Statement of Intent 1 July 2004 - 30 June 2005
Part 2: Departmental forecast report (continued)
Output class performance statements 2004/05
Management of equipment procurement
Description
Under this output class the Minister of Defence will purchase the following:
- management of procurement, or refurbishment, on behalf of the Crown, of significant equipment contributing to a capability of the New Zealand Defence Force. This will involve management of procurement functions from the initial identification of a requirement through ministerial approval-in-principle and commitments; the subsequent acquisition process, including project investigation, risk assessment, quality assurance, equipment selection, negotiation and execution of contract arrangements up to the point when the equipment is delivered to the New Zealand Defence Force; advice on introduction into service and the management of any warranty provisions. It also covers investigation of associated financing arrangements and on-sale to the New Zealand Defence Force.
- maintenance of an information base on industrial capability, and the provision of advice to industry on defence requirements.
Quantity, quality, timeliness and cost
The Ministry will meet the following requirements:
It will progress some or all of the following projects, subject to appropriate Government approval for each:
| Acquisition of new maritime forces vessels for the Navy | This project proposes the acquisition of patrol vessels to meet inshore and offshore requirements for maritime surface surveillance in New Zealand's Exclusive Economic Zone in the South Pacific. The Ministry is purchasing a multi-role vessel to replace HMNZS Canterbury to provide tactical sealift for the New Zealand Defence Force, support disaster relief and peace support operations, conduct resource protection patrols, provide diplomatic and military presence, and for training. In 2004/05 the Ministry expects to negotiate a contract with a preferred supplier, or suppliers, with construction of the ships commencing late in the financial year. Further project milestones will be known once a contract is awarded. |
| Replacement Helicopter Capability | This project proposes the replacement of the Iroquois utility helicopter and the Sioux training helicopter. In 2004/05 it is planned to:
The intention is to take costed proposals back to Government during 2005. |
| Acquisition of light operational vehicles (LOV) for the 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. The project milestones in 2004/05 are to:
|
| Acquisition of medium range anti armour weapon for the Army | This weapon will provide land forces with a medium range capability against armoured vehicles and other targets. A contract through the United States Foreign Military Sales programme for the missiles and launch units was entered into in December 2003, with deliveries expected to be complete by June 2006. |
| Acquisition of direct fire support weapon (area) for the Army | This weapon will provide land forces with the ability to engage targets at a range of up to two kilometres. The intention is to enter into a contract for the acquisition of this equipment by 30 August 2004. Further project milestones, including delivery, will be known once a contract is awarded. |
| Acquisition of very low level air defence radar for the Army | This project will purchase an alerting and cueing system to bring the Army Mistral air defence system up to an improved operational standard. It is planned to enter into a contract for the acquisition of this equipment by 30 June 2004. Further project milestones, including delivery, will be known once a contract is awarded. |
| Upgrade and refurbishment of C-130H aircraft (Project Pegasus) for the Air Force | This project will extend the life of the Royal New Zealand Air Force C-130H Hercules aircraft by upgrading the aircraft systems and undertaking some structural refurbishment work. The intention is to complete the evaluation of the Best and Final Offers from the four tenderers, and following consultation, make recommendations to the Government in late 2004. |
| Upgrade of P3 mission systems (Project Guardian) for the Air Force | This project will upgrade the sensors and mission management systems required for the Royal New Zealand Air Force P-3 Orion maritime patrol aircraft to conduct surface surveillance tasks. The intention is to complete the evaluation of the Best and Final Offer from the preferred tenderer by 31 July 2004, and following consultation, make recommendations to the Government in the negotiating and awarding of a contract. |
It will continue management of the following projects:
| Acquisition of a light armoured vehicle (LAV) for the Army | These Army vehicles are intended to provide protected mobility for light infantry manoeuvre groups in combat or when undertaking peace support operations. The project milestones in 2004/05 are to:
|
| Replacement of Boeing 727 aircraft (Project Waka) for the Air Force | This project replaces the Boeing 727 aircraft with Boeing 757 aircraft to provide greater range and payload capacity. Two aircraft have been purchased. The intention is to modify them to provide a dual passenger/freight capability. In 2004/05 it is planned to:
|
It will complete the following projects:
| Replacement or upgrade of tactical communications for the Army | This project replaces and/or upgrades existing Army short range communications systems to provide a high band width (higher capacity) digital theatre communication system to support command and control requirements of the New Zealand Defence Force Battalion Group operations. The final delivery of radios are expected by September 2004. Ancillary equipment is expected to be complete by March 2005. |
| Anzac Ship | 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. In 2004/05 it is planned to discontinue New Zealand's involvement in this project and settle any outstanding obligations. |
- It will provide support for the Defence Industry Committee of New Zealand.
- 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.
- It will complete material for the Australia and New Zealand Industry Defence Equipment and Capability Catalogue database and update databases on industrial capability.
- It will conduct industry briefing sessions on current defence projects and activities.
- 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.
Delivery of this output will be subject to the following quality standards in accordance with good practice:
- 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.
- 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.
- 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.
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.
In addition, the Acquisition Division will implement recommendations agreed by the Ministry from audits or reviews.
This output class will be provided within the appropriated sum of $3.890 million (inclusive of GST).
| Year | Cost GST incl. $000 |
Cost GST excl. $000 |
Total revenue GST excl. $000 |
Revenue: Crown GST excl. $000 |
Revenue: other GST excl. $000 |
|---|---|---|---|---|---|
| 2004/05 | 3,890 | 3,458 | 3,458 | 3,458 | - |
| 2003/04 | 7,076 | 6,290 | 6,290 | 3,369 | 2,921 |
GST status of departmental output classes
The forecast financial statements in this report present expenses (and revenue) exclusive of GST, in accordance with generally accepted accounting practice. When appropriated by Parliament these expenses are inclusive of GST, in accordance with legislation. Therefore:
- The GST-exclusive amounts for each departmental output class correspond to "total expenses" for 2004/05 appearing in the output operating statements appearing on page 44 of this report, while the aggregate amount for all three output classes corresponds to "total output expenses" for 2004/05 in the statement of forecast financial performance on page 37 of this report.
- The GST-inclusive amounts for each departmental output class correspond to the bolded annual appropriations for 2004/05 appearing in Part B1 of Vote Defence in the Estimates of Appropriation (B.5).
The difference is shown in the table below:
| Departmental Output classes | GST - Excl. (SOI) $000 |
GST $000 |
GST - Incl. (Vote) $000 |
|---|---|---|---|
| Policy advice | 3,025 | 378 | 3,403 |
| Audit and assessment of performance | 1,748 | 219 | 1,967 |
| Management of equipment procurement | 3,458 | 432 | 3,890 |
| Total Departmental Output Classes | 8,231 | 1,029 | 9,260 |
