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 option offering the best value for money.

Economic Development Minister Steven Joyce said the difference between the local tenders and the 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 43m vessel.


The 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 picked by the Ministry of Foreign Affairs and Trade to build the ferry.

Labour's spokesman for economic development, Shane Jones, said the contract showed the Government's new procurement rules were merely paying 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 ignored any economic gain from having this vessel built here.

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

It came down to who could deliver the best value for taxpayers' money, he said.

He believed that in this case the Foreign Ministry "went over and above their obligations to try and negotiate a successful tender with a New Zealand company".