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Request for Proposal A Crucial Stage in Acquisition Programmes

The delay in defence acquisition has apparent consequences and certainly not implausible. The conflict between 'process' and 'procedure' needs to be resolved and responsibility fixed.

It is axiomatic that the defence acquisition process in India is painfully slow. It is more deadly than the game of snakes and ladder in which a fortuitous throw of dice could bring you back to the starting point from the vicinity of the finishing line. In the business of defence acquisitions you could be back to the starting point even after you have crossed the finishing line. The on-going saga of the VVIP Helicopters is a case in point.

The consequences are quite apparent. The long time it takes to acquire a platform, equipment or weapon system could keep the armed forces deprived of the capability they desperately need or it could lead to unconscionable delay in upgradation/life extension of legacy systems. The jinx on procurement of artillery guns is a manifestation of this. The long procurement process could result in time and cost over runs. The Scorpene submarine construction project being a burning example. It is not uncommon to hear the view that it takes so long to procure a system that by the time it is inducted the technology becomes outdated. Whatever be the truth behind this assertion, it is certainly not implausible.

While these consequences are quite apparent, there is another significant implication of the long-drawn out process of defence acquisitions in India. On the one hand, it makes the procedures appear more inefficient than they actually are and, on the other, introduces an element of inefficiency in utilization of the manpower engaged in the acquisition process.

Conceptually, a distinction needs to be made between the 'procedure' and the 'process' of defence acquisition. The procedure, as laid down in successive versions of the Defence Procurement Procedure (DPP), envisages a time-frame for acquisition ranging from a minimum of 80 weeks in multi-vendor cases to a maximum of 117 weeks in resultant vendor cases. Though this is supposed to be a 'proposed' timeline, it is expected to be adhered to, unless there are reasons to believe that this will not be possible, in which case a revised timeline is required to be indicated in the Statement of Case (SoC) for obtaining the 'Acceptance of Necessity' (AoN).

While this is arguably not an unnecessarily stretched out time line, it is followed only in breach. This is so because the 'process' is such that it takes longer than what it should take as per the proposed timeline to cross each stage in the prescribed procurement 'procedure'.

Let us take, for example, the very first step required to be taken as per the procedure after the AoN. As per the timeline given in DPP 2013, the draft Request for Proposal (RFP) is required to be initiated within four weeks of the AoN for collegiate vetting in the Ministry of Defence (MoD) and the vetted RFP is required to be issued within the next four weeks. This implies that the RFP should normally be issued within eight weeks of the AoN. Nothing could be farther away from reality than the expectation that the RFP would normally get issued within eight weeks of the AoN. As a matter of fact, deposing before the Standing Committee on Defence in 2012, the then Defence Secretary had stated that in respect of one of the services it took, on an average, more than nine months to formulate an RFP against the expected timeframe of four weeks. (See 15th Report of the Standing Committee of the 15th Lok Sabha.)

That the MoD itself did not and continues not to believe in the viability of this timeline is apparent from the fact that, as a matter of rule, the AoN continues to be valid for a much longer time during which the RFP could be issued. As per paragraph 20 of DPP 2011, the AoN used to lapse in all cases where the RFP was not issued within two years from the time the AoN was accorded. This period has been brought down to one year by DPP 2013 but it is still way beyond the timeline proposed in the DPP for issuing the RFP. It clearly implies that the MoD recognizes the difficulty in issuing the RFP within eight or even eighteen, weeks of the AoN.

This is where the 'process' comes into conflict with the 'procedure'. Procedurally, issuing of the RFP is not a dispensable step in normal acquisition cases. But the process of issuing the RFP is such that it upsets the proposed timeline at the very initial stage. This situation has come about because not much thought has been given to streamline the process required to be followed at each stage of the acquisition procedure.

If the RFP is to be initiated within four weeks of AoN for collegiate vetting and issued within the next four weeks, the process of initiation and vetting of RFPs must support this timeline but, in reality, it does not. Although RFP format is given in the DPP, initiation of an RFP is not a simple cut and paste job the blanks have to be filled in and, at times, the terms and conditions have to be tweaked to meet the specific requirements of a case. The draft RFPs are prepared by officers in the Service Headquarters (SHQ) who are, at times, drawn straight from the field and put on the staff duties. Since there is no specialized cell for drafting the RFPs on the basis of the AoN, the total number of officers carrying out this and other related jobs in all the SHQs put together, is anybody's guess.

This militates against uniformity in preparation of the draft RFPs and conformity with the procedural requirements. More importantly, certain issues, such as those related to maintenance and transfer of technology, could come up for decision while drafting the RFP but the manner in which those decisions are to be taken is not prescribed. There might even be some amount of reluctance to take hard decisions. This, in turn, could cause problems at the vetting stage. Once in a while vetting, or even initiation of the RFP gets stuck for want of the approved copy of the minutes of the meeting in which it was decided to accord the AoN.

MoD itself has not given much thought to streamline the process required to be followed at each stage of the acquisition procedure.

Since the entire process is driven by the service officers at the SHQs and the Technical Managers in the Capital Acquisition Wing (who are also service officers), the problem is exacerbated because of their short tenures.

In fact, little attention has been paid to capacity building in the SHQs. A proposal mooted more than a year back to start a Defence Acquisition Institute as a part of the Institute for Defence Studies and Analyses at New Delhi for training the personnel in defence acquisition has been gathering dust in the MoD. In any case, deployment of a large number of service officers on desk jobs which are not germane to their career as soldiers is arguably not the best way of managing either acquisitions or the defence of India.

This RFP business is just the tip of the iceberg. The same problems manifest themselves at practically all the subsequent stages in every procurement programme. But RFP is important as it puts the further processes in a straightjacket. Once something is written in the RFP it gets cast in stone. No one can deviate from it. Many acquisition cases fall through because of the RFP related problems. These problems could arise because of the Qualitative Requirements (QRs) or some ambiguity in the RFP. As per 15th report of the Standing Committee on Defence (15th Lok Sabha), in a period of 18 months starting September 1, 2010, as many as 41 RFPs of a particular service fell through because of the QR-related problems. (See the op cit report.) As regards the ambiguities in the RFP, no such data is available but, going by the media reports, some of the problems being faced in the MMRCA negotiations could be traced back to the ambiguities in the RFP.

The speed and ease with which a procurement programme would go through at the post-AoN stage depends on how astutely the RFP had been drafted. Conversely, any shortcoming at this stage could be disastrous. A defect or a shortcoming in the RFP is akin to the manufacturing defect in any equipment. The delay in issuing an RFP, or withdrawing an otherwise perfect RFP, has the same effect. Consider the following:

(a) The RFP is not issued within a year of the AoN - the case has to be re-initiated for a fresh AoN by providing justification for not issuing the RFP in time. The clock is set back by several years. The time, energy and money spent on processing the case earlier goes down the drain. Fresh effort has to be made. The armed forces remain deprived of what they needed. The chances are that the acquisition will eventually cost more.

(b) A defective RFP is issued, the responses are likely to be conditional; cost comparison becomes difficult; approval may be needed for deviating from the terms of the RFP (a near impossible job in itself); consequently, the case gets stuck; the RFP is withdrawn leading to the same result as in the case of RFPs not issued within a year of the AoN.

Ironically, a perfect RFP, though standing a better chance of success, could also derail an acquisition programme at later stages because of a variety of other reasons leading to similar consequences as in the case of defective RFPs.

The speed and ease with which a procurement programme would go through at the post-AoN stage depends on how astutely the RFP had been drafted.

One has to look at this problem from the point of the suppliers also. The QRs which are formulated on the basis of the Request for Information (RFI) are an essential part of the RFP. Some parts of the QRs may become outdated by the time the RFP is issued if there is too much of a time lag between the RFI and the RFP stages. Or some technological advancement might have happened during this period. This could make it difficult for a supplier to submit an unconditional bid that is RFP compliant. A defective RFP would, in any case, force the supplier to submit a conditional response, thereby running the risk of being declared RFP non-compliant.

A long time taken by the MoD after submission of bids could make it impossible for the bidders to hold the quoted price (in fixed price tenders). It becomes a Catch-22 situation for them. The contract becomes less and less attractive because of the inability to hold the price (especially if there is no cushion against exchange rate variation) and, at the same time, they cannot just walk away from it without having to write off all the money they might have spent on responding to the RFP.

Though this is not the only stage in the acquisition process that warrants greater attention, the RFP stage is important as it sets the stage for the entire post-AoN processing of the case. The success of an acquisition programme is largely dependent on the quality of the RFP. There is also a need for MoD to assess whether the outcomes are commensurate with the resources both financial and manpower employed for handling the acquisition processes.

The author Mr Amit Cowshish is former Financial advisor Acquisition and Additional Secretary and Member Defence Procurement Board MoD

Amit Cowshish

Amit Cowshish

 

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