Statement of Intent 1 July 2003 - 30 June 2004
Part 2: Departmental forecast report (continued)
Output class performance statements 2003/04
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.
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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. Subject to the range and scope of responses to the Request For Proposal further definition of milestones will be decided at a later date. |
| 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 intention is to negotiate a contract for purchase by 30 September 2003. Further project milestones - including the time of delivery of the vehicles - will be known once the contract has been awarded. |
| 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. The intention is to enter into a contract through the US foreign military sales programme by 30 September 2003. Further project milestones, including delivery, will be known once the letter of offer and acceptance from the US Government has been finalised. |
| 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 31 December 2003. 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. The intention is to enter into a contract for the acquisition of this equipment by 31 December 2003. 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 evaluation of tenders by 31 March 2004. Following a submission to Government to negotiate and award a contract, further project milestones will be known. |
| 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 evaluation of tenders by 31 March 2004. Following a submission to Government to negotiate and award a contract, further project milestones will be known. |
It will continue management of the following projects:
| Implementation of joint command and control system (JCCS) for the Headquarters Joint Forces New Zealand | This project is a programme to implement an automated command and control system for the New Zealand Defence Force. Joint command and control enables elements from all three services to work together efficiently and effectively by enhancing the decision making process. The intention is to complete the project definition study by 30 September 2003. The deliverables of the project definition study will enable the New Zealand Defence Force to determine what its proposed joint command and control requirements are. Any decision to proceed with the acquisition of these requirements will be made in due course. |
| 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 intention is to have the first batch of vehicles handed over to the New Zealand Defence Force by 31 December 2003, and to have the remainder delivered by November 2004. |
| 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. The intention is to modify the aircraft by 30 June 2004, subject to equipment availability. |
It will complete the following projects:
| Acquisition of Naval helicopter for the Navy | The intention is to complete the project within the Cabinet approval of $380.8 million (inclusive of GST), after allowing for foreign exchange variances, by 30 September 2003. |
| Replacement or upgrade of tactical communications for the Army | This project proposes to replace and/or upgrade 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 intention is to ensure that the additional radios approved by Government are delivered by September 2004; and to complete the project within the Cabinet approval of $134.2 million (inclusive of GST), after allowing for foreign exchange variances. |
- It will provide support for the Defence Industry Committee of New Zealand.
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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.
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It will complete material for the Australia and New Zealand Industry Defence Equipment and Capability Catalogue database and update databases on industrial capability.
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It will conduct industry briefing sessions on current defence projects and activities.
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By using the Industrial Supplies Office 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:
- 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.
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All acquisitions and contracts will meet the Government's policy requirements.
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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.
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Contract awards will be subject to considerations of through-life cost, quality and delivery schedules.
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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.
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Payments will be made at the agreed sum, to the correct supplier, and no payments will be made in excess of the agreed sum.
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Any significant variations or potential risks will be identified, together with corrective actions required or taken.
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Assumptions behind advice will be explicit, and argumentation will be logical and supported by facts.
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Evidence will be given of adequate consultation with interested parties, and possible objections to proposals will be identified.
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Problems of implementation, technical feasibility, timing, and consistency with other policies will be addressed.
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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 Industrial Supplies Office, 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 $5.889 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 |
|---|---|---|---|---|---|
| 2003/04 | 5,889 | 5,235 | 5,235 | 3,369 | 1,866 |
| 2002/03 | 8,553 | 7,603 | 7,603 | 3,613 | 3,990 |
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 2003/04 appearing in the output operating statements appearing on page 34 of this report, while the aggregate amount for all three output classes corresponds to "total output expenses" for 2003/04 in the statement of forecast financial performance on page 27 of this report.
- The GST-inclusive amounts for each departmental output class correspond to the bolded annual appropriations for 2003/04 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 |
|---|---|---|---|
| D1 Policy advice | 2,936 | 367 | 3,303 |
| D2 Audit and assessment of performance | 1,748 | 219 | 1,967 |
| D3 Management of equipment procurement | 5,235 | 654 | 5,889 |
| Total Departmental Output Classes | 9,919 | 1,240 | 11,159 |
