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• Hunn Review
  • Contents
  • Executive Summary
  • Chapter 1
  • Chapter 2
  • Chapter 3
  • Chapter 4
  • Chapter 5
  • Chapter 6
  • Chapter 7
  • Chapter 8

Within this section

• A Joint, Integrated Defence Organisation
• External Sources of Advice on Defence Matters
• Summary of Organisational Proposals

Hunn Review: 30 September 2002

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Chapter 7 (continued)

Co-operative and joint arrangements for New Zealand Defence

A Joint, Integrated Defence Organisation

64. A more integrative structural arrangement would establish a framework - the New Zealand Defence Organisation (NZDO). The NZDO - see Figure 3 below - would receive political direction from the Minister of Defence, and be headed by the Secretary and CDF with shared, prime and single-line accountabilities as set out in Table 1 of this Chapter and Annex H. In practical terms, the Secretary and the CDF would continue to be the Government's principal advisers on defence matters.

Figure 3: A Joint Integrated Defence Organisation Model

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65. The NZDO would comprise the New Zealand Defence Force with its three constituent arms - the Royal New Zealand Navy, the New Zealand Army, and the Royal New Zealand Air Force - together with the Joint Forces Headquarters, and a new Defence Corporate Headquarters/Office.

Defence Corporate Headquarters/Office

66. The Defence Corporate Headquarters/Office (DC HQ) would be the corporate-level policy and management structure for, and the centre point of, the New Zealand Defence Organisation. This suggested title is used to indicate that I do not see the Ministry of Defence being subsumed into the Headquarters, New Zealand Defence Force, or vice versa.
67. The Defence Corporate HQ/Office would comprise the Secretary, the CDF, and other principal military and civilian officers and their staffs. This would include: a Deputy Secretary of Defence and Vice Chief (as co- directors of an integrated civilian-military joint staff); the three Service Chiefs, and their personal office staffs; Heads of equipment acquisition services and defence evaluation; and the Joint Forces Commander, New Zealand. (The main parts of the model are outlined below and in Figure 2 overleaf with a more detailed description provided at Annex J.)

Defence Strategic Staff

68. The core of the DC HQ would be a new integrated and joint civilian-military staff. This group - for the purposes of this report, named the Defence Strategic Staff, - would bring Personnel, Force Development, Logistics, Command, Control, Communications and Computers and Information Systems (C4IS), Defence Policy and International Defence Relations, and Resources Management staffs from the MoD and HQ NZDF, together in new integrated staff groupings. These staff groupings, depicted in Figure 4 below, would be aligned with all strategic management processes outlined in Table 1 and Figure 1 above, and are described in further detail in Annex J.

Figure 4: Main Components of a Defence Strategic Staff

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69. The Defence Strategic Staff would be the main vehicle through which the Secretary and CDF would manage their shared responsibilities. A Deputy Secretary of Defence on behalf of the Secretary and a Vice Chief on behalf of the CDF would co-direct and lead the Staff, with responsibility for co-ordinating all staff effort; developing an integrated, joint corporate culture; and meeting all the Secretary's and CDF's needs for information assistance to support their responsibilities as principal advisers to Government.

Service Chiefs

70. The roles and responsibilities of the Service Chiefs of Staff would be redefined. They would retain important responsibilities as guardians of the ethos and professionalism of their Services. They would continue to be at the strategic management level of the Defence Organisation, so as to participate in setting the overall aims and vision for Defence, and commit themselves to implementing that vision in their own Services. They would contribute to the management of each of their Services but within a framework of responsibility that is increasingly joint in its orientation and focus. Some narrowing of their focus away from the conduct of operations and operational command, which is the prerogative of the CDF and the Joint Forces Commander, and on to recruitment, training, ethics, professionalism and support to forces held at readiness, is already underway: this should be taken a step further if my suggestions in the following paragraphs are accepted.
71. The current legislation requires the retention of the title "Chiefs of Staff'. In any subsequent legislative revision, consideration should be given to changing the title to "Chief of Service". Such re-titling would reinforce a clearer definition of their responsibilities within a Defence Corporate Headquarters, and as part of a joint-oriented NZDF.
72. Whether the title is changed, or not, Service Chiefs would be responsible for:
    • personal advice from a Service (land, maritime or air) professional perspective into strategic management processes;
    • managing the activities to recruit, select and train personnel, maintain equipment and infrastructure that supports or is contributed to front-line force elements so that they in turn achieve and hold a level of capability for assignment to the Joint Forces Commander New Zealand when required for operational missions;
    • assessment and advice on the overall effectiveness of forces and formations for which they are accountable;
    • professional leadership that inculcates values and behaviours that equip their personnel to support, and participate in joint operations
    • the highest professional standards of forces and formations for which they are accountable.
73. A redefinition and re-attribution of NZDF output responsibilities and lines of resource management authority for the Service Chiefs, the Joint Forces Commander New Zealand, and the Land, Maritime and Air Component Commanders would be required to reflect the formers' more focused responsibility for specific recruitment, individual training, equipment maintenance and support activities.
74. The manner of the Service Chiefs' involvement in issues concerned with military capability development and acquisition would also change. The primary method through which the single Service contribution would be made would be through seconded staff officers being part of a joint, integrated strategic staff; the Service Chiefs personal contributions would be through their membership of the proposed new senior management committee structure.
75. International experience (in the United States, Canada, Australia and the United Kingdom) has consistently demonstrated that when single Service Chiefs are integrated into joint structures, they seek to re-create their own staffs to provide them with personal advice. While this may appear a valid requirement, it re-introduces duplication. It runs counter to the goals of establishing a joint, integrated staff structure, and risks re-establishing centres of competition. To ensure that Service Chiefs are provided with the information they need in order to participate in the Strategy Committee and the Chiefs of Staff Committee, they would have full access to the directors of the Defence Strategic Staff. Their current supporting staff could be reduced accordingly.
76. In practical terms, I would see the Service Chiefs spending a good deal of their time outside Wellington taking a hands-on leadership role in the training and preparation of personnel under their command. I see no conflict between this direct involvement in professional development and their participation in the strategic direction of the NZDO.
77. The Service Chiefs would retain the right to request direct access to the Minister. I would suggest this right be set out in a Ministerial directive including the conditions that Service Chiefs provide formal notification to the CDF and, where possible, the CDF attends any meeting with the Minister. Such conditions would preserve the Minister's access to a range of professional military opinions, while allowing the CDF the right of reply and ensuring that the CDF's position as principal military adviser was not undermined. It is expected that this right would be exercised in exceptional circumstances only, particularly as the Minister's participation in the proposed Strategy Committee would enable the views of the Chiefs to be available to the Minister in a forum where transparency and frankness would be encouraged. Such a Ministerial directive could also establish a procedure by means of which both the CDF and the Secretary are consulted prior to the appointment or removal of a Service Chief.

Joint Forces Commander and JF HQ

78. The position of Commander Joint Forces New Zealand (COMJFNZ) would need to be reflected in any legislative change. With the Service Chiefs being responsible for "recruiting and training personnel, and maintaining equipment and infrastructure that supports or is contributed to front-line force elements" i.e., internal outputs, the JFCOMNZ with the three component commanders would be responsible for externally-delivered outputs from the NZDF. These outputs would consist of front-line force elements delivering a directed level of military capability in preparedness for operations, and those units on operations.
79. To be consistent with the overall spread of responsibilities and accountabilities being recommended for the Defence Corporate HQ, the management and accountability lines for resources management would need to be redefined. One option would be for the JFCOMNZ to be accountable to CDF for units deployed on operations, and those units that are being worked up to deploy. This would make the Land, Maritime and Air Component Commanders responsible to CDF for maintaining units at their directed level and working together to carry out joint training required by that directed level of capability.
80. Working relationships and procedures for providing advice on operational responses to security crises need to be defined between the components of the JF HQ and the relevant directorates of the proposed Defence Strategic Staff. For example, planning for operations involves a cycle of information exchange between the JF HQ directorates and the Defence Strategic Staffs Strategic Commitments and, Policy, Strategy and Plans directorates. The latter would provide strategic direction, strategic intelligence, planning assumptions, and information from inter-agency co-ordination. The former would provide feasibility assessments, options for operational force packages, operational intelligence and costing information. Similar linkages for JF HQ contributions to future capability development processes need to be validated. Effective linkages are also needed to make sure that the joint and particular needs of JF HQ front-line units (trained replacement personnel, maintained equipment, training facilities etc) are incorporated into single Services planning.

Joint Logistics Organisation

81. I have noted that the NZDF is already evaluating the feasibility of possible efficiencies to be gained from establishing a Joint Logistics Organisation. Given the positive international experience in this area, I have incorporated a Joint Logistics Organisation as part of this recommended model, since it would provide a unified framework for NZDO logistics management functions including acquiring through-life support for equipment.
82. While having the potential to achieve efficiencies in areas of common logistic support to the three Services, such an organisation should also include centres of excellence required for the specialised support needs of each Service. Such areas include, for example, air-worthiness certification for RNZAF air assets. The aim would be to achieve the optimum balance between joint logistic support for activities that are common to all three Services, and to retain as single Service units, only those activities where there are unique Service-specific requirements.
83. It will also be important to define the supplier-customer relationships and levels of service expected between the Joint Logistics Organisation and the single Service and Joint Force output managers on the one hand and the Defence Organisation Acquisitions Services Division on the other. In the case of the latter, international experience has demonstrated that interoperable working procedures and information resource management systems are essential.

Defence Evaluation Services

84. To address the issues concerning defence evaluations which were outlined in the previous chapter, a prior question needs to be resolved. In order to achieve levels of assurance required by Ministers, should evaluation services be provided by a unit external to a new joint, integrated Defence Organisation? Evaluations are needed to improve the quality of defence policy advice to Government; to assist the NZDO senior executive to continuously improve their use of resources; to manage risks; and to maintain standards. But primarily evaluations are needed to provide Government with assurance that the Defence Organisation is providing value for money and is effectively translating its priorities and directions into force capability and operational success.
85. There is no doubt some evaluations may be best handled externally. In this category, I would suggest the outsourcing to OAG / Audit New Zealand of the conduct of evaluations of defence acquisition projects. There does not appear to be any reason why this service (which essentially concerns performance of a commercial management activity) should be carried out internally. Of all the areas on which successive Governments have sought reassurance, major purchases have been the most sensitive. I would suggest that the Auditor General's audit of the LA V vehicle purchase indicates the value of external assessments of major acquisitions and that this precedent should be adopted as general practice.
86. On the other hand, because most core evaluations required by the Defence Organisation and Government involve specialist knowledge and experience, a new integrated NZDO must have its own evaluative capacity, even if greater emphasis is placed on external assessments. The purpose of such a reconfigured internal unit would be to evaluate:
    • the impacts upon defence policy over time of the annual delivery of NZDO outputs and capital investments and other capability enhancements;
    • the cumulative impacts of defence policy achievements and Defence Organisation outputs upon progress towards achieving strategic outcomes for national security;
    • Defence Organisation (strategic-level) efficiency and effectiveness; and
    • professional standards and outputs performance of NZDF current military capabilities.

87. In the case of professional military outputs performance and standards, the intention should be to pursue the broader concept of performance evaluation of NZDF military capabilities that was envisaged at the time the position of the Inspector General was established. This would mean changing the role of the NZDF Inspector General from that of merely collating OPRES reports to that of being the NZDF's Senior Military Evaluator. He or she would be responsible for a military evaluations staff, as part of an integrated, joint Defence Evaluations unit and responsible (as is the case in other defence systems) for an annual programme of evaluations under simulated operational conditions of selected NZDF capabilities.
88. In the context of a joint integrated organisation, the Head of Defence Evaluations should report directly to both the Secretary and the CDF. Either a military officer or a civilian official with appropriate policy and management experience could fill this position. An important proviso would be the retention of a direct reporting line on matters of professional standards between the Senior Military Evaluator and CDF (as set out in Figure 5 below): this would be essential to support the command responsibility of the CDF.

Figure 5: Evaluation Areas for integrated, joint Defence Evaluations Staff

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89. To undertake the range of evaluations outlined above, a joint, integrated evaluations staff would be drawn from the current MoD Evaluations and Policy areas, and the CDF's Corporate Risk Assessment Unit and Inspector General areas. While the Senior Military Evaluator could retain a direct reporting line to CDF, in all other respects, military evaluators would be part of the Defence Evaluations Staff. As such, they would be expected to contribute relevant expertise not only to professional standards evaluations, but also to outputs and efficiency and effectiveness evaluations.
90. An evaluations function of the kind suggested here would be more likely than the current system to attract and retain qualified staff, particularly on the civilian side. Opportunities would exist for civilian and military analysts to have career development paths alternating between Defence Evaluations and the Defence Strategic Staff. This would be mutually beneficial in developing both evaluative and analytical skills and knowledge that would over time improve policy formulation as well as evaluation.

Acquisitions Advice and Services for Specialist Military Equipment

91. As with defence evaluations, similarly with acquisitions of military equipment, a prior question needs to be asked: is greater value for money to be obtained from continuing the present practice or is this more likely to be achieved through a separate external organisation? Apart from the provision of acquisition-related investment advice, the function is primarily a service and commercial activity. Theoretically, therefore, it does not need to be part of the defence organisation itself.
92. Yet, the practice among our strategic partners is to retain this function in-house. It is accepted that acquisition projects for military equipment are uniquely demanding and that success depends upon developing a cadre of acquisition professionals. In the United Kingdom for example, an appropriate degree of separation from other staffs is established to allow the acquisition organisation to function in a commercial manner, including retaining an essential level of responsiveness to the needs of its customers. The UK Defence Procurement Agency has an integrated board of directors, which includes three senior military officers.
93. In New Zealand's case, because our military forces are small, most equipment projects tend to be unique, so that it would be unlikely that a critical mass of expertise could be developed and sustained in an external organisation. For the time being, therefore, there is a need to retain within the Defence Organisation, an acquisition services capacity.
94. The role of an Acquisition Services Division within the Defence Organisation would be to provide project management services for major military purchases. This service should be focused on supplying in the most affordable manner, equipments that most closely meet the military performance needs specified by the Defence Strategic Staff and agreed by Government.
95. A second role of such a unit would be to provide "acquisition advice to support defence investment cases for major equipment". Clear processes and structures are required to define the parameters and appropriate point in time for this advice. This has not always been the case in New Zealand, particularly on those occasions when the acquisition staff have felt they have "got on to a bargain". If acquisition practitioners provide advice from a commercial perspective too early in the process of military capability definition and development, full consideration of military performance alternatives can be foreclosed. Information on acquisition opportunities should not be allowed to drive choices about what military capabilities are required. Defence policy objectives - not equipment "opportunity buys" - must drive capability requirements. If the capability has not been endorsed as a requirement, the possibility of getting a "cheap deal" on equipment is not only irrelevant but possibly dangerous, if it involves lower safety margins for the military personnel who have to use it. It is only when performance goals for military equipments to meet capability requirements are firmed up that acquisition practitioners should be brought in to advise on issues of acquisition feasibility, develop acquisition strategies and plans and playing a leading role in evaluating proposals and tenders. It is at that point that the commercial instinct for the best value-for-money is most valuable.
96. The Defence Organisation's management and governance arrangements therefore should prescribe when acquisition advice is to be provided. One mechanism for managing this acquisition advice function is suggested below in proposals for governance committees for the Defence Organisation.
97. One other factor also needs to be borne in mind. In addition to major upgrades to existing equipment, or acquiring new equipment, the Defence Organisation must also repair and maintain equipment throughout its life. This includes the purchase of spare parts, updated test equipment, etc. There is a view that a defence acquisitions services unit should undertake such purchases. There is an equally strong argument that a Joint Logistics Organisation should perform this function, as it is an integral part of the logistics support cycle for maintaining and repairing equipment and supplying the logistics needs of the defence function.
98. In examining the pros and cons, international experience offers examples of both approaches. Key issues would appear to be customer responsiveness, and the alignment of accountabilities and responsibilities for service delivery. In my view if the decision were made to set up a JLO, it would be preferable to avoid the transaction costs of splitting off a key component of the logistics function and making the Acquisitions Services Division responsible for it. Spare parts purchasing is integral to the service partnerships that need to be built up by a Joint Logistics Organisation with its single Service customers. These daily relationships are different in nature from those used for "one-off' purchases. It is suggested therefore that the Acquisition Services Division continue to be focused on project services for equipment costing over the current limit of $NZ7m, while responsibility for spare parts and maintenance should be assumed by the proposed Joint Logistics Organisation.

External Sources of Advice on Defence Matters

99. I have been asked to consider options for "enabling policy advice from a variety of sources to ensure high quality, professional, timely, fully-tested and informed defence and security policy advice to the Government" and also "options or structural arrangements and accountabilities that enable appropriate Parliamentary Select Committee participation in defence planning and capital acquisition advice and decision-making". Implicit in the call for these options is the desire to provide contestability of ideas that is at present internalised within the Defence Act structure. In its 1999 Report, the Select Committee proposed the establishment of a Public Advisory Committee on Defence and Security similar to the Public Advisory Committee on Disarmament and Arms Control. As I have not had the opportunity to discuss this question with those who would know, I cannot comment on the success of PACDAC. Nor am I in a position to assess whether an external advisory group on defence issues would assist Parliament: that is for the Select Committee to decide.
100. So far as advice to the Executive is concerned I am not convinced that such an advisory body would add a great deal and could have the opposite effect of what might be intended - that is, it could be a source of discord rather than of consensus. The security of the nation is a principal function of Government. It calls for the clear exercise of authority often in difficult, and confused circumstances. While it is essential that Ministers should have the means of gauging public opinion, particularly when the arguments for and against a particular course of action are finely balanced, I am not sure a public advisory committee would be the best means of providing this insight.
101. My preference would be to take the other steps suggested in this review to improve the quality of information and advice to Ministers before establishing additional institutional frameworks. Once the priority objectives had been achieved and assessed, then further consideration could be given to whether other measures were desirable. For the present I would suggest the emphasis should be on improving the Government's own defence machinery.
102. Some universities are developing their capacity to provide alternative points of view - and I have mentioned above the moves that are currently taking place at Victoria University of Wellington to establish a School of Government (of which the Centre for Strategic Studies would be an integral part). There are also other university-organised events such as the Otago University Foreign Policy or Massey University Defence and Security Studies conferences as well as public bodies like the New Zealand Institute of International Affairs, that provide platforms for debate on defence issues. The Government has given some support to these activities in the past and it may be more cost-effective in terms of improving the quality of public discussion to consider providing additional funding to them rather than setting up a new body.

Summary of Organisational Proposals

103. In summary, I recommend that consideration be given to the implementation of six areas of transformation:
     • emphasis on clear processes and explicit outcomes to achieve the Government's defence objectives and in order to implement them, on the establishment of an integrated Defence Organisation working to a single vision and a common set of values. While these are of the greatest importance, structural change would be needed to enable them to be achieved;
     • a national security governance structure to co-ordinate the formulation of Government policies and planning as well as the activities of all agencies concerned with the development of New Zealand's national security capability .
     • new governance processes emphasising jointness and cooperation, centring on a Strategy Committee that brings together within a framework of Ministerial control, both senior military and civilian advisers and decision-makers. In support of this would be four subordinate committees (the Defence Policy Committee, the Defence Acquisition Management Board, the Defence Capabilities Committee, and the Chiefs of Staff Committee) responsible for managing co-ordinated inputs from across the organisation.
     • increased Ministerial involvement through the chairmanship of the Strategy Committee (at least once a quarter), supplemented by the appointment to the Minister's Office of two advisers from the Defence Organisation - one military, one civilian.
     • new concepts of shared, prime and sole accountability and responsibility for the Secretary and CDF based on equal partnership and participation in the strategic policy and management processes of an integrated Defence Organisation
     • new management and governance roles and responsibilities for the Chiefs of Staff and their current HQ NZDF - based staffs;
     • a new organisational structure - the New Zealand Defence Organisation - with an integrated strategic staff at its centre, supported by a Joint Logistics Organisation, and re-focused acquisition and evaluation functions, which would:
       • bring together both civilian and military contributions to improve advice formulation and management decision-making;
       • model standards of behaviour based on partnership, participation and professionalism;
       • provide information access for the over-lapping and shared responsibilities and accountabilities of the Secretary and CDF;
       • reduce negative effects of vertical boundaries by integrating fragmented staffs into integrated and joint work structures;
       • develop an effective strategic joint culture and capability in the NZDF through the incorporation of single Service staffs into a joint-oriented Defence Strategic Staff, a joint Military Evaluations unit, and a Joint Logistics Organisation
       • bring about, over time, a shift from an information - denial culture to an information - sharing/learning organisation culture; and
       • achieve resource savings in removing the requirement for duplicated overhead support activities, personnel and facilities, particularly in information technology, financial management and administrative support systems.

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