Defence of the realm

by Jonathan Underhill / 26 November, 2015
Security fears bring a warm glow to firms supplying military hardware.
Money Main
Beretta Defense Technologies had several weapons on display that would have looked at home on a Terminator movie.


Celebrity MC Kerre McIvor tried her best to warm up the delegates to the 18th defence industry forum in Wellington, who were able to gain entrance to the TSB Arena only because of a strong police presence. We are all “very fortunate to live in a country where people can make their feelings known without getting blown up”, she said of the peace protesters who kept up a steady and penetrating racket outside the venue during the opening speeches.

It was a tough audience: the 550 delegates from 169 companies, Ministry of Defence, New Zealand Defence Force and assorted Government officials barely broke a smile when McIvor admitted to a foot in each camp – her aunt was a peace-activist nun who protested for the rights of Palestinians, and another relative was in the military.

Her thanks went to the sponsors, especially main sponsor Lockheed Martin, one of the military’s “prime” contractors from which local companies could expect to win some work.

The forum is closed to the public, so ­protesters could only imagine the cluster bombs, bunker busters, napalm, land mines, nuclear warheads and precision-guided, drone-delivered missiles being touted at the trade fair that runs alongside.

Those hoping for a weapons-fest would have been disappointed. New York Stock Exchange-listed Lockheed Martin makes the Black Hawk helicopter, F-16, F-22 and F-35 fighters, ballistic missiles the Trident II and Patriot (Pac-3), and the Minuteman III intercontinental ballistic missile. But its services to the NZ Defence Force are mainly provided by its mission systems, training, maintenance and overhaul divisions.

As Charles Lott, the Defence Force’s chief of joint defence services, told delegates, the New Zealand military is a diversified group but it is too small to work alone, given rapid ­technology change and the need to maintain an effective reach from the equator to Antarctica. The use of lethal force is supplemented by many other tasks: search and rescue, protecting trade routes and guarding against terrorists to name a few.

“Essentially, the New Zealand Defence Force runs its own small shipping line, a large trucking company and international logistics firm, a small airline, a small police force, a mid-sized security firm and an army,” Lott says.

But that’s enough to have created its own ecosystem. Defence has an annual budget of more than $2 billion – “a significant opportunity for New Zealand companies directly or through prime or lead ­contractors”, says Bernie Diver, chair of the Defence Industry Association, which organised the forum.

The association estimates, based on Statistics NZ data, that defence spending sustains about 2500 full-time jobs, at least $125 million in wages and $60 million in profits.

FOLLOW THE MONEY


The defence industry is basking in something of a warm embrace since the release a year ago of “Optimising New Zealand Industry Involvement in the New Zealand Defence Sector”, a Ministry of Defence White Paper prepared by an expert advisory group of Government officials and industry representatives.

The paper notes Defence is inclined to be risk-averse in capital spending, preferring to buy off-the-shelf capabilities from multinational ­suppliers such as Lockheed Martin.

Defence capital expenditure is forecast to average $500 million a year between 2015 and 2018, about double the average spending for 2009-2013. About a third of that spending involved New Zealand suppliers in 2013. The White Paper says this is an area of “significant opportunity for optimising New Zealand industry involvement” in partnership or as subcontractors to prime contractors in areas such as supply chain and whole-of-life support for military hardware.

It made three recommendations – develop a “sophisticated level of whole-of-life costing” in defence capability management by December 2016; improve Defence procurement processes and practices to increase industry involvement by the end of this year; and bolster Defence engagement, information sharing and collaboration with the local defence industry.

That explains why Lockheed Martin’s presentation to the forum was mainly advice to small New Zealand companies on how to do business with big firms, including being patient and having “flawless execution”.

The company, whose 2014 sales totalled US$45.6 billion, is sharing the love. In March it made a strategic (read small) investment in Rocket Lab, the Kiwi firm building a low-cost rocket to deliver satellites into orbit.

It is also backing Northland Spars and Rigging, a small Opua firm that has done work for the New Zealand Navy as a partner in an Australian Navy tender. Northland Spars won the Ministry of Defence Excellence Award for design in 2013. And Lockheed Martin gave a contract to a small group of ­quantum ­mathematicians at Massey and Auckland universities related to the verification of software.

TOYS FOR BOYS


For the weapons nerd at the Wellington forum, there were some bright spots. Beretta Defense Technologies, maker of sniper and assault rifles and semi-automatic combat shotguns, had several weapons on display that would have looked at home on a Terminator movie.

Australian Munitions, a unit of Paris-based Thales Group and a key supplier of explosive ordnance to the Australian Defence Force, had a range of ammunition on show, although none of the missiles, grenades or rockets advertised on its website.

Mt Maunganui firm Oceania Defence had a brochure for firearm suppressors and Tactical Solutions, an Albany, Auckland, equipment and apparel supplier, although not a purveyor of armaments, had a display of gear ready for tomorrow’s front line.

That included a drone-detector system that may be of interest to jails worried about contraband being dropped into exercise yards, or embassies worried about the risk of more deadly payloads.

Tactical Solutions also had a heartbeat monitor from Geovox Security, a device so sensitive it can detect someone hiding in a large multi-axle truck. Among its sales has been L-3 brand X-ray screening systems outside courtrooms for the Ministry of Justice.

The company’s David Wright, who has a background in the UK military and police, recalls wearing “generation-one body armour in the mid-1990s that was horrible but saved lives”.

Since then, everything from footwear to eye protection “has evolved unbelievably,” he says.

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