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The Irving dry dock that sunk two years ago is going to be replaced as part of an upgrade for the federal shipbuilding contract. (CBC)

Taxpayers are kicking in $260 million to build a new large floating dock at the Irving Shipyard in Halifax — replacing one that sank two years ago and will now become scrap metal.

The 152-metre-long Scotia Dock II was submerged in May 2010 to allow a tugboat to enter the dry dock for maintenance, but instead of lifting the tug out of the water, the dock kept sinking.

It stayed on the bottom of Halifax harbour for nearly a month.

The heavily-damaged dock has been sold to Southern Recycling, a metal recycler on the Gulf of Mexico.

Officials at the shipyard were waiting to find out about the federal shipbuilding contract before it decided what to do about the  dock, according to Mary Keith, spokeswoman for Irving.

The company now plans to get a new floating dock, she said. It's part of the expansion to upgrade the yard so it can move ahead with a series of anticipated federal contracts.