The decision to unilaterally repudiate the contract for new Cook Strait ferries is beginning to look like one of the stupidest decisions a New Zealand government ever made. While cancelling the ferries and their associated port infrastructure may have made this year's books look good, it means higher costs later, and not just for the government. Quite apart from the facts that the ports need to be upgraded anyway and new ferries will be far more expensive than the price Labour negotiated, pursuing a cheap-arse no-rail option will mean clogging the roads with megatrucks, and higher freight costs for everyone. And it makes you wish they could just change their mind again and go back to the original plan.
And it turns out that that may in fact still be an option. Because while National has repudiated the contract, negotiations over the exit price are still ongoing. The information is buried in a provisional opinion from the Ombudsman (which has now become final, so I can talk about it). I'd requested the iReX contract, and KiwiRail had refused, citing prejudice to negotiations. The Ombudsman upheld that decision, but in explaining their reasoning, described the negotiations:
The negotiations involve numerous parties, including KiwiRail, Hyundai, and external counsel. KiwiRail is represented in the negotiations by counsel based in the United Kingdom, as the contract is based in English law. The parties are meeting on an at least weekly basis for negotiations. Information about the negotiations and the contract is treated confidentially and tightly held. KiwiRail staff who require access to the information are required to sign non-disclosure agreements.[Emphasis added]The negotiations are highly complex and detailed. They involve Hyundai submitting information to substantiate the costs incurred in various areas relating to the ship build. There are also numerous subcontractors to Hyundai who are making similar submissions, and this contributes to the complexity. KiwiRail has specialist external lawyers, ship architects and ship brokers assisting its verification of the claims.
KiwiRail has provided me with information about the tenor of its relationship with Hyundai. Unfortunately, I am unable to detail this specifically as doing so has the potential to undermine the interests which section 9(2)(j) is intended to protect. However, what I will say is that the nature of the negotiations, including their stage at the time of your request (and now), suggests there is a reasonable likelihood that they would be prejudiced if the information was released.
That opinion was released to me yesterday, and became final today. While the time-lags involved in Ombudsman's decisions may mean the information relied upon is a month old, taken at face value it suggests that contract negotiations are still ongoing. And you'd expect the government to have announced if they'd concluded.
The fact that negotiations are still ongoing also suggests that there may still be space for the government to change its mind, and decide that actually, they'd like those ferries after all. That will not be free. Quite apart from any penalty payment for dicking them around, its clear that the whole negotiation process has cost a lot of people a lot of money, which the government should rightly pay. But their decision is so disastrous that this might still be the cheapest option. Sadly, the unwillingness of politicians to admit they have ever made a mistake means they probably won't take it.
(Meanwhile, the lesson from all of this is to request major government procurement contracts the moment they are announced, and before political interference screws them up and allows the holders to claim “negotiations” as a withholding ground...)
