Wednesday, July 2, 2008

Audit Office Report

The Audit Office's Reporting the progress of defence acquisition project report is a serious indictment on the structure and nature of New Zealand's armed services. In twenty years of watching Government I have never seen a report like it. Essentially the Audit Office has published a report accusing the Defence establishment of obscurantism over its procurement processes in an unprecedented display of frustration by one government agency with another.

In New Zealand Government agencies don't publish this sort of report without severe provocation. Certainly the Audit Office accepts and welcomes the Defence Ministry's claim that it will continue to work with the Audit Office, but this is cant. The Audit Office must be furious to publish such a trenchant criticism and the numbers tell us why.

The first and most important number is that of the year 2005 first mentioned by the Auditor General in the sentence:

In my 2005/06 Annual Plan, I indicated my intention to carry out a performance audit to identify and report changes to costs, time frames, and essential user requirements in selected defence acquisition projects.

It is now 2008. The Defence established were given plenty of warning and yet here we are three years later with the Auditor General releasing an interim report because his staff can't get straight answers from the Ministry/NZDF. Why?

Then there is the track record of the projects themselves. The most expensive ones have been seriously over budget often with no adequate explanation. The Audit Office says many changes have no records to explain them on file. The Defence information systems have not kept records despite the fact they were told three years ago the Audit Office would be investigating. Why?

Then there are the projects themselves. Some, such as the NH90 helicopter are seriously over budget. Some, such as Project Protector have fallen behind schedule. Nearly all the estimates provided to Cabinet for sign-off have been little better than "intelligent guesses" of the eventual cost. In nearly all cases delays have added significantly to project cost.

Altogether the Audit Office paints a picture of a service which has nothing but contempt for the civil institutions it is meant to serve. The Service is more self-serving than serving the public and cannot provide its civil masters with adequate explanations of how and why it spends the vast sums that it does. It perpetuates the myth that civilians cannot possibly understand the military world, that the defence service are the experts and that we should trust them, because they know what they are doing.

This is the fundamental problem with disconnecting the military from civilian concerns. The military thinks its job is to provide an armed force for the military expression of Government foreign policy. Its task is to liaise with other militaries in order to take part in the hairy chested adventuresome world of masculine inter-state bonding. And that's it. Its toy soldiers on a grand scale.

In my view while this view of the military remains in place it will remain very difficult to get any sense out of the secrecy shrouded military world. They will continue to define acquisitions projects based on solely military criteria where the utility of their "toys" cannot be questioned because they are meant to be the sole providers of military advice. Thus the whole funder-provider split which Treasury pushed on the Services (and the rest of the public service) in the 80s is a complete sham because everything ties back to specifications dreamt up by the NZDF.

The fundamental problem is that the Quigley Review was wrong. Wrong because its assessment of the role of the military was not based on a wide enough scope and because its only funding rationale was business as usual. My review assumptions is that the military exists to provide a service to protect New Zealanders in the case of emergencies outside the scope of business as usual. This means that the service must be prepared to deal with all extraordinary hazards capable of mounting a significant threat to New Zealand's regional and civil economic structures. These include bio-terrorism, cyber-terrorism, geophysical and flooding disaster, EEZ resource security, as well as anti-democratic nutters with bombs and machine-guns.

In the course of the review I also questioned whether the NZDF policy of deferring to Australia in all things was really a very sensible one. I could not find many cases (The Harris radio's being a notable exception) where the Australian lead really was the best or most economic choice for achieving the broader scope of emergency response we required.

In the end the Audit Office may get some answers on why the Defence Force has such a poor record in cost estimation and project management. I fear however, they will only get part of the answer because they are only able to ask part of the question.