressing ahead with its base case scenario—procuring two medium-sized ferries. A global search for shipbuilders is already underway, with the Treasury contracting international brokerage firm BRS Shipbrokers to identify suitable candidates.
“The Government will immediately engage shipyards internationally, identifying those with the capability, capacity and interest to deliver new ferries by 2029,” Peters said. “This will narrow the list of potential ship builders to those able to strike a deal, ensuring no time is wasted when we issue the ship specifications later this year.”
The involvement of Korea’s Hyundai Mipo Dockyard, which had been contracted to build ferries under iReX, has not been ruled out. However, the selection process will determine the most suitable shipyard for the new vessels.
Decision Expected in March
A key milestone in the process will come in March 2025, when Cabinet is set to assess both the private sector proposals and the government-led procurement plan. The final selection and contract awards will be based on which approach offers the best balance of cost, efficiency, and long-term sustainability.
Private operators, such as StraitNZ, which runs the Bluebridge service, have expressed interest in the process. Infrastructure New Zealand has also welcomed the Government’s willingness to consider public-private partnerships.
“The most important thing is to ensure we get the best deal for New Zealand,” said Infrastructure New Zealand Chief Executive Nick Leggett. “If there is a public-private partnership arrangement that could do that then it makes sense to explore it.”
A More Strategic Approach
The shift away from rail-enabled ferries is a notable departure from the iReX project, which had required extensive—and costly—harborside infrastructure. Under the new plan, the Government aims to maximise existing infrastructure, avoiding the pitfalls that led to iReX’s cancellation.
With the Cook Strait ferry service playing a critical role in national transport—serving as an extension of State Highway 1—ensuring reliability and affordability remains a top priority. The coming months will determine whether a private sector-led solution emerges as a viable alternative or if the Government proceeds with its own procurement strategy.