7. Defence—Anzac Frigate System Upgrade CostDARROCH BALL (NZ First) to the Minister of DefenceDefence—Anzac Frigate System Upgrade Cost7. DARROCH BALL (NZ First) to the Minister of Defence: What reports has he received on cost pressures within Defence projects?Hon RON MARK (Minister of Defence): Thank you Mr Speaker. I can inform the House that unfortunately as soon as I took office as Minister of Defence I received a report that the Anzac frigate system's upgrade project was experiencing a cost blowout. Costs in the project had increased to a point that the project was facing a budget shortfall of $148 million—Hon Members: How much?Hon RON MARK: $148 million. This represented an increase of 30 percent on the project budget of $491 million.Darroch Ball: What were the reasons for this cost overrun? [Interruption]Mr SPEAKER: And the National Party have just lost a supplementary. [Hon Ron Mark stands] No—sorry I couldn't even hear the supplementary.Darroch Ball: What were the reasons for this cost overrun?Hon RON MARK: Cost overruns primarily occurred due to project management mistakes in estimating the cost of the installation of equipment and delays resolving the issue which made an unacceptable situation worse. The previous Government was first informed of cost pressures within the project in September 2016—Hon Gerry Brownlee: That's right. We said Go away."Hon RON MARK: —2016 Mr Brownlee—when additional costs were first estimated at between $65 million and $74 million. And for a year the previous Government did not act to resolve the issue despite multiple opportunities to do so and costs continuing to rise. Hon Gerry Brownlee: Irresponsible to pay for that.Hon RON MARK: This Mr Brownlee is not the hallmark of a fiscally responsible Government as it always claimed that it was.Darroch Ball: When was a final fixed firm price received for the installation phase of the project?Hon RON MARK: Good question. Lockheed Martin Canada provided a fixed firm-priced contract to that Government in June 2017—some three months out from the election. And to my absolute disbelief they did nothing—nothing nothing. Because the previous Government did not act on the fixed firm price the contract offer had to be renegotiated. This has cost the taxpayer a further $8 million and has caused a delay of seven months for the introduction of the much-needed systems for the Anzac frigates.Darroch Ball: What has the Minister done to resolve this cost blow-out?Hon RON MARK: As soon as I received this information I acted. On Monday Cabinet agreed to provide the project with the funding it requires through a cost-neutral transfer from funds allocated to defence in Budget 2017. Because of the coalition's commitment to fiscal discipline defence has had to accept a manageable but real trade-off in capability because National allowed the cost to blow out. As we are experiencing costs across portfolios this is but the worst example so far of this Government opening the books and finding runaway costs and fiscal holes and that the previous Government was clearly asleep at the helm.Darroch Ball: What reports has he received on historical project management capacity within the Ministry of Defence?Hon RON MARK: Despite managing projects worth billions of dollars of taxpayers' money the Ministry of Defence was massively under-resourced up until 2014. This was despite multiple reviews signalling that greater capacity was needed. Behind a facade of capacity lay a financial risk and the previous Government ignored it until too late to avoid the significant errors made in the management of this project."