Of Matters Military. Mrinal Suman
defence industry in the country, submitted its report in 2005. Its recommendations were wide ranging. It suggested increased participation of the private sector to promote high technology capabilities and create an environment for quantum jump in defence exports.
It also advocated creation of a new institutional architecture for defence acquisitions with enhanced transparency in decision-making and suggested introduction of life- cycle-cost in all cases of capital acquisition projects valued over Rs.300 crores.
Although a concerted effort was made by the government in DPP-2005 to streamline the entire acquisition process, a lot of work had yet to be done. Most importantly, India had to overcome the forces of status-quo which resist changes to perpetuate their predominance. Archaic mindset of pro-public sector bias had to change if India were to achieve self sufficiency.
Defence Procurement Procedure – 2006
With a view to make the procedure more comprehensive, the government revised it yet again. Defence Procurement Procedure – 2006 (DPP-2006) was duly promulgated on 01 September 2006. DPP-2006 covered all capital acquisitions (except medical equipment) undertaken by the Ministry of Defence (MoD), defence services and the Indian Coast Guard, both from indigenous sources and ex-import. It was not made applicable to Defence Research and Development Organisation (DRDO), Ordnance Factory Board (OFB) and Defence Public Sector Undertakings (DPSU), who were to continue to follow their respective procedures for procurements.
The planning process was explained in detail, with proposals for acquisition of capital assets flowing from the long-term, medium-term and short term perspectives as under:-
(a) 15 Years Long Term Integrated Perspective Plan (LTIPP)
It is evolved by the Headquarters Integrated Defence Staff (HQ IDS) in consultation with the Service Headquarters (SHQ) and is based on the Defence Planning Guidelines. It is approved by the Defence Acquisition Council (DAC).
(b) 5 Years Services Capital Acquisition Plan (SCAP)
It is formulated by HQ IDS and indicates the list of equipment to be acquired, keeping in view operational exigencies and the overall requirement of funds. DAC considers and approves it.
(c) Annual Acquisition Plan (AAP)
It is a subset of SCAP. HQ IDS works out the annual requirement of funds for capital acquisitions taking into account the schemes listed in SCAP and those proposed for the year ahead, carryovers, operational exigencies and proposed changes in priorities recommended by the respective SHQ. Based on the budgetary projections and allocations, the draft AAP is formulated by the respective SHQ and forwarded to HQ IDS. AAP is based on a two years acquisition cycle and caters for adequate cushion to safeguard against surrender of funds. Proposals not listed in SCAP may only be processed after due approval of DAC. AAP is approved by the Defence Procurement Board (DPB).
Illustration: Stages of Acquisition Process
In addition to the provision of budgetary support, the planning process also includes scaling, acceptance of necessity and quantity vetting. Thereafter, the Acquisition Wing processes all acquisition proposals incorporated in the finalised AAP under the overall guidance of DPB. See Illustration.
Salient Features of DPP-2006
DPP-2006 was a very comprehensive and exhaustive document which covered the complete gamut of acquisition activities. Recommendations made by the Kelkar Committee were also incorporated. To make the procedure above board, many bold and innovative provisions were included to create an environment of trust in the fairness of the system. Major initiatives were taken to integrate the private sector in defence production. Some of the salient features of DPP-2006 have been discussed in the subsequent paragraphs.
Categorisation of Procurement Cases
‘Buy’ category was further subdivided into ‘Buy (Indian)’ and ‘Buy (Global)’. ‘Buy (Indian)’ must have minimum 30 per cent indigenous content if the system is being integrated by an Indian vendor. Indigenous development was further categorised as follows:-
All cases involving upgradation of in-service weapon systems and equipment were also covered by the new procedure. Such cases were also to be categorised as ‘Buy (Indian)’, ‘Buy (Global)’, ‘Buy and Make’ and ‘Make’ cases.
Maximising Competition
In order to generate maximum competition, the following facilitating provisions were included:-
DPP-2006 discouraged single vendor procurements and aimed at maximising competition. However, at times, India may want to procure state-of-the-art equipment being manufactured by only one vendor to get qualitative edge. Such cases had to be debated by DAC after proper technology scan was carried out by HQ IDS in consultation with DRDO.
Additionally, if only one vendor claimed compliance with the parameters at the time of paper evaluation by the Technical Evaluation Committee, the procedure stipulated that the Request for Proposals (RFP) be retracted and a fresh RFP issued with revised parameters.
Bidding Process
‘Single-stage two-bid’ system was made mandatory as it guards against the possibility of a vendor increasing his commercial offer consequent to the development of a single vendor situation after evaluation. All vendors had to submit their technical and commercial proposals at the initial stage itself, albeit in two separate sealed envelopes. 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 was permitted under any circumstances.
Evaluation
RFP had to contain details of criteria proposed to be applied for selection. In case a matrix was being used, vendors had to be made aware of it along with inter-se weightage assigned to various parameters. No alteration to the matrix was permitted after the issuance of RFP.
Security concerns permitting, representatives of the vendors were permitted to witness field trials. After each stage, a debriefing of all the vendors was required to be carried out in a common meeting (wherever possible) as regards the performance of their equipment. Compliance or