Annual Report for the year ended 30 June 2005
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Part 3: Departmental financial statements (continued)
Output Class - Management of equipment procurement
Defence Industry
Target |
Delivered |
- It will provide support for the Defence Industry Committee of New Zealand (DICNZ).
|
- The Ministry provided support to DICNZ meetings on:
- 12 August 2004 at Ministry of Defence, Wellington
- 1 February 2005 at Trentham Army Camp
- 12 May 2005 at Air New Zealand Engineering Services Limited, Auckland.
- The New Zealand Defence Industry Awards of Excellence for 2004 were presented by the Minister of Defence on 20 October 2004.
- Research by the New Zealand Institute of Economic Research into the effect of Government procurement policies on defence industry in New Zealand was completed in January 2005 and presented to the DICNZ Committee on 1 February 2005.
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- It will ensure that local, including domestic, suppliers are afforded opportunities to compete for work consistent with the government procurement policy set out in Policy Guide for Purchasers issued by the Ministry of Economic Development in July 2002.
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- The Industry Capability Network (ICN) has assisted prime contractors to engage New Zealand industry in current defence business. Recent projects have created over $166 million dollars of work for New Zealand industry.
- ICN in conjunction with Tenix Defence Systems briefed New Zealand suppliers on 30 June 2005.
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- It will complete material for the Australia and New Zealand Industry Defence Equipment and Capability Catalogue database and update databases on industrial capability.
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- Updated industry briefs were submitted for inclusion in the Australia and New Zealand Industry Defence Equipment and Capability Catalogue 2005.
- Database templates are available on the Ministry of Defence website for ease of access to New Zealand business entities.
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- It will conduct industry briefing sessions on current defence projects and activities.
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- Briefings on future industry liaison ideas were conducted at four meetings of the New Zealand Defence Industry Association (NZDIA).
- Assistance has been given to organise a 2005 forum in Wellington.
- Worked with the NZDIA and ICN to ensure that New Zealand industry is afforded the best opportunity to show their capabilities to Tenix and other prime contractors.
- Worked with NZDIA and New Zealand Trade and Enterprise on framework options for the Victoria Government programme for interfacing contracts with local industry.
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- By using the Industry Capability Network as an agent, it will ensure that prospective overseas-based prime contractors are fully aware of the abilities of domestic industry to participate in the supply and support of capability being acquired through projects managed by the Ministry.
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- Suppliers and prime contractors have been referred to the ICN database.
- There is on-going dialogue with ICN to ensure that local industry is offered the appropriate assistance.
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Output Quality Measures and Standards
| |
Comment
|
- New capabilities and major refurbishment will be acquired within approved budgets, to the quality standards negotiated for each project, and within the agreed delivery schedule.
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- The financial summaries of project costs include a valuation of future commitments and forecasts using an average exchange rate of forward contracts still to be settled, plus actual exchange rates for currencies in the bank. The Ministry is of the view that each project will be acquired within its approved budget.
- The quality standards for each project are reviewed during the due diligence process and supply contracts are with companies that operate quality management systems. Equipment produced under contract is deemed to be subject to those quality management systems with acceptance being linked to milestone payments.
- Any significant changes in time frames are discussed in preceding information about individual acquisition projects.
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- All acquisitions and contracts will meet the Government's policy requirements.
- All contracts will be negotiated in a timely manner, and payments will be made on time if the provider is meeting the terms of the contract.
- Contract awards will be subject to considerations of through-life cost, quality and delivery schedules.
- Prices agreed for projects will be based on a competitive tender process where possible. When tendering is not possible, prices will be based either on independent benchmarks, or on full cost disclosure by the provider.
- Payments will be made at the agreed sum, to the correct supplier, and no payments will be made in excess of the agreed sum.
- Any significant variations or potential risks will be identified, together with corrective actions required or taken.
- Assumptions behind advice will be explicit, and argumentation will be logical and supported by facts.
- Evidence will be given of adequate consultation with interested parties, and possible objections to proposals will be identified.
- Problems of implementation, technical feasibility, timing, and consistency with other policies will be addressed.
- Defence industry advice reports will clearly state their purpose and address any issues raised by the Minister.
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- The Ministry has maintained quality control procedures to support the expectations for acquisition activities under this output class:
- prices agreed for new projects approved by the Government during the financial year have been based on a competitive tender process, where applicable and contract awards have been subjected to consideration of through-life costs, quality, risk, delivery schedule and local industrial participation
- potential risks for all projects have been identified together with corrective actions required or taken
- all payments made have been at the contracted prices to the correct suppliers upon the achievement of agreed milestones
- assumptions behind advice have been explicit, logical and supported by facts, adequate consultation has taken place with interested parties and objections to proposals identified
- problems with implementation, technical feasibility and time have been addressed
- ISO 9001 certification has been maintained.
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- The Defence Industry Committee of New Zealand will be asked to confirm annually that the Ministry and its agent, the Industry Capability Network, have appropriately promoted domestic suppliers' capabilities to prospective overseas-based prime contractors.
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- Industrial Capability Network (ICN) has outlined the activities it conducted on projects during the financial year to ensure that competitive local industry was given full, fair and reasonable opportunity to compete for Ministry project work. This included ensuring local capability was a consideration in the bids of potential overseas prime contractors.
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- The quality of management of equipment procurement will be assessed in terms of whether it is credible, respected, and contributes to the achievement of the Government's defence policy objectives by:
- seeking the Minister's views
- seeking the views of key stakeholders in management of equipment procurement.
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- Process management issues are discussed regularly with the Minister.
- The views of other stakeholders are obtained at Executive Capability Board and DICNZ meetings.
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- The Acquisition Division will implement recommendations agreed by the Ministry from audits or reviews.
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- Recommendations from three audits are being implemented.
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Cost of Output Class - Management of equipment procurement (GST exclusive)
For the year ended 30 June 2005
| |
30/6/2004 Actual
$000
| 30/6/2005 Actual
$000 |
30/6/2005 Main
estimates
$000 |
30/6/2005 Supp.
estimates
$000 |
| Revenue |
|
|
|
|
| Crown |
3,300 |
3,458 |
3,458 |
3,458 |
| Other |
1,727 |
594 |
- |
630 |
| Total revenue |
5,027 |
4,052 |
3,458 |
4,088 |
| Expenditure |
|
|
|
|
| Personnel |
1,061 |
1,139 |
1,053 |
1,077 |
| Operating |
2,025 |
715 |
358 |
964 |
| Other |
1,866 |
1,873 |
2,047 |
2,047 |
| Total expenditure |
4,952 |
3,727 |
3,458 |
4,088 |
| Surplus /(deficit) |
75 |
325 |
- |
- |
Project financial performance
For the year ended 30 June 2005
Project payments capitalised against Crown appropriations in 2004/05, and recoveries from the New Zealand Defence Force, were:
Expenditure |
Recoveries
from NZ
Defence Force
|
| |
2004/05
Main
estimates
$000
|
2004/05
Supp.
estimates
$000
|
30/6/2005
Actual
$000 |
2004/05
Supp.
estimates $000 |
30/6/2005
Actual
$000 |
| ANZAC Ships |
2,717 |
368 |
840 |
1,006 |
1,006 |
| Maritime helicopter |
- |
8 |
9 |
861 |
861 |
| P3 Orion autopilot |
- |
- |
- |
10,262 |
10,262 |
| B-757 aircraft |
22,687 |
10,179 |
236 |
- |
- |
| Light armoured vehicles |
16,065 |
25,540 |
21,521 |
123,229 |
123,230 |
| Tactical communications |
6,496 |
1,907 |
1,560 |
4,958 |
4,958 |
| Light operational vehicles |
28,920 |
75,915 |
54,072 |
42,900 |
42,899 |
| Medium range anti-armour weapon |
10,359 |
11,128 |
9,084 |
5,283 |
5,283 |
| Air defence system |
8,751 |
2,697 |
2,138 |
2,088 |
2,088 |
| P-3K Orion systems upgrade |
- |
72,962 |
65,618 |
30,765 |
30,765 |
| Project Protector vessels |
- |
137,530 |
114,035 |
60,996 |
61,005 |
| C-130H Life extension |
- |
38,950 |
43,962 |
- |
- |
| GST on imported goods and NZ payments |
44,178 |
24,245 |
14,585 |
- |
- |
| Total |
140,173 |
401,429 |
327,660 |
282,348 |
282,357 |
The appropriation (GST inclusive) for this output class was increased by $709,000 for:
| |
$(000)
(GST incl) |
P-3K Orion systems upgrade
New provision for pre-acquisition costs in 2004/2005. Funded by recovery from New Zealand Defence Force as Revenue Other. |
183 |
C-130H life extension
New provision for pre-acquisition costs in 2004/05. Funded by recovery from New Zealand Defence Force as Revenue Other. |
146 |
Automatic grenade launcher
New provision for pre-acquisition costs in 2004/05. Funded by recovery from New Zealand Defence Force as Revenue Other. |
84 |
Helicopter capability
New provision for pre-acquisition costs in 2004/05. Funded by recovery from New Zealand Defence Force as Revenue Other. |
141 |
Short-term workspace
New provision for short-term workspace costs for project teams on pre-acquisition activities. Funded by recovery from New Zealand Defence Force as Revenue Other. |
128 |
State Sector Retirement Savings Scheme
New provision for implications arising from the take up of the State Sector Retirement Savings Scheme. |
27 |
| Total change for financial year |
709 |
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