Recommendation for strengthened reporting systems
Hon Phil Goff
Minister of Defence
26 June 2008
Goff backs recommendation for strengthened reporting systems
Defence Minister Phil Goff has endorsed a recommendation for strengthened and more transparent reporting systems for defence acquisition projects.
The recommendation is contained in a report by the Auditor General was made public today.
Phil Goff said he welcomed agreement between Defence agencies and the Auditor General to work together to provide better and more complete information on management of acquisition of defence assets.
“I am pleased that the Auditor General has indicated that his office is not asserting poor performance or negligence by Defence in managing defence acquisition projects,” Phil Goff said.
“I however support the desirability of fuller reporting on projects as they proceed.
As the Auditor General notes, large defence acquisition projects world wide are prone to difficulties, delay and cost increases.
“New Zealand has not suffered the defence acquisition disasters currently causing controversy in countries with which we have close relationships. In Australia, the $1.3 billion Seasprite project has been abandoned without the helicopters ever being flown operationally.
“In the UK, specially designed Chinook helicopters worth $750 million built in 1998 have still not entered service because of faulty radar and software systems. And in the US, new Navy coastal vessels have doubled in price and are years late in coming into service, to name just a few instances.
“Any further safeguards that can be put in place to avoid such problems here should clearly be embraced,” Phil Goff said.
“The Auditor General acknowledges that once Cabinet has given approval to commit funds, movements in prices for acquisitions are minimal – normally less than 0.1 per cent.
“He has however expressed concern at the increase in costs that can occur between when Cabinet first gives its approval to begin the acquisition process and when it later decides to commit funds to the project.
“Defence agencies acknowledge this concern but point out that cost estimates in the first instance are simply ‘intelligent guesses’ until precise capabilities are defined and a tendering process has been undertaken.
“If the process between defining capabilities and completing tendering is lengthy, the ultimate cost of the project can increase significantly because of international inflation in defence costs and movement in currency values.
“Changes are currently being made in response to the requirements of the Treasury’s Capital Asset Management Review.
“However, I welcome proposed cooperation between Defence agencies and the Office of the Auditor General to examine ways in which to improve early cost estimates, and to increase the quality and transparency of reports on the progress of defence acquisition projects,” Phil Goff said.