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STREAMLINING DEFENCE PROCUREMENT PROCESS

The ineffective acquisition process is hindering the industry to provide the required equipment to the Defence Services. The delay can be avoided, if the concerned authorities, at various stages, follow the timeline. Additionally, there is no accountability due to non-integration and involvement of various independent authorities in the process; therefore, it is hoped that the new DPP would tackle all these aspects.

The key purpose of all defence acquisitions is to provide the required equipment/technologies to the Defence Services in the specified/requisite timeframe and reasonably priced. Unfortunately, this has not been so in India in the past few years as most of the major procurements have got stuck in the bureaucratic tangle. Though, in some of the cases MoD may have valid reasons to hold the process of procurement, however, in number of cases, delay could have been avoided, if the concerned authorities, at various stages, had followed the timeline. The long time it takes to complete the process from the Request for Information (RFI) stage to the contract signing stage seems to be no one's interest,  as evident from the then Defence Secretary statement before the Standing Committee on Defence in 2012:

            “Now what happens is that, at every stage, there are delays. The first is the formulation of GSQRs. There are cases where the GSQRs have been formulated, re-formulated, again formulated and it takes months. Then comes framing of RFPs. Now, our procedure says that normally four weeks must be taken for formulation of RFP. I have got the figures of Army. I am sorry I am not having figures in respect of Air Force and Navy. It is just an analysis which we have to make. At an average, which we have worked out, nine months have been taken for the formulation of RFP while it should not take more than four weeks. Then, Technical Evaluation should take 12 weeks, i.e., three months. I have worked it out. The average time taken at TEC is six months. Then average time taken in GS evaluation. As per procedure, it must be from 28 to 54 weeks but at an average, it is not less than 18 months. There are cases where RFPs have been issued but have been rejected. I have a figure from 1st September 2010. As many as 41 RFPs of the Army were rejected and the reasons were faulty GSQR, stringent GSQR, faulty vendor analysis which implies that we have anticipated three vendors but only (one) responded or we may have short listed five vendors, but only two responded. Then (there) are maintenance and technology transfer issues, and other miscellaneous reasons. So, I would say that though it is an integrated procurement system, the delays are there and I cannot pinpoint who is guilty and who is not .”

           Above is a realistic statement even today. Although he conveniently forgot to add the delay caused by Ministry itself. Contract negotiations take months in some cases, years.  Obviously, there is something amiss with the process.  The situation is not very different more than 5 years after the statement was made by the Defence Secretary. These issues have been discussed and debated but continue to defy solution. What is, therefore, needed is a more incisive dissection of the entire process from the stage of GSQR formulation to signing of the contract. This should help in pinpointing the exact problems and figuring out how to fix them.

Present Process

The procurement cycle of defence equipment is unduly long. Besides years are taken by Service HQ to formulate the QR and processing through its various committees.

            The procurement procedure comprises number of stages, starting from the request for Information, formulation of the Services Qualitative Requirements (SQRs), Acceptance of Necessity (AoN); solicitation of offers; technical, field and staff evaluations; technical oversight for acquisitions; commercial negotiation; approval by the competent financial authority; and, lastly, signing of the contract.

            The entire process, according to the timeframe prescribed in DPP, should not take more than 74-114 weeks, depending on a number of factors, such as whether the final financial approval is to be accorded by the Defence Minister or the Cabinet Committee on Security (CCS). In practice, however, it takes much longer than the prescribed maximum period of 114  weeks.

Concerns

RFI to SQR Time

Incidentally, the time frame given in DPP does not include the time taken in formulation of the SQRs and journey of each procurement proposal through various committees before the AoN is accorded. If the time spent on these two activities is also taken into account, the total time taken for piloting a procurement proposal from the beginning till end would be anywhere between 3 to 5 years, if not more. This obviously is antithetical to the need for expeditious procurement of defence equipment, platforms and weapons systems that are critical for modernization of the Armed Forces.

Stages and Committees

The processes associated with each stage and numerous committees have a huge potential for improvement. The task becomes all the more difficult because of the multiplicity of committees that a proposal must pass through an incredibly large number of personnel, drawn from several agencies, participating in the deliberation of those committees. Frequent rotation of personnel involved in the procurement programmes, especially in the service headquarters, makes things more difficult. The question, therefore, is whether these stages can be done away with, or at least modified as suggested, would depend on what has been the experience so far of putting the cases through these stages. Unless, there is overwhelming empirical evidence to the contrary, such measures need to be seriously considered. This will require a certain amount of boldness in decision making but this is what 'maximum governance, minimum government' is all about.

            One possible area for reform is the multiplicity of committees. All SoCs are first taken up for consideration in the Services Capital Acquisition Plan Categorization Committee (SCAPCC), from where they go to the Services Capital Acquisition Plan Categorization Higher Committee (SCAPCHC) and finally to the Defence Procurement Board (DPB) or Defence Acquisition Council (DAC). There is also a pre-SCAPCC meeting in which the industry associations are invited to make presentation on their capability to meet the requirement.

            The possibility of reducing the number of committees needs serious consideration. It might be possible to merge SCAPCC and SCAPCHC. There is considerable overlap in the functioning of DPB and DAC. It would save a lot of time if the cases go directly from SCAPCHC to DAC with only those cases being routed through DPB where some kind of deviation from the existing procedure is required to be approved. This will also save the time in preparing the minutes and agenda papers.

Technical Evaluation

Consider the stage of technical evaluation, about 16 weeks are provided for completion and acceptance of the technical evaluation report, though, of course, it takes much longer in actual practice, in one case it is still on for 2 years. Technical evaluation is a paper exercise which involves preparation of the compliance matrix with reference to the vendor's response. It is worth considering whether the vendor could be asked to prepare a matrix showing the RFP parameters which his offer does not comply with (fully or partially) and give a specific undertaking that except for such parameters, his offer is compliant with the requirement spelt out in the RFP in all respects.

RFP Issue

The DAC is basically the apex decision-making body of the Defence Ministry for clearing defence procurement proposals forwarded by the Indian Defence Forces thereby granting them Acceptance of Necessity (AoN) for various acquisitions, clears the way for the tendering process to start. After this, the very next step required to be taken as per the procedure is the issuance of the Request for Proposal (RFP). However, the follow-up has been desparately slow as a result there is no significant progress on issuance of RFP on the projects granted AoN by DAC even after 4 months.

Trial Evaluation to Contract Negotiation

These above examples are illustrative and similar kind of pattern have been observed in follow up stages post RFP response. The different agencies in the procurement process push a file sequentially to fruition, thus, the procurement of critical systems invariably gets inordinately delayed with the average procurement timelines running into 5-7 years or even more. If one looks closely the processes associated with each stage, similar tendency will be apparent. Be that as it may, two things are clear. One, no dramatic improvement is possible unless this problem is tackled and, two, resolution of these problems may necessitate structural changes in the capital acquisition processes and machinery.

            Understood Niti Aayog has some recommendations on redesign the defence procurement process to the MoD and  made the following recommendations –

  • Demands of three Armed Forces for particular type of Platforms/ equipment must be consolidated to speed up the process in one go for stanradsation and economic benefits.
  • There need not be exhaustive trials of the equipment those with already established Proof of Concept and duly exploited by other countries with an aim to get rid of long trial evaluation process.
  • Benchmarking the price of the proposed purchase of any product during Contract negotiation to arrive at final price, thus obviating long deliberations during negotiations.
  • There is need to bring greater transparency and accountability in the process of defence procurement the Vendors should be apprised of the reason for withdrawal of proposals or rejection of proposals.

Restructuring Acquisition

In the present procurement methodology, the numerous procurement functions are dispersed between the service headquarters and the acquisition wing of the MoD. However, The Director General (Acquisition), who heads the acquisition wing, does not have the full responsibility to ensure accountability, as many of the acquisition functions, such as formulation of QRs, trials, offsets etc, are beyond its power and purview. In other words, if something goes wrong, there is not a single authority other than the defence minister that can be held responsible. There are too many committees and with multiple members and each having its own interest. Government should try and lessen the numerous committees that a defence proposal has to go through as this will help in reducing the time. Further, every acquisition that gets inordinately delayed or cancelled must be questioned and should be analyzed to identify the reason and thereafter necessary and immediate action should be taken.

Way Forward

The DPP needs to reflect the political thrust towards enhancing domestic procurement and boosting purchase of equipment from indigenously designed and developed sources. It is hoped that the new DPP, would tackle all these aspects through simplification, simultaneity and micro management of disparate activities and unambiguous enunciation of the procedure that problems of retraction and delay can be surmounted. MoD needs to focus on how to make it speedy & conclusive. Institutionalization of reforms through the structures will ensure manifestation of outcomes. Lack of accountability is also one of the reasons resulting in derailing the procurement process including issuance of the tender/RFPs. Although there has been an attempt at ensuring accountability by way of prescribing a detailed timeframe for each of the procurement stage; however this has not been adhered. The delayed procurement process could result in serious fallouts by way of time and cost overruns, besides the inducted technology becoming outdated. The Government must thus take all requisite steps to ensure that unnecessary delays are avoided and the timeline is adhered.

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