Defence procurements suffer due to staff inadequacies

Major General Mrinal Suman (Gfiles June 2008)

The Comptroller and Auditor General (CAG) in its report observed that defence acquisition is ‘a cross-disciplinary activity requiring expertise in technology, military, finance, quality assurance, market research, contract management, project management, administration and policy making’. “The existing system of acquisitions being handled by unspecialised personnel posted for three-year tenures is simply not adequate”, it opined. The CAG is the first agency that has looked at the staff inadequacies that plague India’s defence procurement regime. The thrust so far has been on organisational and procedural reforms only, whereas mediocrity of the staff has been the main reason for non-performance.

India has failed to appreciate that procurement of defence equipment is a highly specialised and complex activity needing extraordinary professional skills and unique attributes. Therefore, little thought has been paid to human resources and the staffing system. Procurement of military equipment worth billions of dollars is being carried out by people who are ill-equipped for the job. The quality of personnel continues to be the weakest link in the whole procurement system and this aspect needs immediate attention.

The staff carrying out acquisition related functions is drawn from the three services, the civil bureaucracy and the defence finance. They are neither selected for any particular expertise nor are given any special training to handle defence procurements. They even lack necessary education to comprehend competing technologies and technicalities of complex procurement procedures. Unfortunately, all senior functionaries (both military and civil) do not feel any necessity to improve their knowledge or hone their skills in the mistaken belief that their basic intellect, initial training and subsequent exposure equip them to shoulder any responsibility.

Service Officers

All procurement proposals emanate from the service headquarters. Preparation of Qualitative Requirements (QRs), technical evaluations, field trials and identification of acceptable equipment are carried out by the services staff. Despite their criticality, the services have not considered it essential to assign these functions to suitably selected and equipped officers. The services have laid down minimum criteria for a host of lesser posts but none for acquisition duties. Almost all acquisition functions are performed by officers on routine or last-leg postings. For example, in the case of the Army, Weapons and Equipment Directorate is the nodal agency for all new procurements, yet its head is always an officer on the verge of retirement. It only shows the lack of importance assigned to such a central appointment.

QRs form the basis of all procurement proposals. Formulation of QRs entails thorough knowledge of own mission requirements, products available in the world market, competing stabilized technologies and cost-performance matrix. Poorly conceived and imprecisely drafted QRs create confusion, lend themselves to misinterpretations, compromise quality of equipment, prove expensive and cause immense delays. Unfortunately, the services have totally ignored this crucial aspect.

Technical evaluation including field trials is another vital activity as it validates performance claims made by the producers and ascertains suitability of equipment for induction into service. Although trial of new equipment with differing technologies is a highly specialised task, trial units are nominated purely on the basis of their geographical location rather than for any displayed competence of the commanders. It has been seen that most trial units are incapable of conducting purposeful trials.

Civil Bureaucrats

Once technical evaluation is completed and the staff evaluation report is accepted by the Ministry, a Commercial Negotiation Committee (CNC) under a civil bureaucrat is constituted to carry out all processes from the opening of commercial bids of the technically acceptable vendors to the conclusion of contract.

Civil bureaucrats posted to acquisition posts are neither selected for any special qualification nor for any exhibited talent. As a matter of fact no selection is carried out at all. It is not uncommon to see a bureaucrat from Poultry Development or Khadi Udyog departments being posted to the Defence Ministry to negotiate major contracts of complex defence systems. A senior bureaucrat once remarked that it took him months before he understood military structures and acquired elementary knowledge of defence matters. He rued the fact that he had to bank on his common sense as he was provided no training or guidance. “We are asked to fend for ourselves and ensure own survival”, he added.

Price determination and contract negotiation call for special training. Skills are required with respect to negotiation terminology, styles, techniques, legal implications of various contract situations and contract administration. Most officials go by their gut feeling as they are totally ignorant of various scientific tools.

Defence Finance Functionaries

Defence Finance functionaries play a decisive role as they remain closely associated throughout the whole process from the initiation of a proposal to the signing of the contract. They are required to vet tender documents, appraise commercial proposals, determine fair price, prepare comparative statement of bids to identify lowest bidder, assist in the conduct of negotiations and contract drafting.

Financial issues in acquisition include cost estimating, earned value analysis and total ownership cost reduction studies. The designated role of the Indian Defence Accounts Service cadre is restricted to the provision of accounting cover and audit. Having graduated in languages and humanities, most do not possess even elementary knowledge of economics but are expected to apply economic tools to procurement proposals to help evolve the most suitable alternative. It is grossly unfair to them. India is perhaps the only country where defence economic advisory functions are performed by officials who neither know economics nor defence imperatives. There is a total mismatch between the proficiency required by financial experts in defence procurements and their knowledge of account keeping and auditing.

The Way Forward

Functionaries posted to key acquisition appointments are not selected for any special flair or criteria. For that matter, there is no selection at all and all postings are done in routine turn-over. Parameters and tender documents are prepared in a most amateurish and casual manner. They contain ambiguities which later lead to multiple interpretations. Trials are carried out by units who consider it an additional chore and fail to comprehend their significance. Negotiations are carried out by people who have little comprehension of the equipment or its various functions. They have no knowledge of international trade, foreign exchange trends and cost benefit analysis. Finally, the whole system is bereft of any sound financial advice.

To start with, all appointments that are critical to the defence procurement process must be identified and duly notified. Keeping profile of each job in mind, essential criteria must be evolved for the selection of personnel. To induct talent and inject professionalism, norms for formal education, related experience, past exposure in similar jobs, demonstrated competence and aptitude must be laid down. Selected officers should have an unblemished record and integrity beyond reproach. To provide continuity, their tenure should be for five years. All new appointees must be given compulsory orientation training to acquaint them with procurement structures, procedures and methodology. Equally important is training of trial teams to enable them to interpolate exploitation of equipment in diverse combat milieu.

India is expected to spend close to 100 billion dollars on capital procurements in the next five years. It has generally been accepted the world over that an efficient acquisition organisation can not only expedite procurements but also affect a saving of up to 15 percent of the capital expenditure in initial purchase price and associated life-cycle costs. When translated into actual figures, saving for India may amount to a whopping 15 billion dollars. Therefore, it is time India puts its act together and pays attention to the quality of the acquisition staff.