Boeing 757 Acquisition and Modification

Reporting the progress of defence acquisition projects.

Boeing 757 Acquisition and ModificationProject purpose and history

The purpose of this project is to acquire and modify two Boeing 757-200 aircraft to replace two ageing Boeing 727s. Modifications to the 757 aircraft were required to meet the NZDF's capability requirements.

The Government Defence Statement: A Modern, Sustainable Defence Force Matched to New Zealand's Needs (8 May 2001) noted that a study would be completed to identify the options for replacing the Boeing 727 transport planes, including ownership or the possibility of leasing or chartering.

On 22 May 2002, Cabinet's Policy Committee noted that the LTDP had mentioned that, among other projects, the Boeing 727 replacement project was necessary to avoid a failure of Government policy.

A Fixed Wing Transport Review was initiated by the joint Ministry/NZDF Office of the Chief Executives on 18 July 2002 to consider the Boeing 727 replacement project and the C-130 replacement/upgrade project. In November 2002, the review report recommended that the Boeing 727s be replaced by the purchase of two secondhand Boeing 757s, modified for strategic transport tasks.

Two secondhand Boeing 757-200 aircraft were purchased from General Electric Capital Aviation Services in early 2003. They were operated by the Royal New Zealand Air Force in a passenger-only configuration while negotiations continued with potential contractors for the modification work.*

Singapore Technologies Aerospace/Mobile Aerospace Engineering was initially selected as the preferred prime contractor for the modifications, which were to start in 2006. However, Mobile Aerospace Engineering was selected as the prime contractor, with specialist design and support from Boeing Commercial and Boeing Integrated Defence Systems. Modification of the first aircraft started in early 2007, with modification of the second aircraft to be completed by 2008.**

Cost and time frame changes for the Boeing 757 Acquisition and Modification project

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


 Approval to Commence point Approval to Commit point Ministry's December 2007 forecast to the Committee
Cost
(excluding GST)		 $199.3m 1 $220.6m ($108.2m for purchase and $112.4m for modification) 3 $220.6m
Time frame Mid-2004 2 June 2007 3 Both aircraft expected to be modified by June 2008

Sources

  1. We use the figures from the Cabinet approval of 18 November 2002. The Ministry cites the $100 million to $200 million range from the 2002 LTDP for cost, and the 2004 LTDP figures for time frames (aircraft purchased by mid-2003 and modification complete by mid-2006).
  2. All of the funding in the approval paper was planned for 2002/03 and 2003/04, indicating that completion was expected by mid-2004. It was also indicated that the modification of each aircraft could take four months and that the programme could be delayed until late 2004.
  3. We use the figures from the Cabinet approvals of 18 February 2003 and 8 August 2005.

Changes to costs and time frames as the project has progressed


 Approval to Commence point to the Approval to Commit point Approval to Commit point to the Ministry's December 2007 forecast Total change between the Approval to Commence point and the Ministry's forecast
Cost
(excluding GST)		 +$21.3m 0 +$21.3m
Time (months) +36 1 +12 +48

Explanatory notes

  1. We have had to assume the difference between the Approval to Commence point (mid-2004 - so we use the end of June 2004) and the Approval to Commit point (of June 2007).

* Modification work included installing a cargo door, internal access air stairs, internal aircrew access ladder, increased engine thrust, and upgraded civil communication, navigation, surveillance/air traffic m anagement, and military communications capabilities.

** According to acquisition progress information on the Ministry of Defence's website (www.defence.govt.nz).

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