AAP, The NZ government signed a contract with Australian shipbuilder Tenix for seven new ships without knowing the exact cost of maintaining them throughout their lifetimes, it was revealed.
Instead, it estimated costs to avoid the $NZ16 million ($A15 million) cost for missing a deadline set by Tenix.
Defence Minister Mark Burton on Monday released a raft of cabinet papers about the deal.
The government is facing legal action from a Dutch company which tendered unsuccessfully for the $NZ500 million ($A465.7 million) contract for the new ships.
Schelde Marinebouw BV has laid a $NZ55 million ($A51.23 million) law suit against the Ministry of Defence and Tenix, which won the contract to build the seven new ships.
It has described the tender process as fatally flawed.
The contract was signed recently for Tenix to supply a multi-role vessel to replace the ageing steam frigate HMNZS Canterbury, two offshore patrol ships and four inshore patrol craft.
The papers show the government decided not to carry out further work on “life cycle” costs and options for the fleet mix because it would have missed a deadline set by Tenix that would have upped the price.
The shipbuilder told the Ministry of Defence that its price offer remained valid until May 31 this year, after which it would rise by 3.57 per cent, or $NZ16.35 million ($A15.23 million).
The papers stated that work by officials on “issues of fleet mix options and life cycle costing” would not be completed in time.
But the minister indicated the likely outcome of the additional work would be to confirm the fleet mix offered by Tenix.
“The benefits of progressing now and purchasing the fleet proposed appear to outweigh the benefits of commissioning further work and accepting the price increase,” the papers said.
“… life cycle costs remain uncertain, but early indications are that they could be in the range of $NZ23 ($A21.4) to $NZ45 million ($A41.9 million) per annum above existing baselines,” they said.
The Ministry of Defence “clearly” identified Tenix as the preferred provider of the offshore and inshore patrol vessels, and either Tenix or Damen Schelde ADI (DSA) as preferred provider of the multi-role vessel.
“Ball Solutions, an internationally recognised authority on defence procurement activity and processes, carried out an independent verification and validation on the evaluation process and its results. They concluded that the process and results were sound,” the papers said.
They also noted “legal consequences” should any change have been made to specifications, operating costs or the tendered offer which could disadvantage unsuccessful bidders.
