Defence Procurement – needs further improvement
By Col Sanjiv Kumar(Retd)
Indian Armed Forces are the largest procurers of military hardware in the world, yet most major players in the world do not want to do business with India. The few global suppliers who are still doing business with India are frustrated or hanging on just to be there without much hope of success.
Unfortunately, since independence, the private defence industry was neglected with a singular aim to promote the government-owned defence public sector (DPSU) and ordnance factory board (OFB). Only when they failed to deliver, did the government look at options to promote the private industry. It should be appreciated that a defence industry ecosystem is not built in a short period, it takes years of research and supporting infrastructure. Opportunities to set up infrastructure, allowing it to develop and grow will only make an ecosystem which can sustain and produce world-class equipment.
What ails the system?
The rules and regulations are there but the interpretation is lacking, this is due to lack of continuity of user and the nonuser rules the roost, as he knows the rules and the ways around the system. The poor bloke - Army Officer posted in the chair, is at the mercy of the Babu to hold his hand or guide him, both of which he does not do.
Lack of Initiative or Decision-making ability
The officers are afraid of putting the Pen to paper due to fear that a remark or signature may come to hound him a few years down the line when there is an audit/ complaint/ scam etc. They see the scam in every deal and thus avoid taking a decision. The Babu is only a Staff Officer and therefore not accountable and acts only as an adviser. This delays decision making till either it is too late or the officer gets posted out and the whole process starts all over again.
Bane of NCNC Trails/ Demo
The word NCNC- No Cost No Commitment, demo or trails are used as a stick to buy time and frustrate vendors. A large number of vendors are willing to demonstrate the equipment but the NCNC Trails just keep dragging on and on, the vendor bleeds funds in the trails/ demos and the life of the equipment being used in NCNC is practically written off in the trial/ demo.
Lowest Cost Bid
There exists a provision to give benefit to better technology and a suitable multiplication factor is to be incorporated when working the cost implications. However, this is yet to be exercised and it is always the L-1 (Lowest Bidder) who gets the contract despite offering the lowest grade of technology. Who is the loser- Indian Armed Forces.
The DPM is very clear that there will no or only a limited negotiation with the L-1 bidder but just to prove their negotiation skills there are multiple negotiating committees who want to beat the price down in every meeting. If you give the item free they will want two!! It should be realised that no vendor will give the items at lower than cost value, thus if the price is being beaten down it will only be at cost of the quality of product supplied.
The benchmarking for the price should be done realistically, one cannot look at Amazon or Google and start doing the price benchmarking. Quality comes with a cost and if one wants superior product it should be benchmarked accordingly and not based on last procurement price which sometimes is as old as 5-7 years old or inputs from web portals.
Single OEM does not make all the equipment
In a weapon system, there are numbers of sub-assemblies, which normally are made by ancillaries, no OEM makes all the equipment. Also, an equipment manufacturer does not make ammunition or sighting systems etc if they are part of the system, there are specialist companies which do this. This is unfortunately not realised and the tenders want the supply of multiple products in a single bid, this becomes impractical and the process simply drags on.
Delay in Placing Orders and Passing of Bills
The TEC is held and the price negotiated but when it comes to placing of orders there are inordinate delays of 6-9 months. The price of Defence material has an inflation index of 5-7 % per year, a delay of 6-9 months invariably puts the strain on prices and inflation would have impacted the price already. Post-delivery the bills are sent to the CDA (Bill paying Authority) the people sitting there are looking for their pound of flesh and keep sending the bills back for small -small queries thus delaying the payment till the palms are greased or the vendor becomes so frustrated that he foregoes part payment on his bills. Thus suffering a loss which frustrates him further.
Cancellation of Tenders
Tenders get cancelled at different stages of process a large number of the tenders get cancelled at Trail stage of post-trail evaluation stage. This implies the equipment has been brought into the country and has been put through rigorous trails. At this stage cancelling the tender, on some pretext/ most of times, no pretext at all is just not logical, but then Forces are not know to be the most logical beast!
Setting the System Right
This word should be modified to make it SCNC- Some Cost No Commitment- if it is free no one is bothered, but if the forces pay some cost, could be as low as 10per cent only, they will be forced to take the Trails to a logical conclusion in a reasonable time frame.
Incorporating of T1-L1 Concept- Technology comes with a cost, one cannot expect to procure superior technology without the implied cost being added to the product. The current system does not have a format to capture the T1. Currently identifying and putting a value to the superior product is subjective and thus dissuades the TEC Committee to put their recommendations for the T1 product. There is a requirement to give a value to superior technology which cannot be subjective, and this should be set off when the price bid is opened.
Realistic Bench Marking
The system of getting the price for Benchmarking has to change, we have Defence Attaches and People attending trade shows which happen in different parts of the world every 2 months. A realistic benchmarking of a product can be got when attending these shows and meeting OEMs. Price negotiation should be based on this Benchmark and not just an attempt to beat the vendor down further, to prove a point.
Time-Bound Manner for Supply Order and Bills Payments
Both these need to have a TAT which should be documented as part of the Tender Document, a delay should be justified and suitable compensation is given to the vendor. The team dealing with procurement should have laid down SLAs and these should be monitored/ audited.
Indemnifying the Procurement team
The procurement teams' fear of putting their pen to paper should be removed, they need to be indemnified from being prosecuted for mistake or lapse done unintentionally. If there is no personal benefit someone has taken then the system should hold the hand of the team/ person.
Most sensitive Military equipment comes under ITAR and requires approvals at a different level from the host country for export. The delay in grant of export license could be as much as 3-4 months or even longer at times. The Procuring Directorate should officially take up the responsibility of using the Missions abroad to get the approval from the Host Country Government.
Selection of Technology Superior Equipment
Most of the equipment in the Armed forces is used for decades. It is imperative to take the newest generation of equipment, rather than go for obsolete technology just because it is cheap or the OEM is willing to get rid of the same to a third world superpower.
While we all understand that buying new equipment is not feasible and upgrades are invariably carried out on military equipment, but there should be a time ban before even modernisation should be allowed. Because modernisation is allowed and encouraged under the garb of innovation the forces are stuck with obsolete equipment with non-standard modernisations carried out locally.
Quality Vs Quantity
There is some equipment which is specialist and is required in small quantities while other equipment is required in bulk A case in point Assault Rifle would be bulk purchase and should be Make in India while the Sniper Rifles are specialist items and required in small number. It does not make sense to Make that in India as the numbers are too small for any industry to invest in the project. So what happens, the Indian Industry mounts a scope and bipod on the Assault Rifle and calls it a Sniper Rifle. The forces are saddled with an ineffective weapon and a large sum of money is spent on the modernisation of it from the very year it was inducted into the Armed Forces.
The Ape Syndrome
I call the mentality of some senior officers, when they say, In our Time” They forget that their ancestors who lived on trees thought similarly they too would be living in jungles. This tendency needs to be curbed and any officer who displays this syndrome should be kept well away from the procurement.
The biggest disservice to the Army was done by its Chief when in Kargil war he said, “we will fight with what we have”. While it was called for at that stage to win back our lost territories. But after the war the stand should have been, “We fought with what we had but this is last Time Indian Army fights with inferior equipment” things would have been totally different. The ecosystem would have got developed from the year 1999 itself and by now the defence industry in India would be maturing.
India is looking at becoming a Super Power in the next couple of years, there are huge deficiencies in the Armed Forces and a large amount of equipment is obsolete. There is an urgent need to remove the creases in the procurement system so that the good OEMs who feel frustrated due to delays and do not want to do business in India are again brought into the system to become active partners for the procurement. Taking our new rules and regulation will not help they will make the system open to interpretations and will only delay the procurements to unacceptable timelines.
*Author is an Indian Army veteran. Views expressed here are personal.