The army went against advice and spent $590,000 on bullets that ended up being useless.

It has now resold more than a million rounds of the rifle ammunition at a loss of $240,000 – sparking a warning from the defence minister to smarten up its contracting systems.

The stock of 5.56mm ball ammunition was bought by the army even though the manufacturer advised it was not fit for use in the army's standard-issue Steyr rifles.

Army spokesman Kristian Dunne said the ammunition was bought for use on the Ardmore range, south of Auckland.

The reduced range of the bullets – compared with the standard Steyr rounds – overcame the danger that a ricochet would fall outside the safety zone surrounding the range.

The bullets had worked well in the past, but when manufacturer FN Herstal changed the alloy content they could no longer be fired accurately because the bullets disintegrated as they came out of the barrel, Major Dunne said.

Defence Force chief Lieutenant General Jerry Mateparae said the army sold 1,284,220 rounds of ammunition rather than destroy it.

Eight New Zealand licensed ammunition dealers were invited to tender and Gun City in Christchurch was successful with a bid "in the $300,000 to $350,000 band".

Defence Minister Wayne Mapp said while the army's decision to sell the ammunition was appropriate and the best way to minimise the cost to the taxpayer, "this is not a good situation and I have instructed the Defence Force to improve its contracting systems".

Gun City director David Tipple said he had sold a large quantity of the ammunition to a United States wholesaler and kept the rest.

The Defence Force has long been plagued with troubled acquisitions. Most recently it has faced delays with the navy's Project Protector ships and upgrades to the air force's Hercules and Orion aircraft.

- The Dominion Post

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