Cook Strait ferry project lacked detailed business cases, review finds
A review of the Cook Strait ferry replacement project has found that it lacked detailed business cases and a clear economic framework, such as a cost-benefit analysis, which weighs a project's costs against its expected benefits. RNZ The review concluded that this gave limited transparency to decision-making and limited confidence that the project would lead to the best outcome.
The project reached the government's $1.7 billion funding cap in June. The work is managed by Ferry Holdings, a government-established company that replaced the former iReX project after it was cancelled. Treasury Ferry Holdings took over delivery of the programme from 1 April 2025 under a Project Delivery Agreement.
At the July project launch, the budgeted costs were $596 million for two new ferries, $403 million for Wellington infrastructure, and $426 million for programme management and contingency. An additional $37.5 million for Picton rail-yard upgrades and auto-mooring took the total Picton infrastructure cost to $530 million.
Cabinet set a $1.747 billion cost envelope in March. Ferry Holdings documents showed programme costs were above that envelope. Contributions of $110 million from Picton and Port Marlborough, $100 million from Wellington ports and $10 million from the Transport Agency kept taxpayer costs within the $1.7 billion level, according to RNZ's reporting.
Cost increases were attributed to a reduced ability to re-use existing assets and higher costs for critical elements. These include new linkspans at both ports and a new linkspan approach structure in Wellington. To stay within the funding cap, value-for-money, sustainability and safety enhancements were removed from the project's scope.
In early July, Ferry Holdings sought approval to draw down the remainder of the tagged contingency funding, which is money set aside for unforeseen costs. The funding would be used to complete the main infrastructure works and meet other costs. RNZ
The June final approval business case stated that Ferry Holdings was negotiating about $220 million in third-party funding. It also stated that all $1.704 billion in Crown funding, meaning money from the government, was required to deliver the programme.
