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Centralized Defence Equipment Procurement

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To make the procurement process more effective and accountable, a separate body for defence procurement is the need of the hour, as the delay in procurements have derailed the entire modernization programme of the Indian Defence Forces.

Despite recent reforms, India's defence procurement system retains the perennial pain points, the disturbing facts and distressing trend of past are attributable to defence industrial base remaining anemic under protective in non competitive environment and monopolistic tendencies, faulty procurement policies, resultantly dependency on Foreign OEM. These have been supplemented by 'systemic complexities' associated with lack of trust, functioning in a closed and relatively autonomous manner. Indeed, such practices continue to this day despite the introduction of a series of reforms.

This has resulted in capability gap. India's modernization programmes for the three services have been significantly delayed for reasons of inadequate planning and less than fool proof systems. Review of the status of few major equipment in terms of progress vis a vis initial contracts reflects inability of endless reviews and studies to make any significant change, or is the entire process of modernization simply namesake instead of credible towards battle worthiness.

To make the procurement process more effective and accountable, the Indian MoD is also planning to have a separate body for defence procurement as per the recommendation of Dhirendra Singh committee. Accordingly, an eight-member committee headed by Shri Vivek Rae, former DG (acquisitions) has been formed to recommend a centralized structure to oversee equipment purchases, streamline and expedite the process of buying equipment for the Armed Forces. This committee includes senior retired officials from the Army, Navy and Air Force.

The Existing Structure

At the MoD level, the two important entities in the field of logistics are the Defence Minister's Production and Supply Committee and Defence Research and Development Council. The role of the Production and Supply Committee is most important as it covers the entire gamut of planning force levels and equipment planning related to availability of resources. The COSC advises the Defence Minister on all military matters including logistics matters. Procurement is the first step in the chain of defence logistics and though there is a huge organisation for this purpose, however, there is no single authority has been made overall responsible/accountable for the unprecedented slippages in the procurement timeline. Finally the only man remains accountable is the Defence Minister. The Indian Armed Forces are stuck with vintage equipment which has lived their life. There is no unified command for defence logistics either at national level or at service level resulting in considerable amount of divergence in procurement, stocking & maintenance and support functions.

Capital Procurement

The Defence Acquisition Organisation is responsible for capital procurement of platforms and systems of new induction, based on the projections of defence services respective directorate.  It comprises of four key bodies as well as an acquisition wing. These are: -

  • Defence Acquisitions Council (DAC).
  • Defence Procurement Board (DPB).
  • Defence Production Board.
  • Defence Research and Development Board.

The Acquisition Wing, headed by the Special Secretary (Acquisition), handles all matters concerning defence acquisitions of capital nature. It assists the Defence Procurement Board in its functioning.  The Special Secretary (Acquisition) is assisted by a Financial Adviser (FA) Acquisition drawn from Defence (Finance). FA (Acquisition) functions as an Integrated Financial Adviser to the Special Secretary (Acquisition).

The Acquisition Wing consists of Land, Maritime and Air Divisions dealing with the Army, Navy and Air Force respectively and a Systems Division responsible for systems having tri-service applicability and medical equipment. Each of the Divisions has an Acquisition Manager (a Joint Secretary level officer), a Technical Manager (Major General Equivalent Defence Service Officer) and a Finance Manager (Additional Financial Advisor level officer from Defence Finance).

Though the organisation of DAC is layered but the involvement of the service element or the users in decision making is limited to a Maj. Gen. Level Officer as Tech Manager only for advice on technical matters. The other drawback is that it does not have its own permanent cadre and is riddled by end number of committees, which further delays the proceedings.

Integrated Defence Staff (IDS) provides a degree of co-ordination amongst the three services and ensures inter-service and intra-service prioritisation. Chief of Integrated Staff to Chairman (CISC) is responsible for the co-ordination of long-range plans, five year plans and annual budgetary proposals of the three services in consultation and co-ordination with the Integrated Services' HQ. The Indian Army, Navy, Air Force and the Coast Guard form part of the Integrated Headquarters (MoD) under the Ministry of Defence.

Overview of Procurement Agency in Developed countries

No government can afford to be complacent about its defence acquisition machine and has reason to search the ways for best practice. Some governments trying new approaches include Australia's application of incremental acquisition methods, and New Zealand's exploration of leasing possibilities for combat equipment, both looking for a better way of doing business. The U.S. and the UK have been reforming their acquisition systems continuously for at least the last two decades. In France, the role of DGA is being changed with more focus on preparation for the future, in particular long term cost implications; private ownership is being extended in defence industry; and industry is being required to bring down its prices by as much as 30 percent. Let us go in for more details to draw lessons for our country.

United States of America

The Under Secretary of Defense (Acquisition and Technology) or the Defense Acquisition Executive (DAE) is overall responsible for the policy and management of the acquisition system. Similar positions are created within the Services.

In cases of major defense acquisition programs or programs involving Command Control and Intelligence programs the PM reports through the Head of the Component to USD (A&T) or ASD (C3I) respectively. USD (A&T) takes precedence over Service Secretaries in acquisition matters and ranks number three within the DoD hierarchy. He is the principal staff assistant and advisor to the Secretary of Defense and Deputy Secretary Defense for all matters concerning acquisition, technology, and logistics.

As legislated by Congress, the primary responsibilities of the USD(AT&L) include:

  • Supervising Department of Defense acquisition
  • Establishing policies for acquisition (including procurement of goods and services, research and development, developmental testing, and contract administration) for all elements of the Department of Defense
  • Establishing policies for logistics, maintenance, and sustainment support for all elements of the Department of Defense
  • Establishing policies of the Department of Defense for maintenance of the defense industrial base of the United States.

In addition to performing the above functions, the USD (AT&L) has oversight responsibility for: military installations and their environment; operational energy plans and programs; major weapon systems; missile defence programs; space and intelligence programs; and nuclear and chemical and biological defense programs and the nuclear forces.

They also have their agency staff at services level:

  • Assistant Secretary of the Army (Acquisition, Logistics and Technology) (ASA(ALT))
  • Assistant Secretary of the Navy (Acquisition, Logistics and Technology) (ASA(ALT))
  • Assistant Secretary of the Air Force (Acquisition, Logistics and Technology) (ASA(ALT))

France

DGA (Director General Armament) under the MoD provides the French armed forces with the necessary equipment at the best cost and in due time. Its activities cover:

  • The management of armaments programs
  • The procurement of armaments equipment
  • The technical and scientific expertise related to the outfitting forces
  • Trials and evaluations
  • Overall training and support

Australia

Earlier, the Defence Materiel Organisation (DMO) was responsible for the acquisition, however, the agency was dissolved in June 2015 and its functions transferred to the Capability Acquisition and Sustainment Group within the Department of Defence.

The Capability Acquisition and Sustainment Group (CASG)

They purchase and maintain military equipment and supplies required by Defence and approved by Government. Their annual priorities and funding plans are set out in the Department's annual Portfolio Budget Statements, and performance is analysed and reviewed in the Major Projects Report and the Defence Annual Report.

The CASG is headed by the Deputy Secretary and is supported by the Group Business Manager. They are responsible for CASG's portfolio of acquisition projects and sustainment products. The CASG leadership team has a good balance of private and public sector experience, as well as extensive military domain knowledge. Others are depicted in the table.

United Kingdom

Earlier the Defence Procurement Agency (DPA), of the MoD was responsible for the acquisition of materiel, equipment and services, led by the Chief of Defence Procurement, however, in 2007 the Agency was merged with the Defence Logistics Organisation to form a new organisation called Defence Equipment and Support under the Chief of Defence Materiel.

Defence Equipment and Support (DE&S)

They manage a vast range of complex projects to buy and support all the equipment and services and work closely with industry, including through partnering agreements and private finance initiatives. Their responsibilities are:

  • The procurement and support of ships, submarines, aircraft, vehicles, weapons and supporting services
  • General requirements including food, clothing, medical supplies and temporary accommodation
  • Inventory management

The DSES works under the leadership of the Chief of Defence Materiel, a four-star officer. He is responsible for managing key relationships with the Capability Sponsor and User. They work at the strategic level to make sure that the operational readiness and sustainability needs of the User are met. There are four three-star posts under the Chief of Defence Materiel.

Germany

Directorate General of Armaments (DGA) under the MoD provides the German armed forces with the necessary equipment at the best cost and in due time. Organisation is as given in the Table.

Inference

Defence procurement, is a 'cross disciplinary activity requiring expertise in technology, military, finance, quality assurance, contract management, project management, administration and policy. The procedures for Capital and Revenue procurement are to be fine-tuned to the changing requirements of the defence services, the developments in the industrial and economic environment of the country and the exponential increase in requirements due to the proliferation of inventory. The aim should be to have a large number of common sub-systems between the three Services with the total life-cycle costs concept of the equipment as against the present concept of acquisition costs only. The salient features of the procurement policy of developed countries are summarized in the Table.

Whereas in India, there is no organisation at the national level to oversee, coordinate and integrate defence needs with national development which results in duplication and wasteful expenditure. Defence logistics has not been dovetailed into overall national planning. Main issues need to be resolved are:

  • Lack of inter-linkages between the development plans of the nation and defence requirements.
  • The material requirements of all the three Services are somewhat similar with minor variations. However, all the three Services have separate methods and procedures for procuring materials and supplies. A common procurement agency would be cost-effective, improve quality control and would streamline stocking levels and inventory control. There is also a case for integrating the logistics needs of the paramilitary forces especially when a large number of them are employed for border-manning duties and counter-insurgency operations.
  • Lack of interaction and multiple procurement agencies within MoD work against the principle of economy and lead to increased costs. Bureaucratic delays in decision-making in financial and production planning results in cost escalations.
  • The procurement procedure comprises ten stages, The entire process, according to the timeframe prescribed in DPP, should not take more than 74-137 weeks, in practice, however, it takes much longer than this, anywhere between 3 to 5 years and has gone up to a decade in no of cases. This obviously is antithetical to the need for expeditious procurement. We need to combine few stages or done away with.

Recommendations

  • At the National level, there is a need to establish an NLC on the same lines as the National Development Council. The council should have representation from the Finance Ministry, Industrial Development Board, Department of Science and Technology, Defence, Confederation of Indian Industries (CII) and other industry bodies besides members directly concerned with logistics infrastructure. The broad mission of the NLC would be to ensure optimum utilisation of national resources; industrial mobilization and achieving cost-effectiveness.
  • DPSU and OFB be corporatised and given free hand to manage, compete and perform. Given the lead in infrastructure and skill they are capable of meeting the competitive challenges.
  • There is a need for a Defence Logistics Agency, like the one in the USA and the DLO in the UK to coordinate the efforts of the three Services and it should be overall responsible and accountable for all procurement. The DLA could be placed directly under the MoD and should also oversee the performance of the DRDO, Ordnance Factories, Defence Public Sector Undertakings, DGQA, the Directorate of Standardisation, and so on. This agency should also focus on export of defence items.
  • The procurement Agency should have representation from the Defence Forces at decision making level and it must have a permanent cadre to ensure continuity.
  • Appointment of the CDS, to arrive at a decision on adopting a unified military logistics system needs to be institutionlised and the Chief of Defence Logistics should be placed under the CDS.

The creation of a separate Defence Procurement Organization which is adequately staffed, skilled and sophisticated to address procurement and life cycle sustainment of platforms and technologies will go a long way to fill a gap that has historically limited defence procurement effectiveness. There is always resistance to change, but in the aftermath of 53 years of experience as an independent nation; the time has come to take proactive and dynamic decisions for cost-effective management of defence. Adhering to status quo would only result in delays and wasteful expenditure in the realm of defence logistics. In India we are by and large following the traditional model and need to migrate to a model being adopted by most of the developed world.

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