NZ navy frigate set to return; costs blow out to $600m$700m

AUCKLAND: The second of the country’s two naval frigates is due to leave Canada, eight years after an upgrade project began.

The costs to upgrade Te Mana and before it, Te Kaha, have blown out to between $600 million and $700 million, due in part to project management mistakes.

Main contractor Lockheed Martin Canada and a subcontractor are mired in a longrunning court battle.

The Ministry of Defence said that dispute had not had any impact on the upgrades.

Other delays had pushed the project back by more than three years, even before Covid.

The deal was inked in 2014 at a budget of just under $500 million, but in 2017 the newly elected Labourled government was forced to put in another $140 million, sparking an exchange in Parliament.

‘‘Cost overruns primarily occurred due to project management mistakes in estimating the cost of the installation of equipment and delays resolving the issue, which made an unacceptable situation worse,’’ then defence minister Ron Mark told Parliament at the end of 2017.

‘‘The previous government was first informed of cost pressures within the project in September 2016,’’ he said.

‘‘That’s right. We said: ‘Go away’,’’ former National defence minister Gerry Brownlee said.

Te Kaha returned to New Zealand at the end of 2020.

The New Zealand Defence Force annual report for 202021 rated naval combat at ‘‘no capability’’ and ‘‘0%’’.

The upgrades were to extend the vessels’ operational life to about 2030.

The 2010 Defence White Paper said upgrades were needed ‘‘to address obsolescence and . . . improve defensive capability against contemporary air and surface threats’’.

The upgrades were ‘‘for a fixed, firm price’’, deputy secretary of capability delivery Mike Yardley said this week.

‘‘No extra costs have been incurred by the Crown.

‘‘The only additional cost incurred has been to keep the small project team and ship’s crew in Canada for an additional three months while the acceptance trials were carried out, and this was provisioned for within the project contingency.’’

The Defence Force’s annual review shows $35 million went into the project last year, and $5 million the previous year.

RNZ has asked the Defence Force to clarify whether this was from within the budget, which expanded to $639 million in 2017, or in addition to it. — RNZ