Of Matters Military. Mrinal Suman
Defence Procurement Board functions under the Defence Secretary and has three Vice Chiefs of the services amongst others as members. It executes ‘Buy’ and ‘Buy and Make’ decisions of DAC. It approves the Annual Acquisition Plan and confirms/modifies the inter-se and intra-se priorities of the acquisition proposals of the services. It also recommends procurements on ‘single vendor’ basis. It has the powers to invoke rules governing emergency purchases and forward its recommendations to the Defence Minister. Monitoring of all major procurement cases is one of its important responsibilities.
Defence Production Board has been constituted under the Secretary (Defence Production). Its primary task is to produce the required defence equipment indigenously after receiving technology either from abroad under ‘Buy and Make’ or under ‘Make’ from DRDO. The third board is Defence Research and Development Board, which functions under the Secretary (Defence Research and Development). Its main task is to progress, monitor and report on all indigenous research and development programmes flowing from ‘Make’ decisions of DAC. It also recommends suitable evaluation and assessment processes.
A new integrated set-up called the Acquisition Wing has been created under a Special Secretary with members from the civil services, defence services and finance. It functions under the Defence Procurement Board and is the main instrument for implementing all procurement decisions. This wing was also assigned the responsibility to evolve a new procurement procedure for defence acquisitions.
Consequently, a detailed procurement procedure covering all aspects of ‘Buy’ decisions was put into effect on 30 December 2002. Later, its scope was enlarged to include ‘Buy and Make through Imported Technology’ cases as well. The new procedure was called Defence Procurement Procedure – 2002 or DPP-2002 in short. It covered all steps involved in the complete acquisition process i.e. formulation of Services Qualitative Requirements (SQR), solicitation of proposals, technical examination of offers, field trials, staff evaluation and commercial negotiations.
The aims set by DPP-2002 were as follows:-
Formulation of SQR has always been viewed critically as it is really the start point of the complete process. Over-ambitious, ambiguous, sketchy or impractical SQR can prove to be counter-productive and make the whole process infructuous. Therefore, DPP-2002 stressed that SQR be given out in terms of functional characteristics and their formulation should not prejudice technical choices by being narrow and focused. In addition, SQR should be verifiable and not abstract. Importantly, SQR were divided into essential and desirable categories. Only the Defence Minister, on the recommendations of the Defence Procurement Board, could give waivers for any deviation to essential SQR after the issuance of the Request for Proposals (RFP).
DPP-2002 mandated that RFP be issued only to original equipment manufacturers, authorized vendors and government sponsored export agencies. In case transfer of technology was being sought, ability to provide requisite technology for licensed production was essential. RFP had to be comprehensive in nature and explicit in requirements, as ambiguities could lead to misunderstandings and vitiate the environment. It was also mandated that all vendors be apprised of the evaluation criteria being applied. They must be made aware of the matrix against which their equipment would be judged.
Field trials were conducted under the aegis of the user service as per the trial directive issued by the Service Headquarters. The trial directive had to specify the fundamental aspects against which validation of ‘essential’ features was to be carried out. Evaluation of the support system and maintainability of the equipment were to be carried out simultaneously. Field trials were normally conducted on ‘No Cost No Commitment’ basis. Representatives of the vendors were permitted to be present at the trials, provided security concerns were taken care of.
With a view to promote competition, the Acquisition Wing was tasked to build up a data bank of prospective vendors. Confederation of Indian Industries (CII) was also requested to compile data of prospective Indian vendors who had the necessary infrastructure and potential in different fields. All these steps were expected to enlarge the vendor base.
As stated above, the previous procedure of 1992 had no provisions for inbuilt checks or mid-course reviews. DPP-2002 rectified this flaw with periodic reviews of the process. For all major procurements, there were provisions to constitute independent bodies to scrutinize the entire process. A Technical Oversight Committee consisting of a senior service officer, a scientist from DRDO and an official from a defence public sector undertaking had to be constituted to go through the entire technical process from the selection of vendors to the final evaluation of the competing equipment. It was only after this committee’s clearance that the commercial process could commence. The second check was activated after the commercial negotiations were over. An Eminent Persons Group was to be constituted to critically examine all commercial aspects including the determination of the lowest bidder. The contract was signed only after receiving ‘go-ahead’ from this group. These provisions were introduced to ensure that the procurement process remained free from all irregularities and timely corrective action could be taken, where required.
Earlier, commercial offers were sought from the vendor whose equipment performed the best during technical evaluation. At that stage, the successful vendor always quoted a highly inflated price knowing well that he was the sole successful vendor. It invariably became a ‘take it or leave it’ situation for the government. This major flaw was also sought to be rectified in the new procedure. Hence, a ‘single-stage two-bid’ system was introduced. This implies that all vendors had to submit their technical and commercial proposals at the initial stage itself, albeit in two separate sealed envelopes. Only technical proposals were opened initially while the commercial proposals remained sealed. It was only after the technical evaluation that the commercial offers of the successful vendors were opened to determine the lowest bidder. No change in the commercial offer submitted earlier was permitted under any circumstances. Thus, the commercial offer was always competitive in nature, as at the time of submission of offers no vendor was certain that he would be the sole successful vendor.
DPP-2002 did not make any distinction between foreign and Indian companies or between private and public sectors. It only aimed at generating maximum competition by providing equal opportunities to all and to obtain best value for money for the defence forces. As a result, the Indian companies woke up to the immense potential and business opportunities existing in the defence equipment sector. MoD and CII jointly undertook many concrete steps to accelerate the process.
Fast Track Procedure
With a view to facilitate emergent acquisitions, a need was felt to have a fast track procedure which could be invoked in times of crisis, albeit with inherent checks to avoid its misuse. The government in September 2001 promulgated a Fast Track Procedure (FTP). This procedure could be adopted only for the requirements, which related to an imminent operational situation or a crisis without warning. Its need had to emanate from the Service Chief and the proposal had to be put up to the Defence Minister with the recommendations of the Defence Procurement Board.
As the time is of essence in such procurements, FTP was limited to items, which were likely to be available within the laid down time frame. Long lead cases were to be avoided. It really implied that the items should already be in service or had already been trial evaluated. In exceptional cases, provisions permitted sending of trial teams to the manufacturers’ premises for quick evaluation.
Conclusion
It is not that the reforms of 2002 made the system