Of Matters Military. Mrinal Suman
was felt that the provision of seeking commercial quotes at the outset with 18 months validity was unrealistic and loaded against the vendors. In almost all cases, technical evaluation process took two to three years. Resultantly, the vendors were asked either to extend validity of their quote or withdraw from further participation in the case. Most considered it to be a highly unfair provision. After having invested considerable resources in technical evaluation regimen, it was a tough call to take for the vendors.
When DPP-2006 came up for review, the government sought suggestions from a large number of entities. Indian defence industry participated enthusiastically in all interactions and put across its view point. The US India Business Council and the Defence Manufacturers Association of the UK provided useful inputs as regards their expectations. A number of public and private sector enterprises also gave constructive feedback.
Salient Aspects of DPP-2008
The government deliberated over all the recommendations. It felt that the basic configuration of the procedure continued to be sound, warranting no major reconstruction. Hence, an attempt was made to further rationalise the procedure and make it more credible. Some of the significant policy changes introduced in DPP-2008 have been discussed hereunder.
Promotion of Transparency
The primary thrust of DPP-2008 was on promoting transparency in technical evaluation process so as to convince the environment of its impartiality and objectivity. First, the complete trial methodology was required to be given upfront in RFP itself so that all vendors knew at the time of submitting proposals regarding the parameters against which their equipment would be assessed and the methodology thereof. Secondly, trial directive issued by Service HQ had to be based on the previously declared trial methodology. No new aspects could be added to it. Thirdly, during field trials, debriefing of all vendors had to be carried out in a common meeting after each stage of trials as regards performance vis-à-vis SQR compliance, preferably at the trial location itself. Moreover, all verbal communications with the vendors had to be confirmed in writing within a week and also placed on file for record. Going further, the Technical Oversight Committee was tasked to oversee whether trial methodology followed was in consonance with what was given in RFP. Finally, and most importantly, reasons for disqualification had to be intimated to the vendors at every stage.
Avoidance of Single Vendor Buys
With a view to generate maximum competition and avoid emergence of single vendor situation, a number of innovative measures were introduced with built in checks. Right at the time of formulation of SQR, a compliance table was required to be prepared showing SQR vis-à-vis technical parameters of equipment available in the world market, to ensure that SQR formulated were such that a number of manufacturers could meet them. In case during the paper evaluation of technical proposals, it emerged that only one vendor appeared fully compliant, RFP had to be compulsorily retracted and reissued with reformulated SQR. Besides, Technical Evaluation Committee was required to identify reasons for such an outcome and initiate corrective measures for future cases.
Introduction of Offset Banking
Acceding to the demand of the foreign vendors, the government allowed them to generate and accumulate offset credits by undertaking duly sanctioned programmes in anticipation of future obligations. Offset credits so acquired could be banked for discharge against future contracts. Proposals for undertaking offset programmes for banking purposes were required to be submitted to the designated Joint Secretary in the Ministry of Defence (MoD) for allotting a unique Project Identification Number to each sanctioned proposal. In cases where offset banking was done by way of investment in Indian defence industry and R&D, related foreign investment had to remain valid and active throughout the duration of MoD contract in relation to the concerned RFP.
Selection of Recipient of Imported Technology
Accepting representations made by the Indian private sector, the government agreed in principle that the selection of recipient of imported technology should be made more broad-based and not limited to the public sector only, as done earlier. The government assigned the task of selecting recipient to the Defence Acquisition Council (DAC); and the company best suited to absorb technology could be nominated.
Enhancement of Financial Powers
With a view to expedite grant of Acceptance of Necessity, the government delegated enhanced powers as the then existing financial powers were considered grossly inadequate. This single step was expected to go a long way in speeding up sanctions. Only cases over 100 crore rupees were required to be submitted to DAC. The new powers were as follows:-
An Appraisal
Despite having introduced a number of major changes in DPP-2008, the government missed an opportunity to make the procedure more responsive and dynamic. Some of the major issues that had been left unaddressed were as under.
Absence of Mid-course Re view of C ommercial Process
DPP-2002 had introduced scrutiny of technical and commercial processes of all major contracts by independent experts. In a surprising move, review of commercial process was done away in DPP-2005. For that, the government came under considerable flak. Commercial review was meant to provide pre-contractual process and procedures audit. Most knowledgeable observers had been expecting the government to reintroduce this review to strengthen its claim of promoting probity, but were disappointed.
Extension of Validity
In a major policy change, the government decided to allow vendors to submit fresh commercial proposal in case the validity of their commercial proposal submitted earlier expired before the acceptance of the staff evaluation report. It appeared that the government introduced this provision without studying its implications. India follows single-stage two-bid system to prevent inflation of commercial quote by the technically successful vendor. The new provision effectively nullified it. As MoD had to intimate results of every stage of trials to all vendors in a common gathering at the trial location itself, it would be common knowledge as to which vendors remained in contention. Thus, at the time of preparation of staff evaluation report, in case a single vendor emerged successful, he would be well aware of it. The winning vendor would invariably opt to submit a revised and inflated bid, comfortable in the knowledge that he was the sole winner and could call the shots.
Intimating Reasons for Rejection to Vendors
With a view to promote transparency, the new policy stipulated that every vendor must be apprised of reasons for his rejection at every stage. It was a well-intentioned policy change. However, it had the potential to drag MoD into rancorous inquisitions and protracted adjudication process. Rejected vendors were likely to challenge their ouster. It would become well nigh impossible for the acquisition organisation to convince and placate all unsuccessful vendors, especially at the stage of staff evaluation which is a complex and multi-dimensioned process. The government’s intentions were laudable but practicality remained suspect.
Competition at the Cost of Technology
DPP-2008 mandated that SQR of the equipment to be procured should be of a contemporary technology widely available in the world/indigenous market. Thus, the services were forced to pitch SQR at a base level to ensure that there were multiple producers of the equipment. It was a highly skewed approach. Whereas all governments try and provide the latest equipment to their armed forces, the Indian government, in its misplaced enthusiasm to appear above-board, decided to encumber the Indian armed forces with equipment which may be close to becoming obsolescent. Undoubtedly, prudence demands that India acquires cutting edge technology, even if it is available from a handful of sources.
Restrictive Features of Offset Banking
As per the Indian policy, banked offset credits were not transferable except between the main contractor