A System's View of Services Capital Acquisition

In his maiden operational brief to the Prime Minister recently, the Chief of the Army Staff did not hold back on critical equipment hollowness affecting the Army[i]. India’s frontline forces today are denied essential weaponry needed for safeguarding country’s national interests while policymakers struggle to process crucial acquisition cases through long winded procedures mired with delays. An observation by an no less than a serving Army Chief not very long back that ‘purchase of weapon systems is caught in a snakes and ladders game which has no ladders’[ii] is indicative of the high dissatisfaction level of the Services. Issues concerning night blindness of armoured vehicles, critical deficiency of war reserves of ammunition, non availability of  mainstay howitzers and fuses for Artillery ammunition and obsolescence of Air Defence arm are common discussion topics at seminars and conventions and are widely debated in the open domain. Even low technology items such as bullet proof jackets, helmets and assault rifles are not forthcoming. While on one hand the Army supply chain suffers from severe supply side deficiencies the Ministry of Defence and Service Headquarters at the same time have demonstrated uncharacteristic alacrity in completely expending the Army’s modernisation budget. So the question here is that what are we buying from all the funds committed into capital acquisitions year after year and what capability as designated by the Long Term Integrated Perspective Plan has been actually deployed on ground post committing these funds.

In 2012, Army shortlisted a total of 680 projects worth Rs two lakh crores to fructify in the twelfth Army plan period. A critical list of thirty one out of these 680 projects in the pipeline was identified to include assault rifles, howitzers, Bullet Proof Jackets, Tank and Artillery ammunition, as Priority one[iii]. Come 2014, the above contracts still remain Priority one! This is because no major deal has been inked covering these weapon systems in the last two years while  the value of total acquisition contracts signed per year has increased from Rs 2820 crores in 2011-12 to Rs 7222 crores in 2012-13 and Rs 11,777 crores in 2013-14. The question still remains that what are we actually buying? As the contracts unfold on ground it reveals that while the priority one contracts such as assault rifles, Army aviation helicopters, bullet proof jackets are stuck in procedural wrangles certain equipment relatively lower in priority has been procured not because they were urgently needed but because for a variety of reasons they lent themselves to a procurement relatively free from characteristic delays.  This equipment includes gunnery simulators helicopter missile warning systems, digital control harness and truck mounted lifting devices to name a few. It may thus be worth an analysis as to why despite new versions of an exhaustive contract operating document like the Defence Procurement Procedure revised every few years the system is not responsive to the needs of the users. This brings us to the moot point that Are Capital acquisitions only about procedures? The answer is an emphatic no. Flaws in preparation of General Staff Qualitative Requirements and prolonged trials which are the domain of the services have often been identified as the main causes of delay of acquisition cases. If this judgment were to be taken at its face value, the ‘Fast Track Procedure’ laid out in Chapter four of the Defence Procurement Procedure which precludes both the stage of laying down of General Staff Qualitative Requirements[iv] and Trials should have been a resounding success! Fast Track Procedure on the other hand has been far from successful because since its inception in 2001 the Army and Air Force have been able to process only one case successfully through this procedure while Navy has not even fielded one. Defence Capital Acquisition therefore is much more than only procedures hence the need to graduate to a capability development document in the Defence Procurement Procedure rather than a contract operating manual is imperative. What ails the acquisition system? Is it the Defence Procurement Procedure itself or is it a deficit of our higher defence planning or is it about the budgetary aspects.

Six main issues about capital acquisitions have been raised by analysts from time to time. These are, firstly, a growing trend of acquisitions that completely bypass the Defence Procurement Procedure through the Intergovernmental agreement and the Foreign Military Sales routes. Secondly, there are currently eleven phases of evaluation that are carried out by no less than seven committees and thirteen departmental organs between the services qualitative requirements and the post contract management stages. Several of these phases have no time limits. Thirdly, there is a class division among industries created through categorisation such as State owned, foreign, Indian Majors, and Small and Medium Enterprises etc. There has been a call for a level playing field. Fourthly the offset policy has been a non-starter when looked at from the point of view of its original intention of building indigenous capacity. Now the expanded scope is expected to have its own inter-ministerial issues when implemented on ground without an agreed road map. Fifthly, we have had very little Transfer of Technology for critical systems as a consequence of the existing provisions of the Defence Procurement Procedure. The last and the most important issue which has the potential to resolve all others is the lack of alignment of intentions of the Defence Procurement Procedure with the structure of execution and the lack of accountability to capability development. If this aspect receives the desired focus, it has a potential to resolve all the other issues.

The stated objective of the Defence Procurement Procedure is ‘To ensure expeditious procurement of the approved requirements of the Armed Forces in terms of capabilities sought and time frame prescribed by optimally utilising the allocated budgetary resources. While achieving the same, it will demonstrate the highest degree of probity and public accountability, transparency in operations, free competition and impartiality. In addition, the goal of achieving self-reliance in defence equipment will be kept in mind’. If the stated objective as given above were to be weighed against the actual mechanics of procurement on ground, it will emerge that the requirements of the armed forces are neither approved nor expeditiously procured. They are not approved in the true sense as the Long Term Integrated Perspective Plan does not flow from the National Security Strategy[v] or the Strategic Defence Planning Guidance issued by the political executive but is a compilation of the Long Term Perspective Plans of three services by the Integrated Defence Staff and subsequently approved by the Defence Acquisition Council. More importantly, no dedicated funds are committed to service the Long Term Integrated Perspective Plan in its entirety given the extended time horizon and the acquisition is not carried out strictly based on the Long Term Integrated Perspective Plan. Little wonder then, that the modernisation budget over the past two years has been steadily declining in real terms with committed liabilities between 85 to 96 percent while the approved priority list accepted in principle by the Defence Acquisition Council runs into few lacs of crores. Furthermore, the timelines laid down in the Defence Procurement Procedure are rarely enforced nor is any one agency responsible for ensuring that these are met.

The issue of synchronisation between all stakeholders involved in acquisition has been flagged by most committees on acquisition reforms. Currently the Defence Procurement Procedure acts as the operating document for achieving the Long Term Integrated Perspective Plan. Perspective Plans for the defence industry under the Departmant of Defence Production and the Defence Research and Development Organisation need to be in synchronisation with the Long Term Integrated Perspective Plan in order to achieve the time lines specified in the Long Term Integrated Perspective Plan for almost all categories of procurement. The plans of the industry, Armed forces and the Defence Research and Development Organisation need to satisfy an outcome that is desired by the strategic apex of the Ministry of Defence which could be the Defence Acquisition Council. This outcome would need to be in sync with the strategic defence planning guidance issued by a political body such as the Cabinet Committee on Security in order to be in sync with the developments in other state security apparatus outside the ministry of defence. The point here is that plans need to be top driven to be effective and that the Long Term Integrated Perspective Plan  is the core operating document that could ensure that all plans are moving in sync. This top down process is crucial for effectiveness of the acquisition and needs to be enshrined in the Defence Procurement Procedure with clear responsibilities of who will do what. The planning dimension used to be handled by the erstwhile high level inter-service Defence Planning Staff  under the Ministry of Defence created in 1986 to assist the Chief of Staff Committee. It had senior inter-service staff along with senior representatives from the Ministry of Defence, Defence (Finance), Ministry of External Affairs and a senior scientist from the Defence Research and Development Organisation. The Defence Planning Staff was headed by Director General Defence Planning Staff held in rotation between the three services by an officer of the rank of Lt Gen or equivalent.  The Defence Planning Staff  was made responsible for preparation of coordinated perspective defence plans based on projections received from the Perspective Planning Directorates in the Service Headquarters, Department of Defence Production and Supplies and the Defence Research and Development Organisation. The Defence Planning Staff was to undertake periodic threat assessment to evolve a mix of force levels and weaponry to integrate the requirements of the three services to meet the threat.  The organisation of the Director General Defence Planning Staff was merged into the Integrated Staff on formation of Headquarters Integrated Defence Staff and since then this vital function has not received the desired attention it deserves.

Given the above dynamics, refining the Defence Procurement Procedure may only affect marginal improvements in the overall acquisition paradigm. The performance of acquisition system has not shown any dramatic improvements despite successive versions of the Defence Procurement Procedure because it is not viewed as a complex, multilayered non linear system which it actually is. The acquisition system needs to be viewed as a whole which is much more than the sum of parts[vi]. Entire effort of the policy makers is concentrated towards refining only the processes while the archaic organisational structure on which the Defence Procurement Procedure is riding remains unaddressed. Systems thinking brings out that, organisations usually react to events visible to them and make immediate changes to the processes so that those events do not reoccur. Reacting to events only brings about a transitory change. As per the tenets of systems thinking, the patterns and trends which emerge from the series of events need to be recognised and changes implemented accordingly which again will not be of a permanent nature. However, if we are looking for a permanent change we need to address the structures on which these processes are riding. Going beyond change, if we are seeking a transformation, we should put in place mathematical models intended to capture the fundamental interactions between the system and its environment and later validate the same and measure its performance[vii]. What are the structural changes that we are looking at? Firstly, we need a lean and agile acquisition organisation and secondly, it should be responsive and accountable. Any organisational structure which has more than seven levels falls in the category of a tall organisation. The acquisition organisation in Service Headquarters and Ministry of Defence has more than twenty levels thus suffers from major communication and motivation problems. It will thus be unable to deliver the  outcome desired of it that too with zero intervention of any Enterprise Resource Planning solution. The existing procurement organisation consists of three specialist verticals of Acquisition, Production and Technology. The flow of specialist functional authority is top down in all the specialist verticals. The flow of specialist authority ensures that best practices in that specialist vertical are mandated through orders and guidelines to achieve the end result desired as part of a specialist contribution to a project. Costing, and estimating functions are typically embedded into specialist functions of a large scale. The problem is that there are no lateral linkages between the three functional verticals at the operational level which if put in place would convert it to a more efficient and effective matrix organisation[viii].

In such a milieu, to expect the Defence Procurement Procedure, largely a contract operating and concluding manual to be the panacea for all ills plaguing the system without addressing the structures is unrealistic. Defence Procurement Procedure denotes the internal lead time of the Ministry of Defence and the timelines laid down can only be adhered to if the structures are refined and a Task Responsibility Matrix made out and enforced. Exhaustive recommendations on organisational restructuring have been proposed by a number of committees on acquisition reforms at the highest level. However, the implementation that holds the key to the future of acquisition system has been too little. Implementation can only be affected by a resolute leadership at political, bureaucratic and military levels taking a systems view of acquisition. The interdepartmental structures with diffused accountability and chain of command are designed to foster inter services and inter departmental rivalry. The situation can only be remedied by implementing structural changes as dictated by systems thinking through an act of parliament akin to the Goldwater Nichols United States Department of Defence reorganisation act of 1986.[ix] This is the only way forward.  

The author is Senior Fellow at CLAWS. Views expressed are personal.