Sarah McMillan/cvnznews.com
The government’s $1.7 billion Interislander replacement project has hit its spending limit, forcing officials to strip out a range of planned upgrades, including measures aimed at improving safety, sustainability and long-term value for money.
Documents released by Ferry Holdings show the project exceeded the funding envelope set by Cabinet earlier this year, triggering a push to deliver only the “minimum viable” version of the programme while keeping taxpayer funding within budget.
The latest figures reveal the cost of two new ferries, port upgrades and associated infrastructure is now relying on every dollar of the government’s $1.704 billion commitment, alongside a further $220 million from third-party contributors including CentrePort and Port Marlborough.
To stay within budget, project planners removed a series of enhancements they acknowledge could have improved operational safety, environmental performance and whole-of-life value.
“Several potentially beneficial enhancements have been removed from scope because they push cost above the funding level and are not essential,” project documents state.
The cost pressures emerged as engineers discovered more extensive infrastructure work was needed than first anticipated. New linkspans are required at both Wellington and Picton, while additional construction work is needed after assessments found some existing port assets were unsuitable for reuse.
Despite those challenges, Ferry Holdings says major cost uncertainties have now been substantially reduced and the project’s contingency funding should be sufficient to cover remaining risks.
But an independent review has raised questions about the way key decisions were made.
A June Gateway Review found the project lacked a clear cost-benefit analysis and warned decision-making transparency was limited. Reviewers said there was no obvious economic framework linking the project’s objectives, options and final scope, making it difficult to assess whether taxpayers are getting the best outcome.
The review nevertheless concluded the project remains achievable, giving it an “Amber” rating, meaning significant issues exist but are considered manageable.
Rail Minister Winston Peters has strongly defended the programme, describing it as a “marvellous project” and arguing ministers have maintained strict control over spending.
“We have applied common sense to this project,” Peters said.
“The important focus from now is to deliver as planned, not chopping and changing the design as you’re going along.”
The new ferries remain scheduled to enter service in 2029, with ministers insisting the project is now firmly on course despite the mounting scrutiny.
