Annual Report for the year ended 30 June 2007
Part 3: Departmental financial statements (continued)
Statement of objectives and service performance
For the year ended 30 June 2007
Output Class - Management of equipment procurement
Description
Under this output class, the Ministry is responsible for acquiring military equipment costing more than NZ$7 million, in a transparent and fair way, and in accordance with government procurement policies. The Ministry is committed to providing competitive local industries with the opportunity to support defence, and to ensuring that the Government and the taxpayer get value for money.
This output class involves:
- the management of procurement functions on behalf of the Crown from the initial identification of a requirement through ministerial “approval in principle” to the acquisition process involving project investigation, risk assessment, quality assurance, equipment selection, negotiation and execution of the contract arrangements, up to the point when the equipment is delivered to the NZDF
- management of any warranty provisions beyond date of delivery
- investigation of associated financing arrangements
- arrangement of on-sale to the NZDF
- the provision of advice to industry on defence requirements.
Foreign exchange variances presented in the subsequent pages are from the date the project was approved to 30 June 2007 plus forecasted variances from 1 July 2007 until the project is complete.
Replacement Helicopter Capability
Photographic representation of the proposed TNZA NH-90 helicopter.
To replace the Iroquois utility helicopter and the Sioux training helicopter with a capability that meets the NZDF’s contemporary needs.
The training helicopter was planned to be in service in 2008 with the medium utility helicopter being available for introduction into service after 2009.
1. Medium Utility Helicopter
Objective
A preferred proposal was presented to Government in early 2006 and authority sought to negotiate a contract with the preferred supplier. Subject to further negotiations:
- it was planned in 2006/07 to take a final costed proposal back to Government.
- project milestones would be established following the award of a contract.
Performance
A preferred proposal for the Medium Utility Helicopter was presented to Government in early 2006 and authority sought and granted to negotiate a contract with the preferred supplier. A contract with NATO Helicopter Industries for the supply of eight NH90 helicopters, spares and training was signed on 31 July 2006. Further project milestones are being developed. These helicopters will be delivered to the NZDF over a period from 2010 – 2011.
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (GST inclusive) | ||
|---|---|---|
$ |
||
| Project approval | 771,710,326 | |
| Foreign exchange variances to date and forecast to complete | (471,734) | |
| GST | 96,463,791 | |
| Total approved cost | 867,702,383 | |
| GST exclusive | ||
| Expenditure to 30 June 2006 | 0 | |
| Expenditure 2006/07 | 228,762,439 | |
| Future commitments and forecasts | 542,475,825 | |
| 771,238,264 | ||
| GST | ||
| GST to 30 June 2006 | 0 | |
| Expenditure 2006/07 | 21,279 | |
| Future commitments and forecasts | 96,441,610 | |
| 96,462,889 | ||
| Total forecast cost to complete | 867,701,153 | |
- Foreign exchange variances at 30 June 2007 are favourable by $0.472 million due to the purchase rates of the EUR and USD currency being better than the EUR and USD exchange rates used in the Cabinet paper for financial approval.
EUR approval rate = 0.4625
EUR forecast average rate = 0.4625
USD approval rate = 0.6213
USD forecast average rate = 0.6587
- 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 rates used to calculate commitments and forecasts at 30 June 2007 was EUR = 0.4542 and USD = 0.6525
2. Light/Training Utility Helicopter
Objective
An open competitive tendering process will be conducted in 2006/07 to select a preferred supplier. Subject to the outcome of this tendering process:
- it was planned in 2006/07 to take a final costed proposal back to Government
- further project milestones would be established once a contract was awarded.
Performance
The requirement was re-evaluated following the decision to acquire the NH90 as the medium utility helicopter.
An open competitive tendering process was conducted in 2006/07 for the Light/Training Utility Helicopter to select a preferred supplier. At the end of the period, tender evaluation had not been completed.
Project Protector: New vessels for the Royal New Zealand Navy
Photo of HMNZS Canterbury on route to New Zealand from Melbourne.
Objective
To acquire a multi role vessel (MRV), two offshore patrol vessels (OPV) and four inshore patrol vessels (IPV) to meet inshore and offshore requirements for maritime surface surveillance in New Zealand’s Exclusive Economic Zone in the South Pacific, provide tactical sealift for the NZDF, support disaster relief and peace support operations, provide diplomatic and military presence, and provide training for the Royal New Zealand Navy (RNZN).
In 2006/07 it was planned to:
- take delivery of the MRV, one OPV and two IPVs and pass to the NZDF for introduction into service
- monitor the construction of the remaining OPV and two IPVs, to be delivered in 2007/08
- continue to manage the project, including delivery of all logistic support and training material, until completion in early 2008.
Performance
The MRV was delivered on 31 May 2007. The first IPV is due for delivery by the end of 2007 and the first OPV in January 2008. Monitoring of vessel construction continues and training and provision of spares is progressing. The Ministry will continue to manage the project, including delivery of all logistic support and training material, until its completion in 2008 when all seven vessels are forecast to have entered service with the RNZN.
|
|
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (GST inclusive) | ||
|---|---|---|
$ |
||
| Project approval | 499,724,161 | |
| Foreign exchange variances to date and forecast to complete | (3,431,772) | |
| GST | 62,466,000 | |
| Total approved cost | 558,758,389 | |
| GST exclusive | ||
| Expenditure to 30 June 2006 | 266,058,608 | |
| Expenditure 2006/07 | 106,903,450 | |
| Future commitments and forecasts | 123,329,776 | |
| 496,291,834 | ||
| GST | ||
| GST to 30 June 2006 | 6,451,836 | |
| Expenditure 2006/07 | 24,607,630 | |
| Future commitments and forecasts | 31,397,424 | |
| 62,456,890 | ||
| Total forecast cost to complete | 558,748,724 | |
- Foreign exchange variances at 30 June 2007 are favourable by $3.342 million due to the purchase rates for foreign currencies being better than the exchange rates used in the Cabinet paper for financial approval.
| Approval Rate | Forecast Average Rate | |
|---|---|---|
| AUD | 0.8821 | 0.8981 |
| CAD | 0.8210 | 0.8449 |
| EUR | 0.5059 | 0.5078 |
| GBP | 0.3464 | 0.3461 |
| JPY | 65.5436 | 70.9000 |
| NOK | 4.2444 | 4.3238 |
| SEK | 4.6683 | 4.8647 |
| USD | 0.6215 | 0.6518 |
- 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 2007 were:
| AUD | 0.8963 |
|---|---|
| CAD | 0.8338 |
| EUR | 0.4543 |
| GBP | 0.3492 |
| JPY | 70.9000 |
| NOK | 4.2035 |
| SEK | 4.9522 |
| USD | 0.6525 |
