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Strategic Defence

Defence Procurements- Time For Radical Reforms
By Major General Mrinal Suman, April 2011 [[email protected]]

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Defence Procurement Procedure - 2008 (DPP-2008)  came into effect on 01 September 2008 and is due for biennial review in Sep  2010, under the aegis of the Defence Procurement Board. DPP has undergone  reviews at regular periodicity. Surprisingly, every review has contributed in  making the procedure more cumbersome and unworkable. In the name of reforms,  bureaucratic stranglehold has been strengthened.

A number of discussions, brain-storming  sessions and seminars are being conducted to generate ideas for streamlining  the procedure. Unfortunately, most of these activities are being carried out by  think tanks under the Government tutelage. No new ideas are likely to be  generated as the think tanks have to toe the official line for continued  funding and job security. As has been the practice, all stakeholders would  resist major reforms. Their sole aim would be to safeguard their turf, lest  their clout gets diminished. Unless the Ministry of Defence (MoD) can break  free of past shackles, the procedure is destined to undergo a few insignificant  cosmetic changes only.

The  stated aim of DPP is to – “ensure expeditious procurement of the approved  requirements of the Armed Forces in terms of capabilities sought and time frame  prescribed, by optimally utilising the allocated budgetary resources”.  Additionally, the goal of achieving self-reliance in defence equipment is to be  kept in mind. Unfortunately, not a single objective has been achieved to date.  Optimum utilisation of the allocated budgetary resources is still a far cry –  unexpended funds get surrendered and costs of contracted deals get doubled.  Worse, instead of achieving self-reliance in defence equipment, our imports are  increasing at an alarming pace. In other words, DPP has been a total failure  and it is time radical reforms are undertaken to stem the current drift.
Five measures are suggested hereunder to  simplify and streamline the procedure for expeditious processing of procurement  proposals.

1.  Reduction in the Multitude of Categories
Categorisation of procurement proposals  specifies the route chosen for their further progression. DPP-2002 had  specified three categories for the purpose - ‘Buy’, ‘Buy and Make’ and ‘Make’.  Whereas ‘Buy’ means outright purchase of the complete requirement; ‘Buy and  Make’ implies purchase of part requirement from a foreign vendor and production  of the balance quantity under licence in India; and ‘Make’ denotes indigenous  development of the equipment to meet the complete requirement. With every  revision of DPP, the number of categories has increased – presently there are seven  categories – creating utter confusion and complicating the procedure. 

‘Make  (High Tech)’ category, introduced in 2006 by splitting the erstwhile ‘Make’  category has already proved a total failure. Over three years have passed and  not a single case has made any worthwhile progress. Similarly, the newly  introduced ‘Buy and Make (Indian)’ category is full of contradictions and is  doomed to be a non-starter. If an Indian company develops a system, either  through its own developmental work or through collaboration with a foreign  producer, the question of buy and make does not arise at all. It will be a simple  case of ‘Buy (Indian)’.   

The illustration  below shows commonality of a number of categories.


Illustration 1: Similar Categories that Should  be Merged

It can be seen that all the above four  categories are essentially the same except for the selection process of vendors.  In the case of ‘Buy (Indian)’, ‘Make (Low-tech)’ and ‘Buy and Make (Indian)’,  vendors are selected by SHQ/Acquisition Wing. In the case of ‘Make (High-tech)’  cases, two production entities are selected by the Defence Production Board  from the list suggested by the concerned Integrated Project Management Team (IPMT).  All the above categories can be conveniently amalgamated into ‘Buy (Indian)’,  albeit with flexibility in fixing minimum indigenous content on case to case  basis.

Consequently, there should be only four  categories – ‘Buy (Global)’, ‘Buy (Indian)’, ‘Buy and Make’ and ‘Make (DRDO)’. Scope  of ‘Make (DRDO)’ should be enlarged to include development of high technology  complex systems.

2.  Delegation of Powers
Currently,  MoD is controlling every stage of the procurement procedure. Need for repeated  reference to MoD even for innocuous matters is proving most frustrating and  time consuming. As no decision making powers have been delegated, Headquarters  Integrated Defence Staff (HQ IDS) and Service Headquarters (SHQ) have been  reduced to doing secretarial work for MoD. For example, even the report of the  Technical Evaluation Committee (TEC), prepared entirely on the basis of  unsubstantiated assertions made by vendors in their technical proposals, is  required to be approved by MoD. As it carries limited value, MoD should have  delegated its approval and saved months of time.

HQ  IDS possesses considerable capability to assume additional responsibility.  After the issuance of Request for Proposals, the procurement procedure mandates  two stage evaluation of competing equipment – technical and commercial. Only  technically successful vendors participate in commercial evaluation. Technical  evaluation is a purely user oriented activity and MoD has little to contribute  as most functionaries in MoD do not possess even elementary knowledge of  defence equipment or its exploitation in operations. Therefore, the complete  gamut of technical evaluation should be delegated to the armed forces.

After opening technical proposals on the  due date, MoD should hand them over to HQ IDS for undertaking technical  evaluation as per the methodology given upfront in Request for Proposals (RFP).  As hitherto fore, SHQ should continue to prepare TEC Report, carry out field  trials to validate performance claims and prepare Staff Evaluation Report.  However, power to approve TEC Report and Staff Evaluation Report should rest  with HQ IDS. As MoD approves ground rules for field trials and their inclusion  in RFP, it should scrupulously resist temptation to meddle in technical  evaluation process.

Additionally,  the role of Defence (Finance) should be limited to vetting of RFP and  participation in commercial evaluation proceedings. The current practice of  frequent reference to Defence (Finance) is one of the primary reasons for the failure  of the procurement regime to deliver. Defence (Finance) functionaries contribute  little as they possess no competence in the field of defence economics and are  thus incapable of rendering any worthwhile advice. They are, in fact, the  biggest impediment in smooth and expeditious progressing of cases.


Illustration 2: Flow Chart Showing Suggested Delegation of Responsibility

As  shown in Illustration 2 above, the responsibility for determining vendors whose  equipment is fully SQR-compliant and considered fit for induction into service  should be assigned to the user Service HQ, albeit under the overall guidance of  HQ IDS. Once technically acceptable vendors are identified, the most critical  and sensitive process of commercial evaluation should be undertaken by MoD, as is  being done at present.

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