Defence Procurement Procedure: Need for a Change

The Army Chief has drawn attention to matters concerning defence preparedness which is now in the public domain. A major shortcoming is the systemic weakness that exists in the Defence Procurement Procedures (DPP) which has an impact both on the probity and efficiency of the Armed Forces. Though the DPP 2011 has brought in some changes, our procurement procedures continue to remain a game of snakes and ladders with more snakes and an occasional ladder thrown in. The chances of finding oneself at the bottom of the game every now and then are very many. The procedure has failed to obliterate the discrimination between public and private sectors. The technical evaluation process has remains shrouded in secrecy giving scope for unfair practices to creep in. No effort to speed up or enhance indigenous technological capability has been made. Price negotiations continue to remain under a lid without visible open and fair practices. Institutional weaknesses also exist which leads to delay in finalising the General Staff Qualitative Requirements (GSQR). Mechanisms to avoid frequent changes in the GSQR also need to be instituted as this factor by itself causes considerable delay.

A matter of concern is that the basic configuration of the procedures has remained static without shedding the bureaucratic flavor. We have yet to create an independent structure to handle the process of procurement. No concrete plan has been put in place to negotiate and set in motion the indigenisation route to achieve self sufficiency, or for monitoring its progress. The decision making powers have continued to stay put in the hands of a few in the bureaucracy’s hierarchy who are neither technocrats nor purchase experts. Most are not even aware of the various tax laws applicable in other departments at the centre or in the states. The need for transparency, inducting technological expertise and best management practices has remained all elusive. The system is devoid of any effort to fix targets or accountability.

Structural Changes

It is therefore necessary to create a central, technologically oriented organisation to handle the entire process of procurement – say a Defence Consultancy Organisation for Procurement (DCOP) in which defence experts from all the three services could form part of this organisation. The DCOP should have the authority to summon experts from various fields on a case to case basis and pay them the necessary compensation if required. Independent teams of technical experts meant for different areas of specialisation under the DCOP chosen from amongst the best available in the Private Sector besides maintenance experts from the three services will be the main stay connoisseurs in the technical evaluation process. DGQA will become a part of the outfit. A body to execute projects conceived and sanctioned under the DCOP physically on ground and to handover the completed projects to the user will be incorporated.  A team of legal experts to finalise the contracts and handling the legal aspects including arbitration aspects of the contract needs inclusion. 

Formulation of GSQR

The Defence Experts need to possess on ground experience and tactical know how to be able to spell out the user requirements if need be after consulting Army’s fighting units, formation commanders, and training establishments within a specified timeframe. Thereafter the user requirements need to be translated into technical parameters by the team of technocrats and the user experts to formulate the GSQR making sure that technology doesn’t overtake procurement. Once framed, the GSQR need to be kept unchanged excepting where minor give and take becomes essential after trial evaluation.

Role of Management Experts

The team of Management Experts will drive the entire process of procurement in a time bound manner. They will provide know how of the available equipment in the market to the users, technical experts and the DGQA. It will settle the list and quantity of spares and maintenance contracts needs. Conducting user trials and technical evaluation will be monitored and accomplished under the Management Team. They will set in motion the process of indigenisation and supervise its progress as per the agreed time schedule.

DCOP will oversee the inspection and delivery of the equipments to the Ordnance Depots.  Organising training in the handling, maintenance and repair of the equipment will be a part of their role and be a part of the procurement process.

Technical Evaluation

Trial units for conducting trials could be nominated by the Service Headquarters on a case to case basis. The Service headquarter will also make available the infrastructure such as field firing ranges, training grounds and other administrative facilities for trials. Every trial must be conducted in the presence of a nominated representative of the bidder and technical experts of the DCOP. At the end of the trial, short comings noticed in the equipment will be spelt out to the vendor and necessary time provided to bring the equipment to the required level of technical acceptability. The final stage of technical evaluation will include giving to the vendors an evaluation report listing out the weaknesses and strengths of various equipments tried out so as to make the entire process of technical evaluation transparent. 

Price Negotiations

For price negotiations, a case by case committee of officers could be constituted consisting of services representatives, Ministry of Defence (MOD), Finance, DGQA, and Technical Experts. Inclusion of an eminent person from the industry concerned or public life may be desirable. The convening order should specify the constituents, broad guidelines, and terms of reference and lay down the time limit for submitting the proceedings of the price negotiation committee (PNC). The choice of individuals to be a part of the PNC could be left to the parent organisations concerned. In this process, over a period of time a large number of people will get involved in negotiating prices besides bringing transparency in the process. This will eliminate individual officers developing vested interests.

Final Sanction

The final stage would involve submitting the reports of the technical evaluation, user trials, PNC recommendations and the recommendations of the DCOP with regard to the quantity to be purchased and the preferred vendor to the Ministry of Defence for sanction and allocation of finances. 

Other Essential Aspects

A few other essential requirements include discussion of technical bids with individual bidders spelling out the areas where technical shortfalls need to be brought up. So long as all the bidders come up to the technical requirement, the Government should have no objection in considering their cases further. This will enable the private players to improve on the overall technical capability of their equipment. There is a need to rationalise the technical parameters of the equipments including by the DCOP wherever the technical capabilities demanded are unattainable. The process would thus enhance vender confidence and increase the number of contenders, bringing about competition and improved quality.

The document seeking price bid needs to specify minimum order as well as the maximum order and the time for execution. It may also be desirable to specify that the order may be split between L 1 and L 2 subject to the L 2 coming down to L 1 price in a bid to get the order.  This will provide minimum desirable order to the Defence Private Sector companies for sustenance. Public Sector undertaking will have no differential treatment in the entire process. Incidentally, for the private sector to survive, apart from providing support to the industry, export of military hardware need to be encouraged by providing assistance through our diplomatic channels.

Role of the Government

The Government should restrict itself to policy issues rather than micro managing a subject as complicated and time consuming as Defence Procurement. It should issue broad guidelines and leave the details to the DCOP. The latter should have the authority to amend the rules based on experience and practical issues. A clear indication of the budget allotment for a minimum of ten years will have to be specified so as to plan placement of orders and deliveries as per the Defence Services Perspective Plan. 

Conclusion

The process suggested above provides an out of box solution and an option for procurement very different from the existing procedures.  These changes can bring about increase in vendor participation, earnest endeavor on their part to improve product quality besides better practices in the system which has wilted under the cover of secrecy. It will bring about decentralization in decision making and free interaction between the vender and the procurement agency. Open and appropriate technical evaluation and fair play in price negotiations will emerge. The process it is hoped will bring about better utilisation of the tax payers money. 

 Acknowledgement: Article constructed with inputs received from Mr V Ramgopal, erstwhile marketing executive with one of the TATA group of companies.

Brig V Mahalingam (Retd) is a Defence Analyst

Views expressed are personal