Reports and Publications

• Annual Report 2006
  • Contents
  • Part 1 Overview
  • Part 2: Statement of responsibility and audit report
  • Part 3: Departmental financial statements
  • Part 4: Non-departmental schedules
  • Part 5: Other information

Within this section

Output Class - Management of equipment procurement (continued)

1. Acquisition of light operational vehicles (LOV)

2. ANZAC Ships

3. Light Armoured Vehicles4. Replacement or Upgrade of Tactical Mobile Communications

Annual Report for the year ended 30 June 2006

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Part 3: Departmental financial statements (continued)

Output Class - Management of equipment procurement

It will complete the following projects:

1. Acquisition of light operational vehicles (LOV) for the New Zealand Army This project provides the Army with a modern, light operational, military vehicle. They are the primary means of transport in peacekeeping operations, peace enforcement operations (including in support of the light armoured vehicle) and may provide support for evacuation operations in the South Pacific.
Target	Delivered
The project milestones in 2005/06 are to: complete the delivery of the second and final tranche of 133 vehicles by 30 June 2006	As at 30 June 2006 all but six vehicles had been delivered. Of these six vehicles: four armoured vehicles were held up due to export licence issues one armoured vehicle is to remain in the United Kingdom for testing purposes one non-armoured vehicle was due for delivery in July 2006.
complete the delivery of spares and training.	A minor quantity of spares are outstanding. Training is complete.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	93,333,000
Foreign exchange variances to date and forecast to complete	1,362,240
GST	11,666,000
Total approved cost	106,361,420
GST exclusive
Expenditure to 30 June 2005	57,700,145
Expenditure 2005/06	32,726,302
Future commitments and forecasts	3,655,914
	94,082,361
GST
GST to 30 June 2005	4,802,834
Expenditure 2005/06	5,212,133
Future commitments and forecasts	1,651,033
	11,666,000
Total forecast cost to complete	105,748,361

• Foreign exchange variances at 30 June 2006 are unfavourable by $1.362 million due to the purchase rates of the GBP currency being worse than the GBP exchange rates used in the Cabinet paper for financial approval.
  
  Average GBP approval rate = 0.3556
  GBP forecast average rate = 0.3504
• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 was GBP = 0.3444.

3. ANZAC Ships This project was to procure two ANZAC class frigates from the 10-ship build programme, to replace two existing surface combatants complete with spares and training facilities. New Zealand ships, HMNZS Te Kaha and HMNZS Te Mana have been delivered and are in service.
Target	Delivered
The project milestones in 2005/06 are to: discontinue New Zealand's involvement in this project and settle any outstanding obligations.	The Ministry requested the Australian Department of Defence to identify final Treaty obligations with a view to settlement by 30 June 2006. The Australian Department of Defence is awaiting costing information to achieve our closure objective. There are no other matters to report.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Approved contract at base rates	938,949,321
Approved escalations at base rates	252,391,118
Foreign exchange variances to date and forecast to complete	125,151,984
GST	153,808,491
Total approved cost	1,470,300,914
GST exclusive
Expenditure to 30 June 2005	1,242,635,679
Expenditure 2005/06	179,614
Future commitments and forecasts	500,000
	1,243,315,293
GST
GST to 30 June 2005	157,477,745
Expenditure 2005/06	753
Future commitments and forecasts	-
	157,478,498
Total forecast cost to complete	1,400,793,791

• The ANZAC Ship approval was stated in 1989 base exchange rates against a basket of currencies. A Treaty with Australia recognised contract escalation and currency variances, and agreed the methodologies for calculation.

3. Light Armoured Vehicles These Army vehicles are intended to provide protected mobility for light infantry manoeuvre groups in combat or when undertaking peace support operations.
Target	Delivered
The project milestones in 2005/06 are to: purchase 36 sets of add-on armour.	All add-on armour has been delivered.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	580,296,353
Foreign exchange variances to date and forecast to complete	13,793,878
GST	72,537,044
Total approved cost	666,627,275
GST exclusive
Expenditure to 30 June 2005	585,024,280
Expenditure 2005/06	7,817,704
Future commitments and forecasts	1,248,247
	594,090,231
GST
GST to 30 June 2005	52,238,269
Expenditure 2005/06	1,006,934
Future commitments and forecasts	483,958
	53,729,161
Total forecast cost to complete	647,819,392

• Foreign exchange variances at 30 June 2006 are unfavourable by $13.794 million due to the purchase rates of the CAD and USD currency being worse than the CAD and USD exchange rates used in the Cabinet paper for financial approval.
  
  CAD approval rate = 0.6600
  CAD forecast average rate = 0.6546
  
  

  USD approval rate = 0.4400
  USD forecast average rate = 0.4230

• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 were CAD = 0.8339 and USD = 0.6477

4. Replacement or Upgrade of Tactical Mobile Communications for the Army The project replaces and/or upgrades existing Army short range communications systems to provide high band width (higher capacity) digital theatre communication systems to support command and control requirements of the New Zealand Defence Force Battalion Group operations.
Target	Delivered
The project milestones in 2005/06 are to: purchase specialist vehicular intercom systems for the Special Operations Vehicle.	Delivery of intercom systems was completed in February 2006. Some accessories remain to be delivered. This is scheduled by the end of October 2006.

Financial summary of project costs charged to non-departmental appropriations as at 30 June 2006 (GST inclusive)
	$
Project approval	119,223,000
Foreign exchange variances to date and forecast to complete	4,383,983
GST	14,903,000
Total approved cost	138,509,983
GST exclusive
Expenditure to 30 June 2005	120,361,618
Expenditure 2005/06	1,504,606
Future commitments and forecasts	1,743,598
	123,609,822
GST
GST to 30 June 2005	11,509,462
Expenditure 2005/06	350,971
Future commitments and forecasts	3,039,728
	14,900,161
Total forecast cost to complete	138,509,983

• Foreign exchange variances at 30 June 2006 are unfavourable by $4.384 million due to the purchase rates of the USD currency being better than the USD exchange rates used in the Cabinet paper for financial approval.
  
  USD approval rate = 0.4300
  USD forecast average rate = 0.4141
• Commitments and forecasts are valued using an average exchange rate of forward contracts still to be settled, plus the actual exchange rates for currencies in the bank. The exchange rate used to calculate commitments and forecasts at 30 June 2006 was USD = 0.6477.

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