New Zealand will develop a revised Defense Capability Plan to alert the defense industry to future mid-term requirements, Defense Minister Jonathan Coleman said.

The plan, which must be approved by the Cabinet, and the recent Defense Midpoint Rebalancing Review, are part of a process to ensure that the government can fund its military needs.

In particular, the DMRR "made clear what the trade-offs between funding, defense capability and defense policy would be," Coleman said in his address to the Defense Industry Association's annual conference in Wellington.

"So in simple terms, after costing all the elements of defense capability that we have and are planning to add between now and 2029-30, we have a clear picture of what defense outputs can be delivered for a given level of future funding."

The 2010 Defense White Paper set the strategic vision for the military to 2035, but the government knew it had inherited from a previous administration a long-term funding gap.

The shortfall was about $537 million in operational funding by 2021 and a $4 billion shortfall in capital funding by the mid 2020s.

Coleman said New Zealand's Defense Force has made "significant" back-office savings to alleviate the shortfall, thanks to its Savings and Redistribution Program that has reinvested savings into front-line capabilities including equipment.

These include new trucks for the army, upgraded maritime helicopters for the navy, and a significant pay raise of $45 million for military personnel in 2012. About 90 percent of military personnel had a pay increase, with the average 5.8 percent.

But Coleman said more savings must be found and details of these will be outlined in next year's government budget. Further refinements of military needs will be outlined in the next Defense White Paper, scheduled for 2015.

The goal is for the defense industry and government partnerships to better plan production and boost innovation, Coleman said.

An example is the work by the private firm Air Affairs and the government's Defense Technology Agency for development of the diver training system METRES, which has been sold to the U.S. Navy.

"This cutting edge technology will return significant revenue to the NZDF and is providing global interest for a Kiwi defense product," he said.

Another positive development for the defense industry are new government sourcing rules that came into play Oct. 1.

"The new rules promote a value-for-money approach to procurement, taking into account the total cost of ownership and other direct benefits, rather than just prioritizing the cheapest price," he said.

Businesses will receive more information about procurement opportunities and have longer to respond to tenders.

"Agencies also have been encouraged to engage with the market earlier to build relationships and stimulate competition and innovation.

"These changes will make it easier for the defense industry to do business with the government, including for smaller Kiwi [New Zealand] companies, as that is something that we welcome," Coleman said.

Coleman's affirmation that the government is committed to defense spending comes after his announcement in May that New Zealand will boost defense spending from $318 million to $583 million in fiscal 2013, thanks to a payback from austerity measures.

"In the year to July 2013 the [military] will deliver $190 million in savings after achieving $140 million in the year prior," Coleman said at the time.

While defense spending is rising, the government remains committed to keeping a tight rein on many other spending areas.

The goal of the government is to have at least a small budget surplus of $75 million by June 2015, the New Zealand Herald reported.

Net debt by June 2015 would be about $70 billion.

Recent contract signings include a $113 million deal with Germany's Rheinmetall-MAN in April for 200 new trucks to eventually replace the army's Unimog and heavier Mercedes vehicles.

The first of the 4x4s, 6x6s and 8x8s Rheinmetall-MAN vehicles recently arrived in Auckland.

New Zealand also signed a $242 million contract with Kaman Aerospace in May for the purchase of eight upgraded Seasprite naval helicopters and two spare airframes.

The first three aircraft are due to be transferred from the Kaman facility in Connecticut to New Zealand in early 2015, with all eight helicopters scheduled to be in service during 2016.