$500m ship deal 'flawed'

The Government signed a contract with Australian shipbuilder Tenix without knowing exactly the costs of keeping going seven new ships for the Navy throughout their lifetimes.

However, it had estimated costs to avoid the $16 million cost for missing a deadline set by Tenix.

Defence Minister Mark Burton yesterday released a raft of cabinet papers about the deal.

It is facing legal action from a Dutch company which tendered unsuccessfully for the $500 million contract for the new ships.

Schelde Marinebouw BV has laid a $55 million law suit against the Ministry of Defence and Tenix, which won the contract to build the seven new ships.

It has described the tender process as fatally flawed.

The papers show the Government decided not to carry out further work on "life cycle" costs and options for the fleet mix because it would have missed a deadline set by Tenix that would have raised the price.

The papers stated that work by officials on "issues of fleet mix options and life cycle costing" would not be completed in time.

But the minister indicated the likely outcome of the additional work would be to confirm the fleet mix offered by Tenix.

- NZPA