Mark Burton Speech to Defence Industry Committee Excellence Awards

Thank you David (Haynes) for your kind welcome. I am delighted to be able to be here this evening.

This conference is built around two themes: innovation and excellence. We hear these words bandied around quite a bit these days, but how do they fit into the larger theme of “building a sustainable defence industry?”

When you innovate, quite simply, you think differently. You make changes that no one ever thought of before—changes that are novel, modern and sometimes frightening.

But change in and of itself doesn’t necessarily mean advancement. That’s where excellence comes in. Excellence is what turns innovation into success, and it’s that idea I’d like to speak about tonight.

Defence spending has one purpose: to fully meet the Government’s policy and operational objectives effectively, efficiently and economically.

But while this objective is clearly defined, it cannot be achieved by implementing some kind of “magic formula”. Instead, we must aim for improvements across a range of processes, both in the workings of the NZDF and its suppliers.

New Zealand Defence Industry and Defence have already formed unique partnerships, by virtue of the natural relationship between service providers and service users. Yet, both partners have specific needs. By learning to better understand these needs, the relationship is strengthened and a mutually beneficial environment becomes the norm. While many steps in this direction have already been taken, it’s important to remember that this partnership can always be enhanced.

The past 18 months have been a time of great change for the Defence Forces. In May 2001, the Government published our Defence Statement, which outlined plans for:

A joint approach to structure and operational orientation;

A modernised Army;

A practical Navy fleet, matched to New Zealand’s wider security needs;

A refocused and updated Air Force; and

A funding commitment to provide financial certainty.

These steps were certainly innovative. No previous government had been prepared to consider streamlining New Zealand’s Defence Forces in this way, in order to ensure its credible future. And although we, as a Government, believed that this strategy was the right choice for New Zealand, it’s fair to say that there were those who did not share our belief in those decisions.

However, clear direction was needed in terms of the future, on our defence acquisition priorities, and on how much money would be available. That direction was articulated in June 2002, when the Government published the Defence Long-Term Development Plan (LTDP), a crucial operational planning document that outlines defence spending strategies for the next decade.

The LTDP followed logically on from the Defence Policy Framework and the Defence Capability Statement, and it is, perhaps, the most innovative document of the three. It provides, for the first time, a transparent, robust framework for New Zealand’s Defence Forces, which guides the Government’s decisions regarding defence projects in the context of their affordability and their value in delivering policy.

The LTDP also confirmed that $1 billion in new funding and about $1.5 billion in depreciation funding would be available over the next 10 years. This funding gives both Defence and Industry a clear understanding of our needs and spending capabilities throughout the next decade.
Taken together, these three key strategic and operational documents, demonstrate the government’s commitment to building a modern, focused, professional Defence Force, equipped to meet New Zealand’s defence requirements. They also form the foundation of the relationship between Defence and Industry.

We are rapidly moving into a new era of development. I expect to see New Zealand industry involvement in both the acquisition phase and the through-life operating and maintenance phases of many of our proposed procurements. This means Defence will be making a great deal of information available to industry about our needs and intentions. This flow of information will encourage creative thinking among Industry and spark ideas that will further strengthen the partnership with Defence.

The Long Term Development Plan is a key document. I cannot stress its importance enough. For the first time, industry has proof of, and can have confidence in, the Government’s commitment to the capital projects necessary to regenerate NZDF capabilities.

Clearly, industry is in a strong position to contribute expertise to some of these projects, and many such opportunities exist within the defence force’s framework. This Government is committed to promoting opportunities for strong industry involvement, but it is essential for both partners to find an appropriate balance between Industry needs and the needs of our Defence Forces.

New Zealand industry has already built very effectively on the base provided by the ANZAC Ship Project, and the economic benefits have gone far beyond the original scope of the project. Currently, the industry is supplying a range of services and equipment to other New Zealand defence projects, and in some cases to defence projects overseas.

However, all industry involvement must be considered in terms of competitive costings and quality goods. I am very keen to see New Zealand industry contribute to, and profit from, ongoing involvement with significant Defence projects, but all sound commercial decisions have to take price, availability, reliability and proven performance into account.

We also have to balance the needs of local industry with New Zealand’s trade obligations, which clearly define the ways in which the Government may procure equipment and supplies. Trade agreements often impose restrictions on New Zealand in return for significant competitive advantages internationally.

In principle, these agreements usually require the New Zealand Government to treat suppliers from outside New Zealand in an equal manner to their New Zealand counterparts. In return, their Governments do the same.

Our agreements with Australia and Singapore are two good examples. Under the Australia New Zealand Closer Economic Relations trade agreement, defence organisations in both countries are required to ensure that their processes and practices allow the trading partner’s industry to participate on an equal footing with local companies.

Australia and New Zealand have also established Closer Defence Relations (CDR). Both Defence Forces have agreed to investigate ways of jointly developing capabilities and maximising inter-operability. While there are provisions in the agreement that allow for the protection of each other’s essential security interests and intellectual property, CDR represents a key step in providing a more efficient and cost-effective defence capability.

The Government Procurement Agreement is an agreement between the Commonwealth, State Governments and New Zealand, and it enables Australian and New Zealand suppliers to compete on an equal footing for government contracts in all Australian States and New Zealand. This means, for instance, that both defence forces must ensure that all documents prepared for tendering purposes do not discriminate against any Australian or New Zealand supplier on the basis of origin.

The Co-Operation of Defence Logistics Support Agreement between Australia and New Zealand makes provision for one Defence Force to supply logistics support to the other, as well as outlining ways in which each country can access the other’s industrial base for logistic support.

Taken together, these agreements mean that in terms of defence opportunities, Australia and New Zealand are considered as a single industrial base. Both industries compete on an equal footing, with the exception of such issues as national security or protection of intellectual property. This commercial equality between Australian and New Zealand is firmly embedded in Defence processes and policies.

These agreements obviously present significant trading opportunities for New Zealand industry in the much larger Australian market, as well as opening the doors for trans-Tasman firms to bring new capabilities to New Zealand.

Like Australia, New Zealand and Singapore have established a single procurement market. This arrangement maximises the competitive opportunities for local suppliers and reduces the cost of doing business for both Government and the Industry.

Under the terms of our Closer Economic Partnership (CEP), both countries are committed to transparency, value for money, open and effective competition, fair dealing, accountability and due process and non-discrimination in all aspects of procurement. The CEP also ensures that the opportunity exists for local suppliers to compete on an equal and transparent basis for Government contracts.

Currently, we are advising industry of the government’s Defence Force structure decisions in terms of a number of capital projects, and seeking industry input on the equipment required to update our forces. The Project Protector Invitation-to-Register is an excellent example of that approach.

Twenty-one organisations from the worldwide shipbuilding industry have registered their interest for the supply of new RNZN. There are 14 countries represented in the 21 registrations, one of which is New Zealand, and New Zealand firms figure in a number of the registrations.

The Ministry of Defence now has the task of reviewing the registrations, compiling a short-list of the most highly qualified organisations and then inviting them to tender fully developed proposals.

But, as you know, participating in the construction of a new defence capability is only one of many opportunities for New Zealand industry.

Through-life-support is also essential to us, and the new capital projects outlined in the Long-Term Development Plan will require new and expanded support arrangements. This is an area where NZ industry can add real value through long-term defence partnerships.

This Government is committed to New Zealand industry, and that same level of commitment applies to the New Zealand defence industry. Currently, the Ministry of Defence and the Ministry of Economic Development are undertaking a joint review of industry policy in relation to defence capital projects.

To date, the review has shown that there are ways in which both the Ministry of Defence and Ministry of Economic Development can better assist New Zealand industry in participating in defence projects. I expect that the full review will find innovative new ways to develop that assistance, within the bounds of Government procurement policy and our trade relationships.

And that brings us back to the beginning. Innovation and excellence.

Innovation can mean different things to different people. In Defence, we are looking for innovation from within, to improve our practices and the output from our equipment. We look to Industry for similar innovations, not only to improve the efficiency of our Defence Forces but to improve the entire New Zealand Defence Industry as well.

And in both, excellence is the ultimate measure of innovation.

The recent changes in Defence have challenged us all to think differently, to find creative solutions and to strive for excellence. These changes have been a catalyst for fostering great innovation and excellence in a very small market.

I suggest that the challenge for you as an industry, is to take these qualities to the world. That challenge is in your hands.

Thank you again for the opportunity to share this celebration of industry excellence. I congratulate you all for your achievements thus far, and eagerly look forward to the industry’s future.

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