Disjointed functioning – bane of defence procurements

Disjointed functioning – bane of defence procurements

Major General Mrinal Suman

Every nation’s defence procurement regime aims at providing effective, affordable and timely defence systems and equipment to its armed forces. The stated aim of India’s Defence Procurement procedure is no different. It 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”.

Procurement of new weaponry and equipment in all nations is a multifaceted, protracted and cross-disciplinary activity, requiring participation of multiple agencies. Requirement of new weapon systems flows from threat analysis and required capabilities. Thereafter, a stock-taking exercise is carried out to identify existing gaps in capability. Finally, perspective plans are evolved to acquire wherewithal to cover the gaps.  

Close coordination between different agencies is of critical importance in all multi-disciplinary activities and defence procurement is no exception. That is the reason why most countries have evolved a system of unified functioning. They have created a nodal agency to exercise overarching oversight and to ensure that participating agencies do not work at cross purposes.  

In Britain, the Defence Board, under the Permanent Under-Secretary for Defence is the central authority to provide senior level leadership and strategic management of defence. It is assisted by two major structures in the acquisition process - Joint Capabilities Board decides what capabilities the forces need and Defence Equipment and Support (DE&S) delivers the required equipment or systems. It must be recalled here that DE&S was created in April 2007 by merging two erstwhile entities, the Defence Procurement Agency and the Defence Logistics Organisation.

German defence acquisitions are managed by the Federal Defence Administration (FDA), as per the Defence Policy Guidelines issued by the German Ministry of Defence on 27 May 2011.  FDA is assisted by four organisations. Directorate General of Armaments is responsible for defence research, planning and induction of equipment. Federal Office of Defence Technology and Procurement manages all armament projects (excluding IT) and ensures that the demands of the armed forces are fully met. Modernisation Directorate provides active support for all modernisation projects to improve economic efficiency and effectiveness of the armed forces. Finally, Bundeswehr IT Office handles all IT related issues.

The French Government has adopted a highly centralised model. General Directorate for Armament (Direction générale de l’armement), or DGA in short, is the empowered overarching authority. It oversees the requirement of modern war systems by the French armed forces, analyses various options, identifies the most appropriate route, facilitates development and ensures timely induction. It manages about 80 percent of defence equipment budget.

The US defence acquisition system is characterised by centralised policies and decentralised execution of acquisition activities. The Office of the Under Secretary of Defence for Acquisition, Technology and Logistics is the nodal agency and the overall authority tasked to oversee the complete defence acquisition process. It is assisted by Joint Requirements Oversight Council in reviewing programmes and Functional Capabilities Board in assessing capability gaps and proposals. Contract support is provided by the Defence Contract Management Agency and logistic support by Defence Logistics Agency.

The Indian Conundrum

  

Despite repeated assertions to the contrary, India’s defence procurement regime has been a total failure. It has failed to achieve any of the stated objectives. Procurement cases continue to languish in bureaucratic tangle. Worse, India’s dependence on foreign systems continues to grow while India’s defence industry remains underdeveloped. Periodic reviews are announced with much flourish, but there has been no improvement on ground.

One of the primary reasons for this failure is a total lack of unity of purpose and functioning amongst the various government agencies. The extent of lack of coherence is appalling. Instead of adopting an integrated mission oriented approach, various organs tend to guard their own turf for narrow parochial interests. The case of the Tactical Communication System (TCS) is symptomatic of this malaise. TCS is a mobile wide-area network for battlefield and is universally considered to be a potent force multiplier. An urgent proposal for TCS was initiated by the army in 1996.

The proposal was duly accepted as an upgrade of the existing facility. After wasting five years in processing the case accordingly, the proposal was converted into a ‘fresh acquisition’, to be procured through a hybrid categorisation of ‘Buy and Make’ and ‘Make’ routes. Consequently, extensive work had to be carried out afresh. In a surprise twist, the case was recategorised as ‘Make (Hi-Tech)’ in 2007 and the whole process had to be started ab initio. Concurrently, surreptitious efforts were made by the Department of Defence Production and the Defence Research and Defence Organisation to make it a captive project.

It is only now, after a delay of 16 years, that orders have been placed on two vendors to develop prototype of the system. According to highly optimistic estimates, it will take another decade before the required quantity is inducted. The case shows the degree of gross inefficiency of the system and disjointed functioning of the agencies involved – taking a quarter of century to provide urgently needed equipment to the army. Selfish turf-interests override national concerns.     

The following five agencies participate in India’s defence procurement system:-   

a)    The Services 

                                                                                                            

Being the users, they are the main stake holders. Yet, they are to blame for a   number of infirmities.  They prepare three types of perspective plans – 15-year Long Term Integrated Perspective Plan, 5-year Services Capital Acquisition Plan and Annual Acquisition Plan. As these are prepared in isolation without any confirmed budgetary support, they tend to be mere wish-lists – a compilation of equipment proposals initiated by different directorates. Resultantly, these plans lack pragmatism and sanctity. Worse, they are not adhered to diligently by the services themselves. Newer proposals are given higher priority over the ones included in the approved plans.

Once a procurement proposal initiated by the services is accepted, the services are asked to spell out minimum performance attributes corresponding to the task/tasks envisaged to be performed by the equipment sought. Users’ requirements are spelt out in terms of functional characteristics which are translated into essential parameters, called Services Qualitative Requirements (SQR).

The services are highly sensitive about their right to formulate SQR. Despite the fact that they possess no expertise, they are wary of consulting others. Like spoilt children seeking the latest toys, the services demand equipment with utopian capabilities, cost being of no concern to them.

Unfortunately, there is little dialogue between the three services as well. The army does not consult the air force while framing SQR for helicopters. Similarly, it does not seek advice of the navy while demanding deep sea diving equipment. As a result, most cases get aborted midway due to faulty SQR.

To validate performance characteristics of competing equipment in actual ground and climatic conditions, users’ trials are carried out under the aegis of the services. Herein again, the services jealously guard their turf and refuse to consult other agencies. Quite irrationally, they feel that being the users, they alone are competent to carry out trials. They fail to appreciate the fact that testing of equipment with newer and differing technologies requires expertise which they do not possess.  

b)    Department of Defence

The Department of Defence (DoD) is the controlling authority for all acquisition activities. To start with, it issues Defence Planning Guidelines that form the basis for the formulation of all perspective plans. Defence Acquisition Council (DAC) constituted under its aegis, acts as the controlling body. In addition to approving the perspective plans, it delineates the route for procurement in respect of every proposal initiated by the services.

DAC is riven with factionalism. Every agency follows its own agenda. Whereas the services demand early procurement of their critical requirements, Department of Defence Production (DDP) wants to ensure that all orders go to the public sector entities, irrespective of their capabilities. On the other hand, Defence Research and Defence Organisation (DRDO) blocks all imports by making false claims of possessing  competence for indigenous development within the acceptable timelines, whereas its past track-record is abysmal to say the least. 

DAC is best known for its inability to reconcile inter-agency differences. For example, it has not been able to nominate monitoring agency for offsets – Acquisition Wing or DDP. Although defence offsets were introduced in 2006, vacillation continues while millions of dollars worth of offsets remain unsupervised, unchecked and probably unfulfilled.

DoD can also be faulted for sitting on a pedestal with a deportment of superiority. It has acquired an attitude of dispenser of favours and displays a distinct tendency for functioning in isolation. It continues to concentrate all decision making powers in its own hands and refuses to share authority with others. Even though Headquarters Integrated Defence Staff has been asked to examine all procurement proposals, no powers have been delegated to it. Every case has to be referred to DoD for decisions repeatedly, thereby delaying the whole process inordinately.

c)    DDP

No other agency has done as much damage to India’s quest for speedy procurements and the development of indigenous industry as DDP. It exercises control over 9 defence public sector undertakings and 39 ordnance factories.  Despite their inability to produce quality equipment as per the accepted time schedule, the services are forced to source their requirements from them. Very often the services are given only one option – ‘take whatever the public sector offers or do without it’.  

In all ‘Buy and Make’ cases, wherein bulk quantity is manufactured in India, recipient of imported technology is always a public sector entity. Yet, they have failed to absorb such technologies to upgrade their own expertise. As the recent case of Tatra vehicles has revealed, most public sector entities have assumed the role of traders – they assemble imported sub-assemblies and make huge profits by selling them to the helpless services at inflated prices.

Being a part of the Ministry of Defence, DDP gets to know of the impending acquisition proposals well in advance. It promptly conveys this inside information to one of its public sector entities to enable it to sign necessary MOU with foreign vendors. Such a preemptive move forestalls competition from private companies and presents a fait accompli to the decision makers.

DDP is commonly accused of charting its own selfish path by perpetuating an unhealthy monopoly of grossly inefficient public sector enterprises by wresting preferential treatment for them. Entry of far more efficient private sector is blocked through subtle and unobtrusive policy tweaks. Indisputably, DDP has contributed directly to the current state of affairs – neither the public sector has acquired capability of producing high-tech equipment nor does it allow the private sector to enter defence production. Consequently, India’s defence industry continues to languish.

d)    Defence Finance

As defence procurements have huge financial outlays, every proposal is rightly subjected to close fiscal scrutiny by the Defence Finance functionaries at all stages up to the signing of the contract. They actively participate in commercial evaluation and negotiation of contract.

Undoubtedly, their role of ensuring financial propriety is of utmost importance. Unfortunately, instead of being facilitators and advisers, they have become the biggest impediment to speedy conclusion of cases. It is incongruous that most of them have never studied a word of finance/economics (many are MA in English Literature or Sanskrit) and know little about the defence weaponry, yet they masquerade as defence economic advisors and exercise overriding control.

They do not consider themselves to be an integral part of the overall effort. They enjoy unbridled authority without corresponding accountability. They never accept any responsibility, claiming that they are mere advisers and have no role in decision making. As they have no stake in ensuring speedy fructification of procurement cases, they keep raising infructuous and at times ridiculous observations.  The fact that the Defence Finance officials take orders from the Ministry of Finance worsens the situation.

e)    DRDO

The saga of DRDO is one of missed opportunities and wasted funds. DRDO holds a dubious record of never developing any equipment in the promised time-frame and conforming to the specified parameters. Theirs has been a history of false claims, tall promises, unexplained delays and sub-optimal products. In cases where they do manage to achieve some success, the time taken is so long that the equipment is obsolete even before its induction. Thus, the services are forced to live with critical voids.

Although the primary task of DRDO is to develop indigenous defence technologies and support the services in their modernisation plans, it is more interested in safeguarding its own interests. Driven by the selfish motive of expanding its domain and getting additional budget, it stalls import of even urgently required equipment by falsely claiming competence to produce the required equipment indigenously. Worse, DRDO wastes considerable resources by undertaking needless and unrelated projects.

The Way Forward

Group of Ministers on National Security, in their report submitted to the Prime Minister on 26 February 2001, had faulted the then existing system for defence procurements and opined that it suffered from lack of integrated planning and implementation. Therefore, it suggested the creation of a separate, dedicated and integrated institutional structure to undertake the complete gamut of procurement functions to inject a higher degree of synergy, synchronisation, co-ordination and professionalism.

Although the Acquisition Wing was created as an integrated setup with members drawn from the bureaucracy, the services and the defence finance, it is a sham. Expectedly, it has failed to deliver as a cohesive body. Bureaucrats continue to call all shots and are unwilling to treat service officers as equals. Very cleverly, through the façade of ‘integrated setup’, bureaucrats have managed to obtain the services of the defence officers to do their secretarial spadework. They have been reduced to the status of note-preparers for the bureaucrats to give decisions. Defence officers have been given no powers at all.

Lack of unified functioning is costing the country dear. For example, once a Service Headquarters (SHQ) forwards SQR of equipment sought to DoD, they are considered inviolable. DoD does not consider it necessary to have a dialogue with the sponsoring SHQ as regards the cost-benefit analysis of the proposal. At times, minor dilution of some lesser SQR can result in huge financial gains. Unfortunately, due to segmented and compartmentalised functioning of DoD and the services, the nation suffers.

Reforms in structures and procedures become meaningless unless the impeding dynamics of domain interests and narrow attitudes are ruthlessly eliminated. It has generally been accepted the world over that an efficient and unified acquisition work force can not only reduce acquisition time by up to 30 percent but also affect a saving of up to 15 percent of the capital expenditure. For a country that plans to spend up to 120 billion dollars in the short term, it will be a colossal saving.