Corrections Minister Judith Collins says a new prison will definitely be built and a Wiri site near the Auckland Women's Prison is favoured by her department.
However, she says, the Taupo District Council has approached her about building the prison in its region and she has had informal approaches from Hastings and Horowhenua.
The Wiri site is favoured because it is already zoned for a prison and the Corrections Department owns the land there.
Ms Collins said a group of officials would work on the plans and a final go-ahead was likely to be given next year.
She said no future funding was earmarked for the new prison in this week's Budget because the business case had not been made.
But that did not mean it had been scrapped, as reported yesterday.
The Budget allocated $21 million for officials to work on planning the prison.
National already supports the option of private management of jails.
Ms Collins said she was open to all alternatives, including a private-public partnership, for building it.
"We are also looking at making sure we don't get a rerun of the Springhill prison major, major cost blowout which ended up, with administrative services included, at about $600,000 a bed.
"We are looking at significantly cheaper options around modular housing, transportable cell units and looking at some of the overseas examples where these have been used, in parts of Australia and in Europe."
The Budget allocated $45.8 million to introduce double-bunking of inmates in five prisons over the next two years.
Ms Collins said the double-bunking was not an alternative to a new jail.
"The double-bunking is because the forecasts show that we need to have it in place by the beginning of next year otherwise we are going to end up with prisoners being kept long term in police cells, court cells and prison vans."