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Burton: Speech to Defence Industry Committee

20 October 2004

Hon Mark Burton: Speech

Procurement to support—Speech to Defence Industry Committee Awards of Excellence

Good evening.

It’s a pleasure to be with you here tonight, to look back on the two years since I last spoke to you, to see how far we’ve come, and how much more we have to look forward to.

Tonight is both a culmination of the Defence Industry Forum and a celebration of the Awards of Excellence, which recognise companies that provide outstanding service to defence.

When I spoke at this event two years ago, we had just released the Defence Long-Term Development Plan, or LTDP. I said that night that we were “moving, quickly, into a new era of development.”

Ladies and Gentlemen, I think that may have been something of an understatement.

Since the Plan’s release in 2002, 22 major re-equipment projects have been advanced.

We have updated the Army’s communication equipment, purchased two battalions of Light Armoured Vehicles (NZLAVs), and a new fleet of armoured and non-armoured Pinzgauer Light Operational Vehicles.

Along with new field communications systems, weaponry, and technology upgrades, we have already invested close to $1 billion in the Army alone.

I’m sure you know that at a recent ceremony we celebrated the signing of the contract between the New Zealand government and Australian ship builder Tenix—a key sponsor here tonight of course— for seven new purpose-built vessels.

Known as Project Protector, the project includes a new Multi Role vessel, two 85-metre Offshore patrol vessels, and four 55-metre Inshore patrol vessels to be operated by the navy—a $500 million investment in total, and one that should see significant industry involvement over the coming years.

In fact, New Zealand Trade and Enterprise's Industry Capability Network has just signed a relationship agreement with Tenix, securing a minimum $110 million worth of work to be carried out in New Zealand.

The Air Force, too, has seen progress on major projects, including:

the purchase of two 757-200 jet aircraft to replace our ageing 727s an upgrade of the runway at Ohakea Air Base a 15-year life extending upgrade of our C-130 Hercules aircraft, and the invitation of proposals for the replacement of Air Force utility and training helicopters.

And this month, I signed the contract with L-3/IS Communications Integrated Systems for a $352 million mission systems and communication and navigation equipment upgrade for our fleet of P-3 Orion aircraft.

Again, L-3 is here with us tonight as a major sponsor of this event.

These aircraft are critical for surveillance of New Zealand’s Exclusive Economic Zone and surrounding waters, search and rescue, and meeting our South Pacific obligations.

This upgrade will ensure interoperability with our security partners, allow New Zealand to participate in a range of operations, and provide support to, and significantly extend the effectiveness of, Defence Force’s other maritime and land force elements.

And again, a significant amount of work on this upgrade will happen here in New Zealand through Safe Air.

These projects to upgrade Air Force equipment represent more than $1 billion.

Clearly, this government is committed to building a modern, well-equipped, sustainable Defence Force that meets New Zealand’s Defence needs both at home and as part of the international Defence community.

This conference is built around the theme of procurement to support.

The government recognises the importance of ensuring that sustainable through-life-support is created and maintained for acquisitions being introduced through the LTDP.

Local industry plays a vital part in this support.

Government remains committed to promoting opportunities for strong industry involvement, both in the acquisition and through-life operating and maintenance phases of many of our proposed procurements.

It is essential, however, for both partners to find an appropriate balance between the needs of industry and the needs of our Defence Forces. In 2002, I also said that it would be important for prime contractors to develop strong relationships with local industry during the LTDP acquisition phase. In turn, local industry needs to obtain the data and technical know-how needed to cost-effectively support these new systems and equipment.

Judging from the partnerships that have developed as a result of such projects as the NZLAV, Project Protector, and the P-3 Orion Update, these messages certainly seem to have been taken on board.

All industry involvement must be considered in terms of competitive costings and quality service. After all, the New Zealand Defence Force, just like other buyers around the world, must get (and be seen to get) the best value for money.

But I want to farewell, once and for all, the myth that doing work locally costs more.

International comparisons show that New Zealand rates as one of the most entrepreneurial countries in the world, with our business climate rating very highly in terms of economic freedom.

(In fact, in the recently released World Bank report, Doing Business in 2005: Removing Obstacles to Growth, New Zealand was named the easiest country in the world in which to do business.)

Our technology industries have enjoyed significant success in winning overseas tenders.

You will have heard about some of these successes during this conference, but suffice to say they cover everything from overhauling hundreds of jet engines a year in Christchurch to supplying sophisticated software to large United States companies.

Outside of the Defence Industry sphere, the production of the Lord of the Rings trilogy shows the depth and breadth of talent and innovation that exist in New Zealand, and the world is taking notice on all fronts.

Our agreements with Australia and Singapore also give us access to highly capable regional industry partnerships.

Under the Australia New Zealand Closer Economic Relations trade agreement, Defence organisations in both countries are required to ensure that their processes and practices allow their trading partner’s industry to participate on an equal footing with local companies.

And the Closer Economic Partnership (CEP) with Singapore commits both countries to transparency, value for money, open and effective competition, and non-discrimination in all aspects of procurement.

In 2002 I spoke of this Government’s commitment to New Zealand industry as a whole, as well as to the New Zealand defence industry specifically. In that year, the Ministry of Defence and the Ministry of Economic Development completed a joint review of Industry Policy in relation to Defence Capital Projects.

The review concluded that while Defence would not issue a separate Defence industry Policy, principles relating to industry involvement in defence purchasing would be in accordance with overall government procurement policy.

Government Procurement Policy is based on a range of principles including:

Best value for money over whole-of-life Open and effective competition Full and fair opportunity for domestic suppliers Recognition of our bilateral obligations to Australia and Singapore, and Openness and transparency.

Both Defence and industry have been watching with interest the application of the policy to recent procurements.

I am encouraged by feedback that the policy has been well received by industry and that it appears to be delivering the results we seek—after some understandable initial industry apprehension.

I am also pleased to see that the Defence Industry Committee has commissioned a study by the New Zealand Institute of Economic Research on the effect of the policy.

Of course, there will always be those who will say that this government’s defence spending is too low, and that we should keep up with nations many, many times our size.

Equally, there are also those who think that, for a country like New Zealand, $3 billion of capital expenditure over 10 years on our Defence Force is an obscene amount of money better directed elsewhere.

But it seems to me that neither of these is a practical view. I believe we have developed a thorough, realistic, modern defence policy—one that reflects New Zealand’s place in today’s world.

We have put in place a workable plan to achieve our Defence goals, prioritise our acquisitions, and uphold our commitment as a responsible international citizen.

However, in many ways the hardest work goes beyond re-equipping our Forces. After all, if you make clear decisions about what you want to do, how you want to do it, and have the budget allocation to buy, then inevitably, someone will be available to sell it to you or build it for you.

Now, we have embarked on the more complex task of ensuring that the people side of Defence gets the same quality review and priority setting that we have put in place for acquisitions.

With one of the lowest unemployment rates in the OECD, and a high demand for skilled workers across a range of industries, defence recruitment, training and retention share the very real challenges faced by all major sectors of our thriving economy.

We have to understand this challenge if we are to address it.

So we are currently reviewing our Defence Force resources and capability to ensure that we can meet our policy requirements. There is no point in having state of the art equipment, if we don’t have the people employed and trained to use it—something I know you’ll all understand.

In conclusion, I’d like to acknowledge the men and women of the New Zealand Defence Force, and for that matter, the Ministry of Defence, who work together to ensure that we have world-class personnel [and we do!] matched with world-class equipment.

What better place to that than here, at this function—a function dedicated to honouring excellence in your industry.

Now, it’s time to move on to tonight’s awards. Thank you again for your invitation tonight, and for another excellent year for New Zealand Defence.

ENDS

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