The government has defended its decision to award an $8 million ferry contract to a Bangladesh company rather than a local boat builder as the 'best value for money' option.

Economic development minister Steven Joyce told the Herald the difference between the New Zealand tenders and the successful Bangladesh bid was around $14 million.

"The numbers here were just too big to bridge, whatever way you want to cut it. If we were to prefer New Zealand suppliers at any cost, it would be a recipe for economic disaster," Joyce said.

Twelve shipyards from Australia, Bangladesh, China, New Zealand, Poland and Singapore submitted tenders for the 43-metre vessel.


The new ferry, a replacement destined for the New Zealand territory of Tokelau, is capable of carrying 60 passengers and 50 tonnes of freight.

Bangladesh firm Western Marine Shipyard was eventually picked by the Ministry of Foreign Affairs and Trade to build the ferry.

Labour's spokesman for economic development Shane Jones said this contract shows the Governments new procurement rules were merely 'lip service.'

"It is bizarre New Zealand's boat building industry was good enough for Oracle Team USA but is not good enough for the Pacific Islands," Jones said.

Executive director of NZ Marine Peter Busfield said the Government's new procurement rules ignore any economic gain from having this vessel built here versus by an overseas yard.

New procurement regulations came into effect in October last year, designed to make it easier for smaller kiwi companies to tender for Government contracts.

"We believe the Government's procurement requirements are fundamentally flawed as the process does not factor in the economic gain to the country of buying 'New Zealand made' versus importing," Busfield said.

But minister Joyce disagreed.


"To suggest that you go out and spend $14 million more and you get an economic benefit, is a pretty tough call," Joyce said.

Government procurement needs to come down who can deliver the best value for taxpayers' money, he said.

"In this particular case, it's my understanding that MFAT went over and above their obligations to try and negotiate a successful tender with a New Zealand company," Joyce said.

Busfield said several New Zealand companies had the capability to build the ferry, with Nelson-based AIMEX Ltd saying they could build this vessel in Nelson for NZ$14-15 million.

"(T)he government procuring a vessel from New Zealand for the sum of NZ$14 million would generate an additional NZ$9 million in GDP and sustain the equivalent of 127 employees for one year," Busfield said.

The New Zealand marine industry has been in survival mode since 2008 and some companies are currently walking the narrow line between economic survival or not, Busfield said.

The Tokelau ferry contract is the first agreement with a government for the Bangladesh boat building industry, said managing director of Western Marine Shipyard, Md Sakhawat Hossain.

"By securing an order from New Zealand for the first time, the industry has stepped into the market for the Pacific," Hossain told local media.