The Defence Sustainability Initiative: Building a long-term future for the New Zealand Defence Force - 2 May 2005
Overview
The government has pursued a clear, logical, and consistent plan for rebuilding the New Zealand Defence Force. It has also increased funding for Defence, in each of the past five years, for new equipment, improved pay and conditions of service, and for operations.
This statement follows on the government’s three previous defence policy statements, each of which outlined an important step in the process of rebuilding the NZDF.
The government’s first consideration was the Defence Policy Framework (June 2000), which outlined New Zealand’s security interests and defence policy objectives and set out the principles for rebuilding and shaping the NZDF. These enduring interests, objectives, and principles remain relevant today.
The government then determined priorities for rebuilding military capability. Key decisions about force structure were announced in the Government Defence Statement (May 2001). These decisions were based around:
- a joint approach to structure and operational orientation;
- a modernised Army;
- a practical Navy fleet matched to New Zealand’s wider security needs;
- a refocused and updated Air Force; and
- a funding commitment to provide financial certainty.
The third step was to develop planning tools to enable individual proposals to purchase or upgrade equipment to be prioritised in the context of policy objectives and affordability. The result was the Long-Term Development Plan (LTDP, June 2002 and updated annually). The LTDP has guided a major programme of equipment acquisitions and upgrades.
To recognise the critical contribution made by NZDF personnel, the government has funded pay increases every year since 2000 to reward military service and bring defence personnel remuneration into line with the wider labour market.
The acquisition and introduction into service of new equipment, the pressures of deployed operations, and recruitment and retention of personnel in a strong economy have stretched the NZDF. It is a measure of the quality of NZDF personnel that they have continued to achieve operational successes despite these pressures.
While the Defence Force is acquiring the major equipment it requires, additional resources are now needed to provide the people, infrastructure, and corporate systems to fulfil all its missions and tasks.
In response to this, the government has committed new funding of $4.6 billion ($4.4b operating and $209m capital.) To manage this additional funding and the associated remedial work programme, the government has directed the NZDF and the Ministry of Defence to enhance their management and organisational processes.
Defence Policy - doing what we need to do, well
The government’s defence policy is founded in our security interests and obligations. These security interests, which form the basis for considering military commitments and capability choices, remain those stated in the June 2000 Defence Policy Framework:
- A secure New Zealand including its people, land, territorial waters, exclusive economic zone, natural resources and critical infrastructure;
- A strong strategic relationship with Australia in support of common interests for a secure and peaceful region;
- A political environment in the South Pacific in which national economies, societies and identities continue to evolve in a climate of good governance and internationally agreed standards of compliance with human rights;
- An expanding role in the regional dialogue of South East and North East Asia and, where appropriate, a role in regional security consistent with New Zealand's interests and capabilities; and
- A global approach which supports New Zealand's place in an international community committed to the maintenance of human rights and the collective security responsibilities enshrined in the United Nations Charter, and which strengthens New Zealand's international economic linkages.
The government considers defence to be one important strand of security and a significant element of New Zealand’s international engagement. Our tradition of supporting international peace and security by a variety of means is well established. New Zealand is committed to being a responsible member of the international community, and recognises the necessity of stability for a healthy global trading environment.
The core objective of New Zealand’s defence policy is protection of New Zealand’s sovereign interests. The NZDF is structured primarily to meet that requirement. In the absence of any direct military threat to New Zealand, however, the NZDF also plays a critical role in supporting other government agencies in protecting our offshore resources, securing our borders, responding to natural disasters, and countering the threat of terrorism.
The absence of direct military threat also means that New Zealand’s defence efforts - and choice of military capabilities – can be focussed on supporting our international interests with Australia and in the South Pacific, the wider Asia-Pacific region, and globally.
Generally, we give priority to operations that support our interests in our own region, but we have also clearly demonstrated our commitment to supporting global security through deployments beyond our traditional areas of interest. We will continue to do so in the future.
In considering any military contribution, the government is mindful of our obligations under the United Nations Charter. A defence contribution can be made in its own right, but more commonly it will be one aspect of a much broader effort to resolve crises and support peace. We expect to work with other like-minded countries.
In the past five years, our major military contributions have concentrated in our region (East Timor, Solomon Islands, Indonesia) and in the Middle East (Afghanistan, Iraq, and the Arabian Sea region).
The Middle East operations, which represent a major contribution by New Zealand, support the coordinated international efforts that followed the September 11 attacks on the United States. Our contribution to these efforts will continue.
The events of 11 September 2001 underlined the importance of a number of the government’s defence policy settings, namely:
- the need for a holistic whole of government view of security;
- the need to be ready for unexpected changes in the security environment; and
- the need for a defence force with multi-role capabilities and that is interoperable with our likely partners.
Defence capability – depth rather than breadth
Over the ten years following the end of the Cold War in 1989, declining funding, ageing equipment, and reductions in personnel numbers saw gaps steadily emerge in the NZDF’s capabilities.
By 2000, there was a clear mismatch between defence policy goals, the level of operational activity of the NZDF, and available resources. These resources were spread too thinly over a range of capabilities, not all of which could be sustained. Something had to be done.
The sensible response was to carefully prioritise New Zealand’s defence capability requirements, so that we can do what we need to do, and do it well. To make an effective contribution to New Zealand’s interests, the NZDF requires a suite of military capabilities that are modern, multi-purpose, and affordable.
Choices on defence capabilities have long–term implications, since equipment can remain in service for decades. The government deemed that capabilities acquired by New Zealand should have broad utility, both to offer a range of options for use, and also to remain relevant in our evolving complex security environment.
The Defence Policy Framework provided the following principles to guide the rebuilding of an NZDF that is:
- equipped and trained for combat and peacekeeping;
- deployable;
- able to operate alongside other forces;
- held at appropriate levels of readiness;
- sustainable;
- up to date in technology and doctrine; and
- fiscally sustainable.
These principles informed a number of defence capability reviews, which resulted in the May 2001 Defence Statement, A Modern Sustainable Defence Force Matched to New Zealand’s Needs. The 2001 statement announced the following goals for the NZDF:
- a joint approach to structure and operational orientation;
- a modernised Army (new light armoured and light operational vehicles, improved communications, and new weapons);
- a practical Navy fleet matched to New Zealand’s wider security needs (two ANZAC frigates, a new multi-role vessel and new offshore and inshore patrol vessels – Project Protector);
- a refocused and updated Air Force (upgraded/replacement transport aircraft, new helicopters, and upgraded patrol aircraft); and
- a funding commitment to provide financial certainty.
Reflecting the need to provide depth rather than breadth, and the need to focus resources on capabilities that contribute the most to New Zealand’s objectives, the government decided to disband the Air Combat Force. It also led to the decision to eventually close Whenuapai airbase and consolidate the Air Force’s operational capability at Ohakea airbase.
Completing this extensive development and change programme, while continuing military operations, required additional funding. The government therefore provided:
- new and increased funding for military operations;
- new money, over a four-year period, for NZDF pay and allowances;
- the government also committed over $800 million to purchase urgently needed Army communications equipment and to fund the NZLAV;
- an additional one billion dollars over and above existing and projected depreciation funding, over a ten-year period, for new and replacement capital acquisitions through the LTDP.
In total, since 1999, the government has committed over $3 billion comprising new funding and funded depreciation for capital acquisitions.
Project delivery – the Long-Term Development Plan
The LTDP has been a key tool for achieving the goals of the 2001 statement. It contains a comprehensive list of all planned acquisition projects with preliminary costings, timings, and priorities. The LTDP enables decisions to be taken in the context of policy, priority, and affordability.
Some of the key milestones in the implementation of the LTDP include beginning the construction of the Project Protector fleet, delivery of the Army’s light operational vehicles, delivery of the two Boeing 757s, selecting new helicopters, and procuring special operations equipment. Prior to introducing the LTDP, the government approved the purchase of NZLAVs and Army radios. (see Annex A for a summary of major projects advanced since 1999.)
The government’s progress in implementing the LTDP reflects its commitment to maintaining a modern and effective suite of military capabilities that can make a valuable contribution to New Zealand’s interests locally, regionally, globally, and in support of our friends and partners.
The New Zealand Defence Force – three Services, one force
The government is strongly committed to the ethos of ‘jointness’ as a means of promoting efficient use of resources and synergy within Defence.
Jointness refers to the Navy, Army, and Air Force training, planning, and undertaking exercises and operations together. Jointness also calls for the Headquarters New Zealand Defence Force (HQNZDF), the Ministry of Defence and the three Services to collaborate in rebuilding the NZDF and planning its future.
The first stage of a joint approach was the establishment of Headquarters Joint Forces New Zealand (HQJFNZ) in 2001 at Trentham. This operational-level headquarters is now firmly established. Improving jointness also includes facilitating the operation of the NZDF through a joint command and control system.
In June 2002 the Chief of Defence Force, Service Chiefs and Commander Joint Forces New Zealand jointly signed a Statement of Commitment entitled Three Services – One Force to emphasise the centrality of the joint approach.
The statement is viewed by the senior defence leadership as a public contract between themselves and the Services and civilian personnel of the NZDF.
Three Services – One Force demonstrates the commitment to building an NZDF that is united, professionally trained, competent, appropriately equipped and capable of serving the interests of New Zealand, and confronting the security challenges of the future.
The government has also sought greater cooperation and collaboration within the NZDF, and between the NZDF and the Ministry of Defence, drawing on the recommendations of the 2003 Review of Accountabilities and Structural Arrangements (RASA).
The RASA has improved the quality of joint military/civilian strategic advice and established expectations about cooperation, consultation, and consensus throughout the defence organisation. This work will continue under the Defence Sustainability Initiative and will be assisted by the additional funding and management structures being provided under this new programme.
The government expects high quality defence planning that concentrates resources in agreed priority areas. This requires appropriate corporate structures, skilled planners, and effective planning tools.
The Capability Management Framework (CMF), introduced in 2004, is a key tool, replacing in part the cumbersome Defence Planning System. The CMF is a governance and management system that provides a transparent and robust process for ensuring effective, long-term investments in defence capabilities consistent with New Zealand’s strategic interests and evolving security needs.
Defence operations – being effective, deployable, and sustainable
In recent years, the NZDF has sustained a high rate of operational activity around the world in a diverse set of missions. Our service people have distinguished themselves in such demanding locations as East Timor, Solomon Islands, Iraq, Afghanistan, Indonesia, and the Arabian Sea region.
The missions undertaken by the NZDF range from peace-keeping to capacity building, from reconstruction to maritime interdiction, and from special operations to disaster relief. Given the resources available for Defence, this means our individual force elements are used for diverse roles. This would not be possible without the high quality of our service people, their professionalism, their training, and their commitment to New Zealand.
While undertaking concurrent operations worldwide, the NZDF has kept up a vigorous training and exercising regime. This has included for all three Services the challenge of introducing new equipment, while keeping serviceable equipment that is due for replacement or upgrade.
In these uncertain times, it is not possible to predict what missions lie ahead for the NZDF. The government expects, however, that the NZDF’s level of operational activity will continue at about the current level for at least the next decade.
In these efforts, the NZDF will be supported by the proven professionalism of its people, the modern equipment being acquired through the LTDP, and the additional resources being provided through the Defence Sustainability Initiative.(see Annex B for NZDF involvement in military operations, November 1999 – April 2005.)
Defence sustainability – building for the future
The Defence Capability and Resourcing Review
The Defence Sustainability Initiative (DSI) is the result of the Defence Capability and Resourcing Review (DCARR).
The government initiated the DCARR in December 2003 to identify the optimum capability configuration of the NZDF and determine the resources it needed to undertake the roles and tasks set out in the government’s statements of defence policy and in the LTDP.
The DCARR was also tasked with examining the capability of the Ministry of Defence to support government policy processes.
The government commissioned the DCARR because it was becoming apparent that, although the NZDF is acquiring the major equipment it needs, it does not have the people, infrastructure, and corporate systems to fulfil all the missions and tasks required to meet defence policy objectives.
The DCARR was presented to Ministers in February 2005. It confirmed that operational and organisational capabilities in a number of areas of the NZDF and Ministry of Defence are below what is required by government policy.
The main issues are that:
- Personnel numbers in the three Services, HQNZDF and HQJFNZ are below the required levels. The Army and HQNZDF are most affected.
- In some trades, both the number of personnel and their trained state, are deficient.
- Some major weapons platforms require upgrading or replacement, although the LTDP is addressing this.
- Some military equipment (other than major weapons platforms) no longer meets the required standard. Correcting this requires spending more on ‘minor capital’ projects. This means both more money and additional management capacity to manage the procurement of this equipment.
- Contingency reserve stocks (ammunition, fuel, and spares) are below the required levels.
- The level of stocks that must be held and the rate at which they are consumed depend both on the level of preparedness required and the level of activity undertaken. Where activity levels demand, it is acceptable to draw down heavily on those stocks, but ultimately they must be replenished.
- In general, the Defence Estate (land and facilities) is fit for its intended purpose. There is, however, a backlog of maintenance and a need for up-front investment and ongoing expenditure to restore some facilities and maintain them at an appropriate standard.
- A major programme of work on the Defence Estate must be undertaken over a period of years.
- There are weaknesses in the NZDF’s corporate management – both in the number and type of managers required and the decision support systems needed for strategic management.
- Good systems for command, control, communication and intelligence are cornerstones of military effectiveness. The information age has hugely increased that importance. A substantial investment will be needed over the next ten years to modernise existing systems and keep pace with requirements.
There are a number of reasons for the capability gaps. The most significant are:
- a prolonged period of fiscal constraint throughout the 1990s;
- a higher operational tempo since 1998;
- equipment continuing in service beyond its economic life;
- a strong labour market affecting pressure on recruitment and retention of key personnel; and
- a reduction in NZDF Headquarters and support capabilities due to the high and prolonged operational tempo.
Building up to the Required Capability
The DCARR concluded that, given the need to sustain the present operational tempo, building up capability and resources to meet the government’s requirements cannot be done overnight. What is needed is a significant remedial work programme spread over a number of years and underpinned by the certainty of funding increases.
The Defence Sustainability Initiative (DSI)
In response to the findings of the DCARR, the government has approved additional operating expenditure for NZDF totalling $4.4 billion over the ten-year period, which includes a permanent baseline increase of $0.844 million for the Ministry of Defence from FY 2005/06, and additional capital for the LTDP of $209 million.
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The implementation of the programme will begin in the next financial year (2005/2006). The estimated figures summarised above are shown in millions exclusive of GST. The figures exclude capital funding for equipment.
This additional funding will be distributed over a ten-year programme. The issues now confronting Defence have developed over a sustained period of time. They will also take time, consistent focus and effort to address. They are all issues that can be addressed successfully with a well-planned and well-managed strategy.
The ten-year time frame reflects the need for the NZDF and the Ministry of Defence to develop their planning and management systems, and the NZDF’s ability to recruit, train, absorb, and retain additional personnel.
The extended time frame does not imply a relaxed approach, however. The Ministry of Defence and the NZDF have already begun the process of establishing the necessary corporate systems, and will make significant progress in other areas as soon as possible.
The DSI will be directed initially towards recovery of personnel levels, recruitment and retention, putting new and upgraded capabilities into service, and strengthening the organisational and corporate capability of HQNZDF.
Early priorities for the DSI are:
- commencing the process of additional recruitment, continuing and improving retention of personnel including conditions of service initiatives such as accommodation assistance, pay and allowances, and building up the Navy for Project Protector;
- implementing existing government capability purchase decisions, including the Air Force consolidation at Ohakea;
- reviewing the optimal configuration of the Army as it rebuilds its capability;
- developing an NZDF real estate strategy, policies for housing and accommodation assistance, and addressing deferred maintenance in the NZDF’s property portfolio; and
- developing a programme to address the backlog in minor capital projects, for example, in infrastructure, equipment and IT.
The DSI will support a rebuilding of organisational capability within the NZDF and the Ministry of Defence to help support improved decision-making processes.
Specifically, the NZDF and the Ministry of Defence will work together to put in place an improved corporate planning and performance management regime to support priority setting and resource allocation decisions. Major initiatives include:
- development of an Interim Strategic Plan by mid-2005 that clearly sets out spending priorities;
- development of a Defence Corporate Planning Framework that guides the strategic management of the NZDF and the Ministry of Defence and manages risk; and
- development of a set of subordinate plans that integrate the management of people, infrastructure, equipment, and resources.
The implementation of the new processes and management systems in the NZDF will be substantially complete by mid-2006. The work of rebuilding the NZDF, however, will be ongoing for many years.
A mid-term review will be commissioned after five years to consider, among other things, the appropriateness of the level of funding for the remainder of the funding period.
Defence affordability – a funding commitment
The DSI has the following key funding elements:
- An increase of operating funding of $4,348 million (GST exclusive) for NZDF over ten years from 2005/06;
- Capital injections of up to $209 million over the period FY 2007/08 to FY 2009/10 (or later if the $1 billion LTDP allowance is not exhausted by then) with a review of the appropriateness of this amount at the mid-term;
- A permanent baseline increase of $0.844 million (GST exclusive) from 2005/06 for the Ministry of Defence;
- The Crown bearing the risk associated with the impact on depreciation of asset revaluations for the first five years of the DSI, reviewable at the mid-term review of the DSI; and
- a multi-year arrangement that allows for flexibility in the funding of operational deployments.
This ten-year sustainability initiative demonstrates the government’s sustained commitment to providing defence with the resources necessary to meet the government’s defence policy objectives, as set out in the Defence Policy Framework.
