Hillside Engineering Group in Dunedin should be considered for a multimillion-dollar locomotive-building proposal, government and industry sources say.
State-owned Enterprises Minister Trevor Mallard has proposed assembling locomotives in New Zealand and the Cabinet is considering approving a scoping study.
Mr Mallard noted they could be built at Woburn workshops, Lower Hutt, which is in his electorate.
Mr Mallard was in Cabinet meetings on Monday and unavailable for comment.
But a spokesman for Minister of Finance Michael Cullen said the former MP for South Dunedin was aware of Hillside's interest and a decision (due "within several weeks") would be based on "what was best for the taxpayer".
South Dunedin MP David Benson-Pope said he would advise Mr Mallard of Hillside's capacity for locomotive construction.
"If there is a policy decision to go ahead, I would absolutely expect that Hillside be included in this," he said when contacted on Monday.
Hillside spokesmen declined to comment, but other sources said its workforce of more than 190 had the skills and capacity to compete for any locomotive-building contract.
Hillside is working on a $63 million, two-year contract to rebuild 36 railcars, imported from Britain, for Auckland metropolitan rail.
The latest contract will bring to 104 the number of railcars delivered to the Auckland Regional Transport Authority from Hillside.
Rail and Maritime Transport Union organiser Jim Kelly, a Hillside employee for 26 years and national union president for 20 years, said there were enough skills at Hillside to undertake some of the locomotive work.
He understood KiwiRail now owned about 150 locomotives, most of which were more than 30 years old, plus 3500-4000 rail wagons around the country, including many out of commission and requiring repair or replacement.
National Party state-owned enterprises spokesman Gerry Brownlee noted the Woburn workshop was in Mr Mallard's electorate and described the proposal as a "save-my-seat campaign", NZPA reported.
Green Party regional economic development spokeswoman Sue Bradford encouraged the Government to move as quickly as possible to assemble new KiwiRail locomotives in New Zealand, noting that Hillside was already engaged in rebuilding rolling stock.
