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Defence Procurement Planning – Only Rhetoric, No Substance

Speeding up decision making, de-layering approval and process stages, ensuring level playing field and accountability are some of the measures for building a proper defence procurement planning----

Planning for a country’s defence procurement assumes significance on account of building national security, defence preparedness and more importantly becoming self-dependent in manufacturing of arms and equipment. However, a holistic approach has been long absent mainly due to defence procurement bureaucracy. The absence of timely decision during procurement cycle, placing piecemeal and emergency orders, cancelling of tenders, the inability to commit requisite funds for modernisation and lack of synergy between the Armed Forces and Government entities in development and manufacturing have obstructed the defence planning in India.

Procurement Planning and Budgetary Allocation

The equipment requirements of the Indian Armed Forces are planned and progressed through a detailed process which includes 15 Year Long Term Integrated Perspective Plan (LTIPP), a five year Service-wise Capability Acquisition Plan, a two year roll-on Annual Acquisition Plan and deliberations by the Defence Acquisition Council (DAC). However, as pointed out by successive reports of the Standing Committee on Defence, these vital documents lack the desired rigour, often prepared after the commencement of plan period and are not approved by the concerned agencies. Also, they do not facilitate budget formulation, timely acquisition and industrial preparedness as well.

Procurement Process Cycle

DPP stipulates a time schedule for completion of the procurement cycle of defence equipment which seems to be unduly long. Noteworthy, the first step towards formulating the proposal for any procurement is framing of the basic Services Qualitative Requirements (SQRs) which take years (minimum 22-225 weeks) to get formulated by the Service HQ and after that getting processed through various committees. This is followed by Acceptance of Necessity (AoN) by DAC, which pave the way for the tendering process to start. The below-given figure depicts the long list of major activities of the procurement process cycle and usual approximate time taken at each main activity for a major platform.

The DPP estimates that the entire procurement process comprising of 17 stages from granting of AoN to RFP to contract inking could take up to two to three years but in actual practice, it takes over 5 years for the Government to purchase even simple items like ballistic helmets. It is observed that the procurement delays from the formulation of technical requirements to the final approval by the competent financial authority like the Cabinet Committee on Security, amount to 2.6 to 15.4 times the laid down deadlines for various projects.

Procurement Time Lines

The Indian Air Force (IAF) in 2000 itself expressed interest in buying 126 Medium Multi Role Combat Aircraft (MMRCA) MMRCA fighters. Subsequently, a RFI was issued in 2001 in this regard; however, a RFP worth $12 Billion only got issued in 2007 after a prolonged delay of almost 6 years. It was only after over five years of procurement process including of trials that finally French defence major Dassault Aviation was selected. The contract negotiations that began after, took almost 27 months with finally reaching to a deadlock over the cost issues. Finally, the programme was shelved resulting in wastage of efforts, time and money. And the Government in April 2015 announced its decision to acquire 36 Rafale combat aircraft worth over $5 Billion in flyaway condition from France under Government-to-Government (G2G) route.

The MMRCA is not just one case that appears to be ill-timed and undoubtedly ill-calculated and reflects poorly on India's defence acquisition process but there are innumerable including of 145 BAE M777 ultra light howitzer; assault rifles for the Army, 197 Reconnaissance & Surveillance Helicopters to name a few.

Acceptance of Necessity (AoN) is not Procurement

In most of the Parliament questions on procurement the Government quotes the number of AoN accorded and surprisingly our Member of Parliament hardly go deep in to the issue. AoN is just one initial step in the defence procurement process and all AoNs do not result in RFP being issued. As per the Standing Committee on Defence (2019-20), AoNs issued over FY15-FY19 is almost Rs 3 Lakh Crores; however, out of these almost about 63% are yet to convert into orders as shown in Figure below.

Furthermore, as per an internal report of MoD, only 8-10% of 144 proposed deals in the last three financial years fructified within the stipulated time periods. The average time taken by these 133 schemes was 52 months, which is more than twice the laid down duration of 16-25 months stipulated in the defence procurement policy. The case of Project 75I programme under which six new advanced stealth diesel-electric submarines are to be built for the Indian Navy substantiate this fact. The AoN for the Project 75I has lapsed the number of time (around 7 times) till date and thus the procurement process has remained stalled. This project first had got AoN way back in November 2007 but since then awaiting issuance of tender. The programme now is expected to cost Rs 80000 Crores which was initially to cost Rs 50000 Crores years back.

Redundant Stages

One of the major obstructions in the defence procurement not adhering to the timeline is the fact that there are number of redundant stages in procurement process which need to be done away or streamlined. The number of committees and its member on the name of collegiate vettings within Services HQ should be lessened. Incidentally, members keep on changing depending on the time and service commitment, leave and transfer. Below given figures depicts various committees involved in the procurement process.

The number of such committees has been increasing with each expert committee and revision of DPP. Some of these committees such as Collegiate committee for Phase wise vetting of QR, SCAPCC/ SCAPCHC, Technical Oversight Committee (TOC) etc. are mere duplicated efforts.  The User has to telescope formation of QR and realistic field trials.

Standardisation of Equipment

The three Defence Services need to standardise common inventory equipment to reduce the overall logistics and shed preference for imports with unrealistic individual services qualitative requirements (SQRs). SQRs lay down requirements of the equipment, preliminary specifications, as well as the maintainability and quality requirements. While laying down the SQR the distinction needs to be made between procurement and development.  Realistic GSQRs have to be realistic, unfortunately at times the Users ask for moon.  For example, a GSQR for two caliber Assault Rifles few year back is the classic case.

Furthermore, as per a CAG report, at times, the QR parameters are vendors driven, besides being unrealistic as they could not be met by even some of the biggest defence companies in the world. Such a narrow approach to QR formulation, which is key to determine quality, price and competition, is bound to complicate procurement and derail acquisition. Like in the case of the MMRCA and Attack Helicopters, the QRs of the IAF contained 660 and 166 parameters, respectively and accordingly created bottlenecks during technical evaluation as none of the vendors could fully meet all the parameters. In fact, as per CAG, in 90 percent of cases, none of the bids submitted by vendors could meet all the IAF’s QRs.

Vested Interest of Government Sector

Moreover, at times even when the Qualitative Requirements (QR) of a particular system does not meet the end user then also it happens that they are still forced to buy keeping in mind the vested interest of Indian defence production and research agencies – DRDO/OFB/DPSUs. Like, in the case with Akash missile systems. As per CAG report in 2017, 30% of the missiles failed when tested. The Army too had said in 2017 that the missile did not meet its operational requirements due to higher reaction time. Recent reports of 2019 suggested that the IAF’s Akash Missile squadrons reported frequent unserviceability and long duration downtime while alleging that several government agencies, including missile manufacturer Bharat Dynamics Limited, Bharat Electronics Limited, did not tell the truth to the government about malfunctioning Akash Missile system. Still, in Sep 2019, the Government approved the procurement of seven additional squadrons of Akash missiles for the Indian Air Force at a total cost of Rs 5,500 Crores and there are more orders for Army in pipeline as well. The defective ammunition produced by OFB lying with Ammunition depot is another such example.

Procurement Pattern

Procurement must be based on capability, by using its bargaining power to be able to import intelligently and acquire the requisite transfer of technology needed to promote domestic capacity. The plethora of policy reforms over the last five to six years, aimed to bridge the gap between defence modernisation and indigenisation by getting wider private sector participation, is on a very slow start. The Raksha Udyog Ratna (RUR) policy announced soon after the defence sector was opened up in India for the private sector in 2001 was scrapped. The ‘Make in India projects’ made no progress and now ‘Strategic Partnership’ is moving at a snails’ pace. Rather, in last few years there has been no single big ticket defence contract inked by the country for the Armed Forces. And, most of the contracts signed have been direct or emergency based contracts with virtually no or negligible technology transfer.

Rhetoric and announcement on self reliance in defence development and manufacturing have been going for decades without any tangible effect. One such example is the cancellation of Rs 3200 Crores deal with Israel for 3rd generation 8356 medium-range Spike ATGMs in 2017 even after conducting trials and negotiations. The deal also envisaged partnership of manufacturer Rafael Advanced Defence Systems with private company Kalyani group and both even had set up a missile sub-systems manufacturing unit. The main reason for cancellation of the Spike project was the DRDO's assurance of timely development (in next 2-3 years) of the indigenous Nag ATGM missile development programme. However, the product continues to await induction. Noteworthy, the missile has been under development since 2009 and almost Rs 10000 Crores has been spent on the programme. It also still remains doubtful as to whether the Army's concerns including the high cost of the missiles as well as various technical limitations have been attended to. Further, even by the time it gets inducted there will be much technological advanced 4th and 5th ATGM in other countries making India lagging behind.

Rhetoric and announcement on self reliance in defence development and manufacturing have been going for decades without any tangible effect.

Way Forward

Acquiring defence capability and maintaining operational preparedness cannot be done by way of merely according AoN but what matters is making a decisive difference by accelerating the procurement process and to supplement it with committed funding as per the respective requirement. The need of the hour is having a well defined Defence Procurement Planning, speeding up decision making, de-layering approval and process stages, ensuring level playing field, to unleash and promote indigenization. Some of the steps that can be considered for building a proper defence procurement planning are discussed as under.

The first step requires the procurement procedures and the methodology of induction of new weapons and other systems need to be streamlined with bottlenecks to be removed. The Government must thus take all requisite steps to ensure that unnecessary delays are avoided and the timelines are adhered. For ex. requirement of Rifles for the Armed Force can be standardized and rather than going for different tendering process, a single common tender can be issued to reduce the procurement process and also time and cost associated.

Secondly, the procurement process needs to be supplemented with committed funding as per the respective requirement and plans of each Defence Service but of course after due consideration. The need of the hour is optimizing defence expenditure. Over the years, there has been a growing trend by the Armed Forces with regards to returning unspent money due to delays in procurement. Instead of having a separate budget for procuring indigenous armaments, the Government should rather focus on agreeing the persistent demand for non-lapsing funds. One way to do is by considering project-wise allocation of funds that do not lapse and creating an account to put the funds. This in turn will grant ready access to funds whenever any deal is inked and will not be affected by a sudden financial crisis leading to delay or cancellation of any defence purchase.

Thirdly, Government should try and lessen the numerous committees that a defence proposal has to go through as this will help in reducing the time. There are way too many committees with multiple members, each having its own interest. As per a CAG report, on an average, a high value procurement proposal has to pass through 80 members across eight different committees before being sent to the Cabinet Committee on Security. Such a cumbersome committee system with multiple decision points is a perfect recipe for inefficiency and delays.

Lastly, some additional measures such as Setting up of a Project Management Unit (PMU) to support contract management, realistic General Staff Qualitative Requirements (GSQRs) of weapons/platforms and streamlining  the Trial and Testing procedures to make faster procurement decisions, can be looked into by the Government. Also, the Industry must be updated well in advance about Armed Forces requirements, including numbers, specifications, and timeline and the private sector should be given ample opportunities and support by the Government.

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