Part 1: Introduction

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

In this Part, we describe:

The purpose of our audit

In May 2005, the Government approved a Defence Funding Package for NZDF, which amounted to $4.4 billion (excluding GST) of extra operating funds over 10 years. The extra funding was not guaranteed. The planned annual increases were subject to change through the annual budget process.

NZDF prepared a 10-year programme to use the extra operating funding to improve military and corporate capabilities, which had become depleted.1 The programme was called the Defence Sustainability Initiative (the Initiative).

NZDF planned to the carry out the Initiative in three phases:

  • the foundations phase (from 2005/06 to 2007/08);
  • the construction phase (from 2008/09 to 2009/10); and
  • the consolidation phase (from 2010/11 to 2014/15).2

We audited NZDF's progress against the results expected during the foundations phase. We set out our detailed expectations in each Part of our report.

In December 2008, the Government's decisions effectively ended the Initiative as a distinct programme. The current Defence Review and resulting Defence White Paper will set the Government's defence policy.

The New Zealand Defence Force

NZDF is made up of the:

  • Royal New Zealand Air Force (Air Force);
  • New Zealand Army (Army);
  • Royal New Zealand Navy (Navy);
  • Reserve Force;
  • Territorial Force;
  • Headquarters NZDF, which is responsible for strategic command and management roles; and
  • Headquarters Joint Forces New Zealand, which is responsible for planning and conducting all deployments.

The Air Force, Army, and Navy are collectively known as the Regular Force.

New Zealand Defence Force's main duties

NZDF's duties are mainly in two areas: deploying forces and being prepared for potential new deployments.

Deployments include:

  • deploying forces internationally as directed by the Government, such as to Afghanistan and Timor Leste;
  • joint exercises with forces from other nations, such as Australia, Canada, Japan, and the United Kingdom; and
  • providing planned support to other government departments, such as the Department of Conservation and the Ministry of Fisheries.

Being prepared for potential new deployments includes being ready:

  • to respond to short-term urgent events, such as to provide humanitarian relief in response to disasters or to support the New Zealand Police; and
  • for potential international deployments, such as new peacekeeping or combat missions.

How we carried out our audit

We based our findings on our analysis of NZDF's public and confidential documents. We worked closely with NZDF to ensure that we correctly understood and used military terms, and the context for our audit and findings.

During the foundations phase, NZDF was to complete 16 projects to improve capability (see Appendix 1). We audited the steps NZDF took to ensure the quality of the projects' results. However, it was beyond our resources to give assurance about the quality of every project that NZDF had completed or had in progress during our audit. For example, we checked that NZDF had prepared an interim strategic plan (see Appendix 1, project 1), and that the Minister of Defence accepted the plan. But, we did not verify that its contents were optimal. We took a similar approach to other matters.

The then Cabinet approved $209 million (excluding GST) in the Defence Funding Package for major capital items. Because we are separately auditing the quality of the monitoring and reporting systems that NZDF and the Ministry of Defence use for defence acquisition projects, we excluded them from this audit.3

The Defence Funding Package included funding for two projects to improve capability within the Ministry of Defence. We did not audit these projects, but for completeness we have included them in our list of the Initiative's corporate capability projects (see Appendix 1).

How we have reported our findings

In May 2009, we provided NZDF with a report that contained technical and confidential material (the classified report). We did so to ensure that our detailed findings were available to NZDF as the mid-term review of the Initiative began.

We also circulated the classified report to the Minister of Defence and chief executives of the Ministry of Defence, Department of the Prime Minister and Cabinet, State Services Commission, and the Treasury.

This, therefore, is the second report we have produced and it sets out our main findings. We have adjusted this report to recognise that the Initiative, as a distinct programme, has effectively ended.

The structure of our report

Parts 2 and 3 of our report discuss NZDF's performance during the foundations phase against expectations for its main military roles: maintaining deployment capability, and being prepared for potential new deployments.

The remaining Parts of our report discuss NZDF's performance against expectations in three broad areas:

  • military personnel – NZDF was expected to:
    • increase personnel numbers in the Air Force, Army, and Navy; and
    • increase personnel numbers, and effective personnel, in critical trades and ranks;
  • equipment – NZDF was expected to:
    • clear a backlog of shortages in minor capital equipment;
    • increase the quantity of stock held in readiness for potential new deployments; and
    • ensure that Project Protector had enough operating funds to recruit and prepare crews for the new vessels; and
  • corporate capability – NZDF was expected to:
    • consolidate corporate services and recruit more corporate personnel; and
    • carry out 16 major corporate projects.

In Part 12, we discuss NZDF's ability to balance expectations, workload, and capacity. We also comment on NZDF's role in reviews of the Initiative's progress, and its arrangements for managing and reporting the Initiative's implementation.

1: More information about the Defence Capability and Resourcing Review (February 2005), which led to the Defence Funding Package and the Initiative, can be found at

2: More information about the Initiative's three phases, and major areas of focus for each phase, can be found in NZDF's statements of intent at

3: In June 2008, we published Reporting the progress of defence acquisition projects, which was an interim report.

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