Multi-Role Vessel and Patrol Vessels (Project Protector)

Project purpose and history

The purpose of this project is to replace HMNZS Canterbury with a Multi-Role Vessel, and introduce a mix of offshore and inshore patrol capabilities through the purchase of two Offshore Patrol Vessels and four Inshore Patrol Vessels.

The Defence Policy Framework released in June 2000 noted that there was a strong case for having an enhanced military maritime patrol capability. It was envisioned that this might include medium-sized lightly-armed patrol vessels operated by the Royal New Zealand Navy (but also with specialists from other government agencies such as the New Zealand Customs Service), as well as a Multi-Role Vessel more than 100 metres long for operating in the South Pacific and the Southern Ocean/Antarctic Ocean.

On 17 December 2001, Cabinet directed the Ministry, with the NZDF and other departments and agencies as appropriate, to seek proposals from manufacturers and suppliers to meet the requirements for a Multi-Role Vessel, and offshore and inshore patrol capabilities. The overall cost of the project was not to exceed $500 million (with a US$100 million cap for the Multi-Role Vessel).

The Ministry identified Tenix Defence Pty Limited of Australia (Tenix) as the preferred tenderer. After discussions with other agencies and analysis by the Ministry, Cabinet considered two options for the Project Protector fleet on 17 May 2004. These were:

• option A: To accept the Tenix proposal for one Multi-Role Vessel, two Offshore Patrol Vessels, and four Inshore Patrol Vessels at a proposed price of NZ$458 million; and
• option B: To seek an extension to the Tenix proposal until 31 August 2004, to permit full evaluation of fleet mix and long-run cost implications, at an additional likely cost of $16.35 million if the same fleet composition was retained.

On 19 May 2004, having been authorised by Cabinet, the Cabinet Policy Committee accepted option A, and granted Ministers powers to approve the final contract within the agreed budget of $500 million. Subsequent required changes to the Tenix proposal* and the addition of the Ministry's project management costs meant that the forecast cost of the acquisition increased from $458 million to $499.7 million by the time the contract was signed in July 2004.

Cost and time frame changes for Project Protector

Costs and time frames at the Approval to Commence and Approval to Commit points, and figures forecast as at December 2007

Sources

1. We use the figure from the Cabinet approval of 17 December 2001. The Ministry cited the $500 million figure from the 2003 LTDP.
2. We use the figures from the contract signed on 28 July 2004.
3. The Treasury understands that the defence agencies, after the Ministry's December 2007 forecast, have found that their project commitments now exceed the project's budget. The defence agencies have advised us that Ministers have been informed of the project's cost and time situation.

Changes to costs and time frames as the project has progressed

Explanatory notes

1. This is the difference between the Approval to Commence point (2005 - so we assume the end of 2005) and the Approval to Commit point (December 2006).
2. This is the difference between the Approval to Commit point (December 2006) and Ministry's December 2007 forecast (delivered June 2007).
3. This is the difference between the Approval to Commit point (28 December 2007) and the Ministry's December 2007 forecast (all ships expected in October 2008).

* The changes ranged from minor layout changes to more significant changes (like the need to store and circulate aviation fuel on the Multi-Role Vessel, extended fire protection systems, and the modification of loading/unloading cranes).