Of Matters Military. Mrinal Suman

Of Matters Military

representatives from SHQ, based on documents issued by authorised agencies and presented by the vendors.

Apart from overall IC, the same percentage of IC will also be required in Basic Cost of Equipment; Cost of Manufacturers’ Recommended List of Spares; and Cost of Special Maintenance Tools and Special Test Equipment.

Indigenous Content Defined

For the purposes of the DPP, IC for an equipment or an item shall be arrived at by excluding from the total cost of that equipment/item the following elements at all stages (tiers) of manufacturing/production/assembly:-

Direct costs (including freight/transportation and insurance) of all materials, components, sub-assemblies, assemblies and products imported into India.

Direct and indirect costs of all services obtained from non-Indian entities/citizens.

All license fees, royalties, technical fees and other fees/payments of this nature paid out of India, by whatever term/phrase referred to in contracts/agreements made by vendors/sub-vendors.

Taxes, duties, cesses, octroi and any other statutory levies in India of this nature.

Indian Vendor Defined

For the first time, the definition of an Indian vendor for the purposes of defence procurements has been spelt out in the new DPP to clear all confusion. Unless specifically provided for in a clause/section/chapter or elsewhere of the DPP, an Indian vendor means:-

For defence products requiring industrial licence: an Indian entity, which could include incorporation/ownership models as per Companies Act, partnership firm, proprietorship and other types of ownership models including societies as per relevant laws, complying with, besides other regulations in force, the guidelines/ licensing requirements stipulated by the Department of Industrial Policy and Promotion, as applicable

For defence products not requiring industrial licence: an Indian entity registered under the relevant Indian laws and complying with all regulations in force applicable to that industry.

Splitting of SQR

A major change relates to the splitting of SQR into two sub-categories as follows:-

Essential Parameters–A: These are parameters that generally form part of the contemporary equipment available in the market and form the core of SQR. These will be tested and validated at FET stage.

Essential Parameters–B: Though not available originally in the equipment fielded for FET, these parameters can be developed and achieved by the vendors using available technologies. These parameters need to be tested and validated within a specified time frame as stipulated in the contract. Failure to meet these parameters after signing of the contract and within the stipulated time frame, will lead to forfeiture of all bank guarantees (Performance Bank Guarantee, Additional Bank Guarantee and Advance Bank Guarantees, if any) and attract other penal provisions as may be prescribed by the government.

Introduction of Enhanced Performance Parameters

Enhanced Performance Parameters (EPP) are those parameters that enhance the capability of the equipment, vis-à-vis the essential parameters. SQR may not contain EPP in all cases. Inability to meet the EPP does not preclude vendors from being eligible for the bidding/bid evaluation. However, if a vendor claims to have equipment meeting the EPP as specified in SQR and RFP, then they must provide details of the same in their technical bids, which will be tested for compliance during FET itself.

Equipment successfully meeting EPP parameters will be awarded a credit score of up to 10 percent, for evaluation of L1, with each individual attribute not exceeding a credit score of up to 3 percent, as approved by AoN according authority.

Treatment of Single Bids Rationalised

In case a single bid is received at the bid submission stage, SHQ may proceed with the process and complete the Technical Evaluation without retracting RFP. Within 4 weeks from the acceptance of TEC report, the case must be referred to AoN according authority. In case it is concluded that there is no scope for change in SQR and other conditions of RFP; and that retraction and reissue of RFP is not likely to increase the vendor base, then the case may be progressed with the approval of the Defence Acquisition Council, provided the vendor agrees to hold the original commercial bid till completion of the procurement process.

Conclusion

In addition to the above mentioned procedural reforms, a number of other changes of significance have also been introduced. For example, having realised the failure of the old ‘Make’ procedure to deliver, it has been revamped.

The threshold for the Integrity Pact has been reduced from the earlier Rs 100 crore to Rs 20 crore. All cases involving upgrade of an in service weapon system/equipment will also be covered by DPP-2016. Categorisation of such cases may be carried out depending on scope of the proposal, availability of indigenous technology and the need for seeking critical technologies from foreign vendors.

Validity of AoN for categories under ‘Buy’ and ‘Buy and Make’ schemes has been reduced to six months. However, for ‘Buy and Make (Indian)’ schemes and turnkey projects, it will be one year. AoN would lapse for all cases where RFP for approved quantity is not issued within the original validity period of AoN. In such cases, SHQ would have to re-validate the case and seek fresh AoN with due justification for not processing the case in time.

Threshold for the application of the offset clause has been raised from the earlier Rs 300 crore to Rs 2,000 crores, thereby exempting a large number of defence contracts from the convolutions of offsets. This single step will help expedite procurements and save offset cost penalty.

Recent reforms in DPP are well intentioned. Quite rightly, a great deal of stress has been laid on harnessing the potential of the India industry, especially the private sector and MSMEs. It is not that the guidelines and directions contained in DPP-2016 are flawless in all respects. But then, reforms are a continuous process.

It is equally important that good policies get translated into discernible actions on ground. It is only then that an environment of free competition, fair play and transparency can be built which is so very essential for defence procurements.

Part – II

Acquisitions Need ProfessionalManagement

Centralised Authority for Defence Acquisitions:An Urgent Requirement

The primary objective of all defence procurement systems is to provide required defence systems to their armed forces in the specified time frame with least expenditure of national resources. All countries have been grappling with the twin problems of time and cost overruns. Additionally, the defence forces are often blamed for demanding unrealistic and at times improbable performance attributes.

There are three distinct but overlapping stages through which an acquisition process passes:-

(a)

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