Scoop Election 08: edited by Gordon Campbell

On Defence’s failed policy of “civilianisation”

March 9th, 2012

One of the tried and true maxims of management is that business hates uncertainty – because, don’t you know, business can’t be done in a climate where the rules keep on changing, and where CEOs lack a firm foundation on which to base their decisions.

Somehow, this wisdom is rarely extended to the work force, who – evidently – are expected to become ever more productive in a climate of total insecurity, where the rules and their roles keep on being changed, where their jobs and career paths are constantly being restructured and where casualisation and contracting out ensures there is little capacity to make any reliable plans for the future. CEOs, it seems, require certainty – but everyone else is expected to thrive on its exact opposite.

The latest example of this crackpot ideology has been unfolding in the country’s Defence Force which have been put through a process of “civilianisation” and contracting out, ever since the last Defence White Paper targeted the need for savings of $355 million by 2014/2015. The result has now resulted in a form of mutiny by Defence chiefs, who appear to have unilaterally called a halt to the policy that has been imposed on them, and which they have had to inflict on the troops in uniform:

Military bosses are stopping more redundancies because the first stage of reforms was so damaging and traumatic that staff morale slumped to its lowest level, and the Defence Force struggled to retain its best people….But Vice Chief of the Defence Force, Rear Admiral Jack Steer, appears to have told politicians before telling Defence Minister Jonathan Coleman, who says final decisions have not been made.

Yesterday Rear Admiral Jack Steer appeared before a parliamentary select committee and bluntly described the impact of “civilianisation”, which had seen about 300 redundancies of uniformed staff and about 100 rehired in civilian roles. Rear Admiral Steer said sending 300 redundancy letters was “one of the hardest things we’ve done in a very long time”, and staff were suffering from “change fatigue”.

“It was damaging because our people felt we let them down, that we weren’t looking after them, that we broke the social contract.” The attrition rate was 19 per cent – 685 roles were vacated between August 2011 and January 2012 – and staff morale was at its lowest since the Defence Force surveys began eight years ago.

The foolhardiness of this “civilianisation” policy is probably obvious to everyone but Treasury – who appears to think that the nation’s defence forces can be hired, trained and fired with the same gay abandon as new recruits in the fast food industry. Not only do the promised savings never eventuate – or miraculously become only “aspirational” when the shortfall becomes apparent – but there is collateral damage everywhere else in the organization. Fear is not a good motivator for productivity, and a hierarchical organization based on trust and respect for those in command is particularly vulnerable when the troops are treated as entirely disposable.

As in any other organization subject to the false economies of contracting, out, the process also “hollows out” the in-house experience and expertise. It renders the organization prone to being price-gouged by the contractors – often they are the same people who have just been fired – who have every opportunity and added motivation now to charge the earth for their scarce skills. The Defence White Paper recognised this likelihood. Eighteen months ago, Scoop described the cost savings/civilianisation programme, and warned against the problems now becoming evident:

Over the next 5-10 years at least, the White Paper assumes that the extra needs of the defence forces are to be funded mainly by internal cost savings. In line with the Key government’s usual rhetoric, resources are to be shifted from to the front lines, from support staff – magically, without any loss of quality in front line performance, or in the subsequent counselling and care of deployed troops. Where possible, this will be achieved via a process of civilianization of support staff, and by contracting out – which the White Paper optimistically says (6.41) will be cheaper.

Some of the hundreds of millions of dollars in annual savings projected (8.16) by the White Paper look both arbitrary – a suspiciously neat 10% can be shaved off the $150 million cost of training, the report jauntily assumes – and overly optimistic. Especially since $84 million in ‘ quick win’ savings (see 8.10) have already been made. In a poignant paragraph, the armed forces are advised to ‘manage’ the recruitment of good prospects who are failing the literacy and numeracy tests that are currently required.

Elsewhere, the possible impact of employing civilians on military career structures and retention is barely addressed. It is simply taken on faith that military personnel will want to move in and out of military service over the course of their career. Contracting out, it concedes in an aside (6.49) will increase the possibility of price gouging by contractors. Not to worry about that, though.

Time will tell (come the Defence Review in 2015) if this privatization process has saved as much money as the White Paper proposes. Certainly, some of its recommendations will increase the paperwork – the demands for supportive documentation for every single major purchase for instance, and the addition of a specific manager to manage the interface between the Ministry and the NZDF on each purchase, do not look consistent with the drive to prune back bureaucracy.

The relevant parts of the White Paper were remarkable for bringing up the dangers of civilianisation, but then pressing on regardless. Look at paras
6.40 and 6.41 for instance.

6.40. Personnel are the core capability of the NZDF. They are also a major driver of costs. This White Paper has identified a number of initiatives which are intended to reinforce the importance of those working for the NZDF while also looking at ways to shift resources to where they are needed most.

Hey, people in uniform are important, but they cost money :

41. By one calculation, those in uniform earn additional benefits worth on average about $18,50016 per year for all ranks. As such, the principle applied by the NZDF is that any position that does not deploy, or that does not need to be filled by a military specialist, or that is not providing operational respite, should be filled by a civilian, because they are less expensive.

Oh, the humanity – but hey, getting rid of them will be cheaper ! That seems to have been the prevailing ethos. And the paragraph on price gouging (6.49) is worth reading in the light of yesterday’s revelations by Read Admiral Steer:

When outsourcing any function, it will be essential to retain enough in-house expertise to manage contracts and invigilate performance. It will also be prudent to avoid becoming so dependent on any one contractor that the NZDF is strategically exposed to either service interruption or price gouging.

The “hollowing out” of in-house expertise is also well under way. Yesterday, Read Admiral Steer revealed that during the restructure, two navy officers each pocketed $50,000 in redundancy payouts and were then rehired in the same roles, as contractors. Thus, the chickens of casualisation and contracting out are coming home to roost. Not only in the Defence Force, but on the docks in Auckland.

Until bureaucrats – and their masters in central and local government – realise that the work force cannot be treated as disposable cost units but as people with their own needs and desires for security and the capacity to plan for the future, similarly“traumatic” and needlessly painful disasters will keep on occurring.


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    1. 4 Responses to “On Defence’s failed policy of “civilianisation””

    2. By Paul on Mar 10, 2012 | Reply

      One wonders WHY Treasury is given such an elevated status – especially given their recent record.
      How about some radical change and cost savings in that arena. Perhaps make it an agency of the Ministry of Economic Development.

    3. By Robert Miles on Mar 13, 2012 | Reply

      The National Governments shortsighted and rather stingy cuts to Foreign Affairs and Defence are based on a lack of, insight and political courage. Fundamentally Bill English and Stephen Joyce believe cuts in such areas are of least interest to the public.
      Real cuts in public spending would obviously involve reshaing hospitals, health and social service delivery and the sort of restructing of the Police being conducted by the Britsh Conservative Government. However given that Ryall and English have attempted to restore the power of the traditional powers in medicine , ie the specialists and to defer to the opinions of the ordinary public however wrong and illinformed there is almost no chance of fundamental restructuring of the public services on a sensible basis even if the international bankers are called in.
      NZ Governments do not take defence and strategic foreign policy seriously, it is a low priority and defence forces are financed them for reasons of promoting employment particulary of ordinary people, supposedly to discipline them and skill train them and for trade relations and relations of Australia.
      The NZ Political and Bureaucratic class is almost devoid of any understanding of the professional class of naval and airforce officers and the role of the post 1950s RNZAF and RNZN. That is the main reason the Labour Government and Foreign Affairs bureaucracy was unable to cope or handle the 1985 nuclear ships crisis. Other than the left leaning Helen Clark they had zero understanding of the realities of modern anti submarine warfare or the role NZ forces were intended for.
      With due respect for Mr Prosser of the generally army supporting NZ First, the greatest opponents of a sophisticated RNZAF and RNZN have been the Act Party and its Parliamentary, despite their staggeringly hpocrtical attempt to be supporters of the military. As a freelance paid defence commentator in the 1980s and 1990s for the NBR and ocassionaly the Press and Timaru Herald I consistently supported the Air Forces campaign for Aermacchis , F-16s and maintenance of a strike force. If it had been possible in 2000 I would have at least continued to press in the media for the F-16’s however it ceased to be possible to do that after about March 2000, because of the personal hostility of key members of the Act party and because at that time Helen Clark made certain changes in media policy which deliberately restricted who could be a serious media paid commentator on defence to controllable elements of the professional media. It had been very much an aim of Labour to control the ability of freelancers to write seriouly on such matters and have an essentially registered system of Professional Journalists.
      In terms of the changes made to the Navy, it is true I always supported a change away from large crewed specialised anti submarine frigates of the Leander and Anzac type toward high endurance corvettes very much along the lines of what has been build in the HMNZS Otago and Wellington OPVs. However I almost always maintained that they had to be armed with a decent range of radars and a small frigate gun of the 76mm or 57mm type of the sort that is used on FFG7s, Canadian frigates, US Coastguard cutters and the new LCS. This would only have added about $40 million to the cost of each OPV. On the Orions I never commented much after the 1980s but did not share Hagars opposition to their proposed Rigel upgrade in the early 2000s and I support their continuation in service are replacement with equivalent modern maritime surveillance and a/s capability and stand off missile option.
      It would certainly have to be said that the Quigley Defence Committe of the late 1990s was very hostile to the F-16 purchase other that the Nat minority. It was the fact that the act MP and committe Chair had ridiculed the proposed F-16 purchase that made Clark appoint him as the F-16 independent reviewer in 2000. The fact Quigley then turned around and proposed a hypothetical purchase of just 12 of the Charlie Wilson F-16s was a masterly exercise in political positioning- as it was obvious that Clark would scrap them regardless.
      Territorial and Act Deputy Minister of Defence Heather Roy was never convincing as a proponent of the AirForce and F-16s and was in fact clearly determined to have the Skyhawks sold off as fast as possible. Other leading members of the Roy family expressed great hostility to me of any attempt to campaign for the maintenance of the F-16 order in early 2000 describing support for the Nat order of the planes as a useful politcal tactic in the late 1990s but not in any way to be advanced into actual operation or service.

    4. By Robert Miles on Mar 13, 2012 | Reply

      In terms of the sound and fury that drove defence feelings and approaches on the right in the 1980s and 1990s, the key point is that many conservatives and rural people believed nuclear power was the future power source of the world. I never believed that because nuclear power is not economical and in its existing forms is a modified of coal steam powered plants in which the urianium reaction drives steam turbines. Its essentially stalinist era heavy industry and to me seemed to make sense only in a country like France devoid of coal, natural gas or much solar or hydro potential. Nuclear tactical weapons were still the main and necessary anti submarine weapon in the early 1980s and even our Leanders and Orions were fundamentally made to deliver them. I exaggerated in the 84-85 nuclear debates and journalism in saying all USN escorts were nuclear armed, but they were all certainly nuclear capable including the FFG-7s and Charles Adams. If you had to sink a attacking nuclear sub, it wouldn’t matter if you damaged your own hull from shock and even the oldest converted Asroc fitted Gearings actually fired live nuclear Asrocs as a key part of the final JFK atmospheric nuclear tests in 1962 to prove they would work. All post 1962 USN frigate construction had stonger hulls to cope with shock back effects.
      In terms of the Airforce strike force their use was to maintain a high tech large airforce and train forward air controllers, infantry, frigate a/a targeting and coastguard patrol. Upgraded Hawks or Aermacchis would have been good enough

    5. By RobertM on Mar 13, 2012 | Reply

      In terms of the issue of the credibility of professional and technical opportunities in the Clark and Labour remade NZ armed forces- a much larger more viable RNZAF could have been maintained if the strike force had simply had a squadron of better engined and armed Aermacchi 339s or similar RAAF Hawks 100s types. Such aircraft would have cost a fraction of F-16s or A-4s to operate and would have been adequate to assist in training army units in air support and forward air controlling and in providing training targets for frigate guns and missiles. In my articles in the l980s and 1990s such Aermacchi and Hawks were my preference, but I did take the f-16 option seriously. The real point of the strike force is that it preserved a large independent airforce and provided a conservative social force larger , more middle class and I realised more deeply rooted in the NZ Community than the smaller and more class based Navy.
      The F-16 and FFG offer of the late 1990s by Clinton were primarily aimed at strengthening NZ support for Australian forces to encourage the Howard govt to adopt a more independent and flexible policy towardsIndonesia in terms of economic influence and foreign policy. Howard and Costello actually very much favoured the existing rapproachment with Indonesia rather than the application of more pressure.

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