Major Projects Report 2013 Volume 1 Part 1 and 2

The Major Projects Report is an annual publication (having been produced since 2010) which is intended to provide transparency and assurance about how the Ministry of Defence managed major defence equipment purchasing projects are being progressed.

The Report is produced by the Ministry of Defence and the New Zealand Defence Force. It is independently reviewed by the Office of the Auditor-General.

The Report focuses on how well projects are:

• keeping to the approved budget;
• adhering to the agreed schedule; and
• delivering equipment to the specifications provided for in the contract.

The Report covers the period 1 July 2012 – 30 June 2013. It is a snap shot of the situation as at 30 June 2013.

Ten projects are covered in total, including seven existing projects and three new projects. The existing projects featuring in the report are:

• A109 Training and Light Utility Helicopter procurement;
• C-130 Hercules Transport Life Extension;
• NH90 Medium Utility Helicopter procurement;
• P-3K Orion Maritime Patrol Aircraft Mission Systems Upgrade;
• ANZAC Frigate Platform Systems Upgrade;
• Project Protector Remediation; and
• Defence Command and Control System (DC2S) procurement.

The following new projects were authorised by the Government in the period between July 2012 and April 2013:

• Maritime Helicopter Capability (MHCP);
• Medium/Heavy Operational Vehicles (MHOV) (trucks); and
• Strategic Bearer Network (SBN) (satellite communications capability).

The Medium/Heavy Operational Vehicles and Maritime Helicopter projects were the first projects to be developed using the Government’s Capital Asset Management (CAM) Regime, including Treasury’s Better Business Case (BBC) model and the State Services Commission’s Gateway Review Processes. These approaches require detailed and rigorous testing of the underlying assumptions and conclusions behind project proposals. 

One project featured in the 2012 Report, the ANZAC Frigate Phalanx Close-in Weapon System Upgrade, has been handed to the NZDF to complete introduction into service and is therefore excluded from the 2013 report.

The Report identifies the following progress as having been made in the period from 1 July 2012 – 30 June 2013:

• A109 Training and Light Utility Helicopter: A109 aircraft were involved in the conduct of basic transport tasks within New Zealand. Training for the first group of maintainers and aircrew was conducted.
• NH90 Medium Utility Helicopter: Two further NH90s were delivered (of a total of four) to the Air Force for testing and evaluation.
• C-130 Hercules Transport Life Extension: A third upgraded C-130 Hercules transport aircraft was delivered to the Air Force for testing and evaluation. The remaining two C-130s entered the upgrade programme at RNZAF Base Woodbourne in Blenheim.
• P-3K Orion Maritime Patrol Aircraft: The second and third P-3K Orion maritime patrol aircraft were delivered to the Air Force for operational testing and evaluation. The last two P-3K aircraft are being upgraded at RNZAF Base Woodbourne in Blenheim.
• ANZAC Frigate Platform Systems Upgrade: Phase 2 of the project upgrade of the heating, ventilation, and air conditioning was under way on the first frigate, HMNZS Te Kaha. It was 57% complete as at 30 June 2013.
• Project Protector Remediation: The Protector Remediation Project was 60% complete, including major work on HMNZS Canterbury and remediation of the Landing Craft.
• Defence Command and Control System: A more suitable software product for the Defence Command and Control System Project , the “Global Command and Control System – Joint”, had been identified and was under consideration.

The Report notes that:

• There has been further schedule slippage across the C-130, NH90, ANZAC Frigate Platform Systems Upgrade and Defence Command and Control System projects.
• In the case of the Defence Command and Control Project, the slippage was due to evaluation activities of the “Global Command and Control System – Joint” software product which would deliver a better outcome for the Project.
• Projections of final expenditure as at 30 June 2013 show that for the past year projects remained within budget.
• A number of risks and issues are being managed relating to personnel numbers, project timing and cost and technical/capability changes.

The Auditor-General noted:

• Co-operation between the Ministry of Defence and the NZDF is continuing to improve.
• There are opportunities for further improvement, particularly in the use of joint risk registers for projects and in the management of the increasing overlap between the acquisition and introduction into service phases.
• The three new major projects show promising indications that capability definition and acquisition costs are being better managed through buying off the shelf, and that Defence is responding to opportunities to acquire capability.

Also noted were the following concerns:

• The availability of personnel continues to pose a significant risk to these projects.
• The schedules show significant delays over the life of the projects started before the current financial year. Most of those delays are a legacy of previous decisions and events.
• The difficulties in training and re-training crew and managing the availability of personnel noted last year in relation to the NH90 project remain unchanged this year.