Fancy new planes for the defence force - but will a $2.5b decision be put to tender?
Source: https://www.stuff.co.nz/news/112948824/-

2019-05-28 05:46:58

The Government may be set to receive advice to make a $2.5 billion defence spending decision, without going to tender.

Stuff understands officials are preparing to deliver a proposal that would see the purchase of a replacement for the Air Forces' ageing Hercules C-130 airplanes bypass the tender process and go straight to "sole-source" procurement.

The Ministry of Defence would not be drawn on whether it planned to circumnavigate the tender process, but confirmed a paper with recommendations on the next steps would be going to Cabinet in the coming weeks.

The purchase of planes to replace the Air Force's ageing C-130 Hercules could cost anywhere up to $500 million for the planes themselves.

Ongoing maintenance and "through-life support" over the course of their lifetime would take the cost up to $2.5b.

Several defence industry heavyweights were vying to supply New Zealand's air force with replacement planes in the medium airlift category. But two main competitors - Lockheed Martin and the Boeing-backed Brazilian company Embraer - have emerged as the two most viable options against the defence force's requirements.

Lockheed may have the inside track as the preferred option within some quarters of the defence force - given it had a long and tested history - but the revelation also raises questions over the level of influence military personnel may have over procurement processes.

National Party defence spokesman Mark Mitchell said the procurement plans were concerning. The Ministry of Defence had a chequered procurement history - the NH90 helicopters and the LAV III army vehicles were both high-profile controversies.

"We spent a lot of money when we were last in Government, making sure the Ministry of Defence has got a world-class procurement system, and now they're going to subvert that if they do go sole-source," Mitchell said.

But there were also risks in purchasing brand new equipment.

"One of the risks we carry if we procure equipment that hasn't already been proven and brought into operation, then there can be all sorts of issues for us," Mitchell said.

"But at the end of the day, the best way to give ourselves a competitive advantage, is to have some competitive tension in the procurement system, where you've got different companies competing."

Mitchell said there could be three potential options the ministry of defence needed to do due diligence on; the C-130J, the KC-390 and a Japanese option - the Kawasaki C2, also had outside potential.

There were legitimate reasons for the defence force to go sole-source on some of its purchases. A lot of military equipment was so specialised, and a country's military needs so specific, there may only be one product worth buying.

But that was not necessarily the case with the C-130 replacement, and while all companies had submitted detailed proposals in May 2017, that was under a less rigorous process than an open tender - relevant information for all options will have likely updated significantly since then.

A tender process would allow new information to be formally submitted for further scrutiny.

The revelation comes at the same time National dropped a bombshell in Parliament, releasing confidential details of the Government's budget. Finance Minister Grant Robertson said some of those details were correct, but some weren't. He wouldn't be drawn on how much National had gotten right.

But one claim, that the Government had allocated $1.3b for the purchase of assets in this year's defence budget

The budget drop had nothing to do with the planned purchase of the C-130 replacements. The money eventually budgeted for that, was not expected to be included in this year's budget figures.

A review ordered by Defence Minister Ron Mark early on when he assumed the portfolio, found the changes made to the Ministry of Defence's procurement processes under the last Government, were sound.

Mark said when he takes recommendations to Cabinet, they will be recommendations he is comfortable with.

"In terms of how that purchase will be handled, I've yet to take a paper to Cabinet.

"Whatever process the Cabinet approves, will be a process I take to Cabinet."

The replacement was a "critical" project he said, which the Government was determined to get right.

A spokesperson for the Ministry of Defence said the project was "one of the highest priorities" within the soon to be released Defence Capability Plan.

"The decision on replacing the C-130 Hercules will have consequences for decades to come, so officials have been carefully considering the options.

"Once a decision has been made by Cabinet, a public announcement will be made on next steps. This is expected to occur in the coming weeks."

WHAT ARE THE OPTIONS?

A like-for-like replacement would see the Government purchase the Lockheed option; the latest version of the same plane, called the C-130J.

Its reliability is well-known, and its an option that many accept would service the majority of the New Zealand Defence Force's needs.

Defence experts often cite the need for "inter-operability" with our international defence partners as a key requirement, when looking to purchase new equipment.

Australia has flown the C-130J since 1999 but has only extended a maintenance deal to 2024, when it's being speculated by some quarters Australia will look to review its continued use.

Embraer's KC-390 - while a much newer model - has made waves across the world for its speed and payload capabilities, which are generally accepted to outstrip those of the C-130J.

The KC-390 could technically fly from Christchurch to Antarctica and back again in a single day. While the C-130 could not.

But the KC-390 is so new it has not been proven in the field, although much of the technology it uses, has.

A number of countries already have it on order. Brazil is under contract for 28, Portugal is in the final stages of confirming purchase for five. Embraer was in the final throes of completing military certification, to be completed by the end of the year.

The first three aircraft are due to be delivered to Brazil this year.

The airforce operates five C-130 Hercules. It took delivery of the first three Hercules in 1965, and a further two in 1969.

The aircraft are used by the defence force, for passenger and cargo movement in support of combat, peacekeeping and humanitarian relief operations. Their replacement is a high priority spend

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