Cost-cutter's cleaver leaves deep wounds

21:28, Feb 02 2013

Not quite so fast, Minister.

To some, it might be convenient to dismiss a highly critical report into the civilianisation of the New Zealand Defence Force as "old news", as Minister of Defence Dr Jonathan Coleman did on the radio late last week; to others, the report and its revelations are viscerally instructive.

If you want to know how this Government got itself into such a mess over the Novopay debacle, a system which even Minister of Everything Steven Joyce now describes as a dog "with a few fleas" - and which requires ministerial and technical inquiries to sort; if you want to know how it almost destroyed this country's diplomatic culture and capabilities; how it is routinely and determinedly unpicking the weave of New Zealand social fabric with its continued restructurings and public sector cost-cutting - then the auditor-general's report is a compelling case study.

But first, a little of the backstory. In September 2010, the Government told NZDF to reduce its costs so money could be redistributed; more specifically it sought to save $350 million to $400m in annually recurring savings by 2014-2015, enhance frontline capabilities, and maintain specified outputs.

A significant initiative within this was the "civilianisation" project: it would convert soldiers in logistics, training and administrative functions into civilians to save money which would then, theoretically, be put back into frontline staff and operations.

As the auditor-general's report points out, the NZDF committed to converting 1400 military jobs into civilian positions. However its first mistake was doing so without knowing how many military positions it would need from 2015. NZDF projected the review would save $20.5m a year by 2014-2015. The auditor-general's office estimated savings of $14.2m in total, considerably less than planned.


All three arms of the Defence Force raised concerns at the proposed pace of the changes and the methodology employed. For example, the army said that it was concerned that its reductions were going to "significantly impact on its ability to sustain operations . . . "

Military staff targeted for possible discharge were to be categorised as having "low, moderate or high commitment to service" regardless, one suspects, of what an objective assessment might show. The report cites an internal NZDF document quoting navy staff: "[We] tried to reword the [discharge] letters when we got them as we were shocked at their obviously controversial and unfeeling tone. We were told in no uncertain terms we were not to alter the 'template' . . . "

In a 2011 briefing for the incoming minister of defence, NZDF stated: "The civilianisation process has inevitably impacted on morale, leading to staff retention issues and associated costs and risks from lost expertise." The report cites that in 2011-2012, the navy's inshore patrol vessels sailed 397 days instead of 534 to 590 sea days, essentially because of a staff shortages.

In its conclusions the AG's report not only says the savings of the civilianisation project were significantly overstated, it points to its poor design, stating: "NZDF did not know how many civilian staff it needed and lacked a workforce strategy." It says that "in deciding quickly to implement the civilianisation project . . . the effects should have been addressed much earlier, when those who had been asked to comment on the design of the project expressed concerns".

In the restrained language of public sector officialdom, the report's overall conclusion that the project "has had limited success in terms of the targets aimed for by NZDF", is a damning indictment.

What the report does not concern itself with, quite rightly, is the politics of all this. This is how it works: Government dictates the policy and instructs officials to make it work; neutral public sector analysts who raise objections are routinely sidelined or find themselves out of work.

In the politically motivated drive to "cut through", and regardless of repeatedly flagged potential consequences, the opinions of other experts are frequently dismissed. This is the arrogance of power and when allied to the ambition and zeal of that new class of bureaucratic acolyte, the change manager, the consequences can be disastrous.

As is the case of the civilianisation project - and most likely Novopay, not to mention the near- calamity with the Ministry of Foreign Affairs and Trade restructurings - typically, when hurried, design is flawed, goals and savings overstated, warnings and advice ignored, and implementation prosecuted with all the subtlety of the butcher's cleaver.

The results: savings not achieved, other targets not met, destruction of morale, and the inevitable necessity for remedial "work" - costing millions - to undo the damage.

Old news? Enough already.

Sunday Star Times