Major General Mrinal Suman, AVSM, VSM, PhD
Procurement of defence equipment in open, free and impartial competition is one of the stated aims of the defence procurement procedure (DPP). To achieve that, a well defined process has been prescribed in DPP. To start with, all eligible vendors are invited to submit their technical and commercial proposals in separate sealed envelopes to the Acquisition Wing. Vendors whose technical offers are found to fully comply with the specified Services Qualitative Requirements (SQR) are asked to field their equipment for field trials to validate performance claims. Finally, commercial offers of technically acceptable vendors are opened and compared to identify the lowest compliant bidder for the award of the contract.
It is a rational method and should have succeeded in expeditious procurement of all requirements of the services. Unfortunately, the experience of the last eight years has been highly disappointing. India has been unable to conclude a single major contract in a competitive environment as mandated in DPP. Take the case of artillery guns. It has been dragging on for close to a decade now without any result. As a desperate measure, India has been forced to approach the US for emergent supply of 145 M777 155mm Light-Weight Towed Howitzers under the US Foreign Military Sales programme. It will again be a single vendor deal.
Most knowledgeable observers were not surprised at the above development. In his report covering the period January 2003 and March 2005, the Comptroller and Auditor General had pointed out that 66 percent of all procurements had been carried out on single vendor basis during the period under review. Although a number of reasons are commonly cited for India’s inability to procure equipment in multi-vendor competition, the root-cause has unfortunately remained overlooked. It lies in the provisions of DPP that impose restrictions on the nature and level of technology the services can demand.
No Cutting-edge Technology for the Services
Despite MoD’s claims that it aims to ‘equip Indian armed forces with equipment, weapons systems and platforms that provide an edge to them over our potential adversaries’, provisions of DPP effectively rule out procurement of technologically advanced defence systems.
Equipment is always sought by the services for the performance of designated operational functions. For that, the equipment must possess required performance attributes. These attributes define essential functional characteristics which are spelt out as SQR. They express the user’s requirements in terms of capability desired with minimum required verifiable functional characteristics in a comprehensive, structured and concrete manner.
Formulation of SQR is really the start point of every procurement proposal. Usually, it takes 4 to 5 years for a major contract to be concluded, another 2 to 3 years for the equipment to start getting inducted and a further 3 to 5 years for all the supplies to arrive. This implies that the normal time lag between the formulation of SQR and commencement of supplies may stretch between 6 to 8 years while it may take 9 to 13 years for induction of the contracted quantity.
In order to generate multiple responses, DPP mandates that SQR should be of ‘contemporary technology widely available in the world/indigenous market’. It stands to reason that any technology that is ‘contemporary and widely available’ at the time of making SQR will invariably be approaching obsolescence by the time its induction commences and would certainly be close to becoming obsolete when the final deliveries are received. Thus, DPP’s stipulation of ‘contemporary and widely available technology’ effectively rules out modern equipment for the Indian armed forces.
Further, all vendors whose equipment are found to be fully SQR-compliant are considered fit for award of contract. Better performance gets no extra consideration. In other words, no merit list is prepared to prioritise equipment as per their demonstrated performance. All of them are considered at par and the cheapest one is procured. As better performing equipment would invariably be based on more sophisticated technology and will always be more expensive than mediocre technology, the services get deprived of the latest equipment.
The services have realised that they would never be able to get high-tech equipment under the provisions of DPP and would have to remain reconciled to receiving cheapest ‘common place technology’. Therefore, whenever they want the most modern equipment, they approach MoD to invoke single vendor provisions. Phalcon AWACS, Smert rocket system, Sukhoi aircraft, Javelin missiles, Hercules aircraft, radars and electronic hardware are some of the recent examples of one-to-one deals outside the purview of DPP.
The Way Forward
In special circumstances, it may be in India’s interests to negotiate deals on one to one basis without open tendering. State-of-the-art defence equipment and platforms that are not available openly in the world arms market can only be got from a willing friendly nation. However, single vendor procurements suffer from major limitations and should be resorted to in exceptional cases. In the absence of comparative quotes, single vendor dictates costs, exploits buyer’s dependence and provides indifferent after sales support. Even the environment views single vendor procurements with suspicion and skepticism.
Importance of technology in warfare is well recognised. As service life of major weapon platforms extends up to 30 years, it is essential that equipment procured for induction is of latest genre of technology so that it does not become obsolete prematurely. India must make its procurement procedure more responsive to the needs of the services as regards need for cutting-edge technology.
For that, instead of SQR, a performance range with minimum inescapable and maximum acceptable limits should be prepared. Thereafter, various performance parameters should be assigned differential weightage as per their criticality. After technical evaluation, a matrix should be prepared to identify top performers within the permissible range, thereby giving due credit to better technology. Commercial proposals of three best performing equipment should be opened and their inter-se commercial appraisal carried out to determine the most cost-effective option.
Need for generating competition cannot be disputed but it must not be at the cost of saddling the services with run of the mill equipment. Therefore, India should adopt the above mentioned system of preparing performance matrix in a scientific and transparent manner. It will facilitate procurement of technically superior equipment in a competitive environment ensuring best value for money.
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