Defence Sustainability Initiative

The Defence Sustainability Initiative (DSI) has been well publicised in stand alone documents, the 2005/06 and 2006/07 NZDF Statements of Intent and the NZDF 2005 and 2006 Annual Reports. In summary, as a result of the Defence Capability and Resourcing Review (DCARR), the Government has committed to providing the NZDF with the financial resources to recover and grow. The DSI funding package is $4.6 billion over 10 years (2005/06 to 2014/15). This package will enable the NZDF to develop military and organisational capability to a level that will ensure the Government’s defence policy objectives can be met on a sustainable basis.

The DSI funding package provides the financial resources to:

• restore personnel numbers in the three services, HQ NZDF and HQ JFNZ to the levels required, over a period of time;
• address the number and trained state in some trades deemed as critically deficient;
• replace and upgrade some major weapons platforms in accordance with the Government’s intentions, through the LTDP;
• raise the standard of some military equipment (other than major weapons platforms) that is currently beneath the required standard;
• return contingency reserve stocks to acceptable levels;
• reduce the substantial backlog of maintenance and capital expenditure in the Defence Estate, over the longer term; and
• restore aspects of corporate management capability that are currently severely depleted.

Steps to responsibly manage the DSI funding package allocation process and to ensure that the allocation remains sustainable over 10 years have been developed and implemented, and will continue to be monitored. The DSI is required to be reported on annually, and is subject to annual review and a formal review after five years.

The following table is a summary of the DSI funding commitments.

Notes:

1. The figures are as at 1 April 2007 and are GST exclusive.
2. The $86.9 funding shown for 2005/06 included $16.6 million for the NZDF continuing contribution to Operation Enduring Freedom in Afghanistan and $5.3 for Defence Force Allowances.
3. The remaining annual increments are net figures after taking into account the arrival of new capabilities, retirements of old equipments, and other changes to the support and sustainment of the NZDF.

The following diagram shows, in simplistic terms, the Defence Capability and Resourcing strategy, as related to the DSI funding commitments, over the ten-year timeframe.

The projects that come under the DSI are now Business as Usual; albeit the requirement to provide annual DSI reports remains extant.

The Government’s three main priorities for attention were:

• Restoration of personnel numbers,
• Delivery of projects on the Long Term Development Plan (LTDP), and
• Improving the NZDF’s and MoD’s corporate management capabilities.

A brief summary of the progress to date, against these priorities is as follows:

• The restoration and growth of the organisational capacity of the NZDF, in terms of personnel, is being achieved and is in line with DSI targets; though there are risks emerging. Recruitment of experienced personnel from other defence forces (lateral recruitment), as well as normal recruitment, and reduced attrition rates have been positive indicators in the last 12 months; albeit lateral recruitment and retention carries a higher cost. The main risks in the short term revolve around accommodating current increases in personnel costs.
• The latest version of the LTDP was presented to Cabinet on 6 September 2006 and released by the Minister of Defence on 17 October 2006. The NZDF is able to manage the LTDP so as to maintain its affordability.
• Equipment deficiencies, other than those of major weapons platforms, are being addressed under an expanded Capital Equipment (Minor) programme. Affordability of the CP (Minor) is being addressed by the introduction of a new CP (Minor) prioritisation system.
• The key organisational changes required to improve strategic management ahead of the bulk of the DSI programme have been completed. These have include the establishment of the Executive Leadership Board (ELT) under CDF, the establishment of a corporate Planning Branch and an Organisational Support Branch, the completion of a comprehensive strategic planning framework, the production of a full NZDF Strategic Plan (launched in March 2007), establishment of the Joint Logistics Support Organisation (JLSO), and an electronic Defence Performance Management System (DPMS) - a key management tool for the ELT. Other projects remain on track for completion over the next year.
• The major risks to the completion of the DSI are operational and fiscal. The operational risk is posed by the continued high tempo of operations which is having the effect of slowing the recovery and growth.
• The main fiscal risk to the DSI is the pressure on operating expenditure, which is expected to remain over the next few years. The main factors are internal and externally-sourced inflation, and the global increase in commodity prices, particularly for fuel and ammunition. The need to fund remuneration increases in order to achieve the DSI personnel targets will also be a challenge. In response, the NZDF has embarked on a complex work programme to ensure all its baseline expenditure is fully aligned to DSI objectives as articulated in the NZDF Strategic Plan.

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