N.Z. frigate negotiator drives hard bargain

Press, 31 August 1989, Page 6

N.Z. frigate negotiator drives hard bargain

By

BRENDON BURNS

in Canberra New Zealand and Australia will pay much less for Anzac frigates than they expected, says a Deputy Secretary of Defence in Canberra, Dr Malcom Mclntosh.

He told “The Press” yesterday that New Zealand, and Christchurch in particular, were well placed to do well from Australia’s multibillion dollar defence industry. Dr Mclntosh, deputy secretary for acquistion and logistics at the Department of Defence, has overseen negotiation of the Anzac ship deal for Australia.

If New Zealand bought four frigates, the cost would be “well below” the working estimates of $2.1 billion spread over 20 years, he said.

A better than forecast price had been achieved for both countries through very competitive tenders.

This result came before the Ministers of Defence and Finance, Messrs Tizard and Caygill, went to Canberra on Tuesday to finalise what Australia’s Defence Minister, Mr Beazley, said was an extremely hard bargain. “Even before any deals were done between Australia and New Zealand you were weel below SNZ2 billion,” said Dr Mclntosh. “The reason you’re well under is we had a very competitive bunch of bids.”

The cost to New Zealand included all the maintenance and shore support envisaged under the original project memorandum of understanding. Dr Mclntosh said the deal offered to New Zealand was for two ships with an option to acquire two more

later at the same price. The contract negotiated with the Amecon consortium specified firm prices except for exchange rate fluctuation and inflation. Mr Tizard said on leaving Canberra on Tuesday that New Zealand had negotiated to buy two ships. Provision had had to be made for another two later. The deal guarantees New Zealand companies the right to win 20 per cent of the total Australian content used in building eight Meko 200 class frigates for Australia and two for New Zealand. Dr Mclntosh said if New Zealand companies could not win a 20 per cent share of the Anzac ship project, they could compete in the wider Australian defence budget. This was worth about $5 billion a year in procurement, computer work and servicing. Mr Beazley said on Tuesday that New Zealand companies would have access to his defence budget once a two frigate deal was confirmed. Dr Mclntosh said most New Zealand companies did not have the expertise for defence work, where higher specifications Were demanded than civilian contracts. The Government might have to examine its requirements for industry standards and quality control, he said.

But Australian firms had only begun to win a majority share of the country’s defence contracts in the last three or four years. The Anzac frigate project would impose its own standards, forcing New Zealand companies to comply.

Dr Mclntosh identified several areas where New Zealand com-

panics were likely to do well in Anzac frigate and other defence contracts: • Heavy engineering, particularly welding, — the “think big” energy projects were said to have provided a good basis of skills for work on the modules which make up Anzac ships. Taranaki and Canterbury were well placed for engineering contracts, he said. “Christchurch will get a lot of work out of this.” 0 Communications equipment, — this would probably be limited to systems less sophisticated than those demanded for weapon control, he said. • Computer equipment — This was unlikely to include combat systems, but there were hardware and software opportunities. 0 Engine maintenance — Air New Zealand already services Australian military aircraft and warship engines. Dr Mclntosh said wide scope also existed for New Zealand manufacturers in the less high-technology contracts running to hundreds of millions of dollars. “So long as you get the quality and specification systems you’re in good shape,” he said. He ruled out the possibilty of Australian manufacturers gaining preference. “In the defence game if you put in a better, lower-priced tender, you will win — there’s no question about that,” he said. Dr Mclntosh said New Zealand’s wage and exchange rates stood it in a very favourable position to win Australian defence contracts.

“If your exchange rate keeps going the way you are, you’ll get the lot,” he said.