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SIMPLIFICATION OF MAKE-II PROCEDURE COULD BE A COMPLEX TASK

Indian Government has made changes in the 'Make II' sub-category in order to promote indigenous design and development of the prototypes of high technology. The author analyses the effectiveness of the suo-motu proposals into the scheme of things —

One of the salient features of the Defence Procurement Procedure (DPP) 2006 was the introduction of a 'Make' procedure for promoting indigenous design and development of the prototypes of high technology complex systems by the Indian industry. In a sense this was the precursor of what is toady referred to as 'Make in India' in defence.

            Having drawn a blank for more than a decade since then, with not one development contract being awarded to anyone, the Ministry of Defence (MoD) decided a decade later in 2016 to create two sub-categories under which the 'Make' projects could be undertaken. While the newly-created 'Make I' sub-category entails funding of the cost of development of the prototype to the extent of 90 per cent, the projects under 'Make II' sub-category are supposed to be self-funded by the industry.

            The developments in the last one and a half years have been more encouraging than in the preceding ten years, which saw only three 'Make' project - Futuristic Infantry Combat Vehicle (FICV), Tactical Communications System (TCS) and Battlefield Management System (BMS) making some headway. While future of these big-ticket projects hangs in balance, the Services have drawn up a fresh list of potential 'Make' projects to be undertaken in accordance with the changes made in 2016.

            The first list, brought out in May 2016, had 23 projects. The list was revised in March 2017 with the number of projects going up to 30. The latest list notified in September 2017 contains as many as 44 potential 'Make' projects of all the three Services. The charge is being led by the Indian Army with 22 projects, followed by the Air Force with 12 and the Indian Navy with 10 projects. The list can be accessed at : http://www.makeinindiadefence.com /Updated%20List%20&%20%20project%20manager%20details%20-%2010.7.2017.pdf

            These lists contain useful details about each project, broad specifications, expected minimum order quantity and the time-frame within which the project should ideally be completed. Each project has been assigned a nodal officer whose contact details are given in the list.

            This information was missing in the Technology Perspective and Capability Roadmap (TPCR) released in 2013 with the objective of sensitising the industry about the future needs of the Armed Forces so that it could gear up to meet those needs as and when the project was sanctioned by the ministry. No wonder then that not much headway could be made.

            Learning from the past, the Services have now been actively interacting with the industry to bring it on board and get an idea of which sub-category would suit a particular project. This initiative is crucial for the industry, which has also been taking a keen interest, to make a business case for taking up the projects.

Changes made in the 'Make II' sub-category

In the midst of these encouraging developments, the Defence Acquisition Council (DAC) decided on January 16, 2018 to tweak the 'Make II' sub-category. The scanty details given in the Press Information Bureau Release indicate that the following decisions have been taken by the DAC to simplify the procedure for execution of projects under the 'Make II' category taking into account the fact that this sub-category does not entail any government funding for development of the prototypes by the development agencies:

  • The MoD will henceforth accept suo-motu proposals from the industry
  • Start-ups will be allowed to equipment for the Armed Forces
  • The minimum qualifying criteria for participating in the 'Make II' projects will be relaxed by removing the conditions related to credit rating and reducing financial net worth
  • All vendors meeting the relaxed eligibility criteria will be allowed to participate in the prototype development process
  • The vendors will not be required to submit the Detailed Project Report (DPR)
  • After approval is accorded by the competent authority for a 'Make II' project, all subsequent clearances will be accorded by the Service Headquarters (SHQ) concerned
  • Even if a single individual or firm offers innovative solutions, the SHQ will have the option to accept and process the vendor's development initiative
  • There will be no foreclosure of a project after it is sanctioned, except 'on default by the vendor, to ensure that the successful vendor has assured orders'
  • To hand-hold the industry and start-ups, the SHQs will set up project facilitation teams to act as the primary interface between them and the industry during the design and development stage and to provide technical inputs, trial infrastructure and other facilities required by the developers
  • The SHQs will be allowed to hire domain experts/consultants from the private sector to increase the outreach and enhance awareness among the industry

All these decisions have ostensibly been taken to help the industry. It is also possible that the ministry was spurred by the industry and the DAC's decisions are based on the suggestions made by it. These decisions should further the cause of indigenous design and development in the long run but these could also affect the momentum which has been building up in the past one and a half years. However it is not clear at this juncture how these decisions will be implanted in the existing procedure without causing any anomalies or creating confusion about the modalities of implementation.

Where do the suo-motu proposals fit into this scheme of things?

It would be evident that the existing procedure is Services-driven which is just as well as the primary objective of the 'Make' projects is to meet the futuristic requirements of the Armed Forces, identified by them after an internal assessment as a part the planning process.  Though it is not very clear at this juncture what is meant by suo-motu proposals but going by the dictionary meaning of this Latin legal term, it would imply a proposal made 'on its motion' by the Indian companies, including the start-ups.

            This could change the nature of the existing scheme from being Services-driven to at least partially vendor-driven with consequent diffusion of the focus on meeting the needs identified by the Armed Forces which has been gaining some momentum with the notification of the list of potential 'Make' projects in 2016 and 2017.

            It is also possible that the intention of the DAC is to let the Indian industry pick up projects which relate to the identified need of the Armed Forces and make suo-motu proposals that seek to fulfil those requirements but the only way it can be done under the present circumstances is by picking up projects from the current list of 'Make' projects, which are anyway being acted upon by the SHQs and the industry.

            Whether the proposal is unrelated to any need identified by the Service or emanates from the notified lists, the SHQs will have to examine the suo-motu proposals before seeking approval of the competent authority for permitting the proposer to take up the project.

            Considering that with the relaxation in the eligibility criteria and start-ups being made eligible to participate in the 'Make II' projects, the Project Management Units (PMUs) in the SHQ could be saddled with a large number of proposals which they will need to examine without the advantage of any prior feasibility study or the Detailed Project Report, which the DAC has decided to do away with.

            This SHQ will have to be more cautious when they exercise the option of accepting and processing the offer made by an individual or a solitary firm to provide an innovative solution for it would be difficult to determine the uniqueness of the proffered innovation unless it is evaluated against competing offers or alternative solutions.

            It is a good idea to set up project facilitation teams to hand-hold the industry and start-ups during the design and development stage and to provide technical inputs, trial infrastructure and other facilities required by the developers -  tasks which the IPMTs are supposed to perform anyway.

But, more to the point, it presupposes availability of a sufficiently large pool of experts from which personnel could be drawn to constitute teams that are also empowered to take decisions to address the problems that are bound to come up during the implementation stage in any project. It is a challenge that cannot be easily met.

            A greater challenge lies in implementing the decision to allow the SHQ to hire domain experts from the private sector to increase the outreach and enhance awareness among the industry because past experience shows that it is not easy to lay down the terms and conditions, as well as the modality, of hiring outside experts and to keep them gainfully employed.

            The decision that appears quite incomprehensible at this stage is that there will be no foreclosure of a project after it is sanctioned, except 'on default by the vendor, to ensure that the successful vendor has assured orders'. What could possibly constitute a default by the vendor in the context of a project which is not even funded by the MoD? It will need to be clearly defined.

            But more to the point, there is no reason why the MoD should make a vendor foreclose any such project as it would not only entail the loss of capital already infused in the project by the vendor but also kill the prospects of successful completion of the project in future and the possibility of the vendor finding alternative markets for the product.

            There is clearly a need to work out the modality of implementing the decisions taken by the DAC with a great care and a clear focus on how these decisions would serve the objective of meeting the requirement of the armed force for major equipment, platforms and weapon systems within the limited financial resources at MoD's command.

[Issue: 1, January-February 2018]

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