Annual Report for the year ended 30 June 2007
Part 3: Departmental financial statements (continued)
Output Class - Management of equipment procurement
Boeing 757 Acquisition/Modification for the Royal New Zealand Air Force
Objective
To replace the Boeing 727 aircraft with Boeing 757 aircraft to provide greater range and payload capacity for the RNZAF.
In 2006/07 it was planned to:
- complete the detailed design
- induct the first aircraft into the modification programme
- monitor the modifications process
- deliver the first modified aircraft to the NZDF
- induct the second aircraft into the modification programme.
Performance
Two aircraft have been purchased and are being operated by the RNZAF in a passenger configuration. Both aircraft are being modified to provide a dual passenger/freight capability. Detailed design reviews have been completed and the first aircraft was inducted into the modification programme on schedule in March 2007. Delivery forecast for January 2008.
The second aircraft will now be inducted in November 2007 with delivery forecast for mid 2008.
Photo of Boeing 757.
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (GST inclusive) | ||
|---|---|---|
$ |
||
| Project approval | 220,603,771 | |
| Foreign exchange variances to date and forecast to complete | (871,452) | |
| GST | 27,575,375 | |
| Total approved cost | 247,307,694 | |
| GST exclusive | ||
| Expenditure to 30 June 2006 | 143,597,853 | |
| Expenditure 2006/07 | 35,650,202 | |
| Future commitments and forecasts | 40,483,266 | |
| 219,731,321 | ||
| GST | ||
| GST to 30 June 2006 | 13,100,541 | |
| Expenditure 2006/07 | 2,052 | |
| Future commitments and forecasts | 14,472,802 | |
| 27,575,395 | ||
| Total forecast cost to complete | 247,306,716 | |
- Foreign exchange variances at 30 June 2007 are favourable by $0.872 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 = 0.6093
USD forecast average rate = 0.6119 - 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 was USD = 0.6525.
Direct fire support weapon (area) for the New Zealand Army
This project is now being managed by the NZDF and will provide land forces with the ability to engage targets at a range of up to two kilometres.
Army Engineering Equipment
This project has been split into its components and will be undertaken by the NZDF.
In 2006/07 it was planned to:
- take costed proposals back to the Government
- negotiate a contract with a preferred supplier, or suppliers.
Project components are being managed by the NZDF.
Light operational vehicles for the New Zealand Army
Objective
To provide the Army with a modern, light operational, military vehicle as a primary means of transport in peacekeeping operations, peace enforcement operations (including in support of the light armoured vehicle), and in support of humanitarian operations in the South Pacific.
In 2006/07 it was planned to:
- undertake project closure activities
- monitor the performance of the light operational vehicle fleet from a warranty perspective.
Performance
Warranty issues identified early during the delivery are being attended to by the contractor.
Photo of Pinzgauer General Service Variant.
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (GST inclusive) | ||
|---|---|---|
$ |
||
| Project approval | 93,333,000 | |
| Foreign exchange variances to date and forecast to complete | 1,272,011 | |
| GST | 11,666,000 | |
| Total approved cost | 106,271,011 | |
| GST exclusive | ||
| Expenditure to 30 June 2006 | 90,426,447 | |
| Expenditure 2006/07 | 2,450,706 | |
| Future commitments and forecasts | 1,704,384 | |
| 94,581,537 | ||
| GST | ||
| GST to 30 June 2006 | 10,014,967 | |
| Expenditure 2006/07 | 412,455 | |
| Future commitments and forecasts | 1,238,578 | |
| 11,666,000 | ||
| Total forecast cost to complete | 106,247,537 | |
- Foreign exchange variances at 30 June 2007 are unfavourable by $1.272 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 = 0.3508 - 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 was GBP = 0.3492.
ANZAC Ships
Objective
To procure two ANZAC class frigates from the 10-ship build programme complete with spares and training facilities.
In 2006/07 it was planned to discontinue New Zealand’s involvement in this project and settle any outstanding obligations.
Performance
The New Zealand ships, HMNZS Te Kaha and HMNZS Te Mana have been delivered and are in service. Agreement has been reached with the Australian Government on the financial arrangements necessary to close the project and outstanding obligations have been settled.
Photo of HMNZS Te Mana.
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (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 2006 | 1,242,815,293 | |
| Expenditure 2006/07 | 42 | |
| Future commitments and forecasts | - | |
| 1,242,815,335 | ||
| GST | ||
| GST to 30 June 2006 | 157,478,498 | |
| Expenditure 2006/07 | - | |
| Future commitments and forecasts | - | |
| 157,478,498 | ||
| Total forecast cost to complete | 1,400,293,833 | |
- 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.
Light Armoured Vehicles
Objective
To provide protected mobility vehicles for light infantry manoeuvre groups in combat or when undertaking peace support operations.
Performance
Project closure is underway including contractor resolution of latent defect issues.
Photo of Light Armoured Vehicle.
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (GST inclusive) | ||
|---|---|---|
$ |
||
| Project approval | 580,296,353 | |
| Foreign exchange variances to date and forecast to complete | 13,792,807 | |
| GST | 72,537,044 | |
| Total approved cost | 666,626,204 | |
| GST exclusive | ||
| Expenditure to 30 June 2006 | 592,841,984 | |
| Expenditure 2006/07 | 35,422 | |
| Future commitments and forecasts | 1,211,752 | |
| 594,089,158 | ||
| GST | ||
| GST to 30 June 2006 | 53,245,203 | |
| Expenditure 2006/07 | 60,958 | |
| Future commitments and forecasts | 423,324 | |
| 53,729,485 | ||
| Total forecast cost to complete | 647,818,643 | |
- Foreign exchange variances at 30 June 2007 are unfavourable by $13.793 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 2007 were CAD = 0.8338 and USD = 0.6525
Replacement or Upgrade of Tactical Mobile Communications for the Army
Objective
To replace and/or upgrade 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 NZDF Battalion Group operations.
Performance
Financial closure of the project is progressing with final figures being requested from the United States Foreign Military Sales system.
| Financial summary of project costs charged to non-departmental appropriations as at 30 June 2007 (GST inclusive) | ||
|---|---|---|
$ |
||
| Project approval | 119,223,000 | |
| Foreign exchange variances to date and forecast to complete | 1,080,878 | |
| GST | 14,903,000 | |
| Total approved cost | 135,206,878 | |
| GST exclusive | ||
| Expenditure to 30 June 2006 | 121,866,224 | |
| Expenditure 2006/07 | (1,787,024) | |
| Future commitments and forecasts | 224,677 | |
| 120,303,877 | ||
| GST | ||
| GST to 30 June 2006 | 11,860,433 | |
| Expenditure 2006/07 | (407,307) | |
| Future commitments and forecasts | 3,110,639 | |
| 14,563,765 | ||
| Total forecast cost to complete | 134,867,642 | |
- Foreign exchange variances at 30 June 2007 are unfavourable by $1.081 million due to the purchase rates of the USD currency being worse than the USD exchange rates used in the Cabinet paper for financial approval.
USD approval rate = 0.4300
USD forecast average rate = 0.4260 - 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 was USD = 0.6525.
