Part 11: Corporate capability projects

New Zealand Defence Force: Progress with the Defence Sustainability Initiative.

11.1
In this Part, we discuss NZDF's progress in completing 16 major projects to improve corporate capability.

Although slower than planned, NZDF made good progress towards completing 16 major projects to improve military and corporate capability. The main reasons for delays were timetables that were too short, rising costs, and the effects of deployments.

11.2
NZDF was expected to carry out 16 major projects to restore corporate capability, which had been severely depleted in the years before the Initiative. Appendix 1 sets out a list of the original 16 projects, a short description of each, and their status (open or closed) at December 2008.

11.3
The expected completion date for all 16 projects was 30 June 2006, which was only one year into the foundations phase. In our view, given the number, scale, and nature of the projects, this was an overly ambitious timetable.

11.4
Therefore, we considered it reasonable to expect, during the foundations phase, that NZDF would:

  • make good progress with all 16 projects;
  • record reasons for any delays; and
  • tell stakeholders about any delays.

11.5
NZDF made good progress with nearly all the projects. By 30 June 2008, only six projects were not complete and these were being managed as business as usual (see paragraph 12.16). Of these six:

  • four were in progress, and these were the:
    • risk management framework;
    • defence performance management system;
    • defence estate strategic plan, including the defence estate optimisation strategy; and
    • housing and accommodation assistance, due to be completed by 30 June 2010;
  • one extra project (the Army transformation programme) was awaiting a Government decision before advancing;1 and
  • one project, the knowledge management framework, was postponed to give priority to other matters. However, one of this project's components (the information management and information exploitation project) was in progress.

11.6
NZDF updated the timetables for the Initiative's major areas of focus, and documented them in its statement of intent for 2008–2011. Each change represented a delay in starting or ending work in the following areas:

  • Increasing the quantity of major capital stock that NZDF holds was moved from the foundations phase to the construction phase (see Part 7).
  • Implementing the Army's future structure was moved from the construction phase to the consolidation phase.
  • The end-date for restoring the defence estate was moved from 2011 to 2015.
  • The date by when the Navy planned to reach its target personnel numbers was moved from 2011 to 2014.

11.7
As part of its routine reporting, NZDF explained the delays. There were broadly three reasons: optimistic planning, rising capital and operating costs, and higher-than-planned deployments.

Optimistic early planning

11.8
The project briefs for the original 16 projects were prepared at the beginning of the Initiative, when NZDF's planning capability was inadequate. Therefore, it is not surprising that the timetables for many projects were overly optimistic.

11.9
The projects were not discrete or simple. As NZDF started to carry out the projects, it needed to take other actions or carry out other reviews to get more value from the original projects or to release funds for the projects. For example, NZDF carried out an internal baseline review with the aim of using savings in one area to meet the Initiative's priorities in another area. Some of the original projects were suspended while the baseline review was being carried out.

11.10
The timetables for the 16 projects did not necessarily consider the links and relationships between related projects. As well as links between the 16 corporate capability projects, there were also links between those projects and NZDF's other significant work programmes, such as the:

  • defence capital asset management practice review;
  • defence transformation programme, which followed on from the baseline review;
  • long-term development plan;
  • resource allocation and management work programme; and
  • major capital acquisitions (with the Ministry of Defence).

11.11
The complex relationships between projects and programmes meant that sometimes one project needed to wait for another project to make progress before it could proceed.

Rising capital and operating costs

11.12
NZDF has to manage within its budget. As we would expect, NZDF prioritised projects within its resources to make the best overall progress on the Initiative, even if this meant that projects would take longer than originally planned to complete.

11.13
Inflation eroded the value of the Defence Funding Package, which meant that the funding could not achieve as much as was originally planned unless efficiencies were achieved. Inflation affects NZDF more than many organisations. For example, the average rate of military inflation is 3% more than the economic average inflation. The inflation rate for military capital equipment is higher again – it is double the average rate of military inflation.

11.14
Operating costs also increased during the foundations phase. For example, the Navy paid $600 for each tonne of fuel in 2004 compared with $1900 for each tonne in October 2008.

The effects of deployments

11.15
Deployments had widespread effects on NZDF, and even small deployments added to NZDF's difficulties in scheduling and achieving projects. Significant resources were needed to manage deployments, which meant that time and effort was directed towards meeting current needs and away from long-term rebuilding (see Appendix 2).


1: Project 17 was the Army configuration review, which resulted in the Army transformation programme (project 19). NZDF considered that the Army transformation programme was part of the Initiative. (See Appendix 1 for the full list of projects.)

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