14 Dec 2017

Govt to keep contractor despite soaring cost

6:03 am on 14 December 2017

The government will stick with the contractor upgrading two of the navy's frigates despite the costs going tens of millions of dollars over budget.

The HMNZS Te Kaha out at sea with a helicopter flying above

The HMNZS Te Kaha at sea. Photo: NZDF

The project has run into trouble on several occasions, and is now estimated to cost $639 million.

The previous National government admitted last year the upgrade would cost $100m more than budgeted. Earlier this year the Treasury warned careful management was needed after the cost went up again.

National MP and former defence minister Gerry Brownlee said his government had not been prepared to pay that much for the frigates.

He said the National government was not happy with the Canadian company earmarked to do the work, Lockheed Martin, and had started to look elsewhere.

"To spend that much money for something that might only last another 10 years, you do have to be very prudent.

"So we were looking at alternative options. We had given Lockheed Martin the opportunity to re-price. I don't know they've done a lot about that. Quite clearly they've managed to convince the new minister they are the only crowd in the world who can do this stuff," Mr Brownlee said.

Defence Minister Ron Mark said there was no evidence the National government had been searching for a new contractor.

The delays had gone on for too long and he had no choice but to stick with Lockheed Martin Canada, he said.

"This project was signed off to happen in 2008. It's now 2017. What is the National Party suggesting? That we wait another nine years and dither and go in the hope we might find another tenderer?"

Mr Mark said the government had discovered a range of overspending across several ministries, and there may be more in the defence portfolio.

"It was not my dream to walk into my portfolio and the first paper I have to front to Cabinet, the Prime Minister, is a paper telling everyone I have a $148m blow out in a project."

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