Part I
EDITOR’S NOTE
The new Defence Procurement Procedure (DPP) 2016, released at Goa during the last DefExpo is undoubtedly a path breaking document. However, it falls short in not addressing all issues with the required boldness to turn some legacy procedures on their heads and herald a new era where every stage of the procurement process is oriented to speedy decisions while catering for requisite time required for trials, vetting and decision making. As it stands, there are very many areas that need to be addressed with greater dynamism. Brig Anjum Shahab identifies such areas and provides a few practical and out of the box answers in his two part article.
Excellent Policy Changes in DPP-2016 But Procedures Still Need Improvement
Part I
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DPP-2016, released on 8 June 2016, is an extremely good and comprehensive procurement manual with many path breaking policy initiatives of great significance such as introduction of a new category named ‘Buy-Indian IDDM’, major policy changes in MAKE Procedures, decision to go for Strategic Partnership and many more measures. These policy initiatives provide serious impetus to indigenous design and development of defence products which would ultimately result in greater self reliance, reduction in imports and more importantly increase in exports, of course over a period of time. Ministry of Defence (MoD)’s boost to indigenous developmental activities is indeed laudable.
It was widely expected that through DPP-2016, MoD would come out with simpler and shorter procurement procedures for doing capital acquisitions which would ultimately result in acquisition in an acceptable and shorter time frame. It is therefore a bit disappointing to note that while the document comes with some very excellent policy changes, very little efforts have been made for matching procedural changes. A few cosmetic changes of little significance are of course there but they would have very little impact to meet the aspirations of all stake holders.
As in the past, the process continues to start with ‘Issue of Request for Information (RFI)’ followed by Formulation of Services Qualitative Requirements (SQR), Acceptance of Necessity (AON)/Categorisation, Request for Proposal (RFP), Technical Evaluation Committee (TEC), Field Evaluations, General Staff (GS) Evaluations, Oversight, Contract Negotiation Committee (CNC), Approval of the Expenditure by Competent Financial Authority (CFA) and finally signing of Contract. There is no change. Therefore, time frame for completing various activities from AON to contract would continue to take as much as in the past; more or less. Thus the desire of the user to get his equipment in a faster timeframe and that of the vendor to get speedy return on his investment remains unfulfilled. Procedures, as given in Chapter II and III, hence need to be reviewed all over again. They need to be simplified and timeframe to complete procurement process needs to be substantially reduced.
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Admittedly, procedures as given in Chapter II of DPP-2016 have proved to be very effective as hundreds of procurement cases worth thousands of crores have been successfully concluded following procedures for ‘Buy (Indian), ‘Buy (Global)’ and Buy and Make with TOT ever since the time these categories have been conceived. Buy & Make (Indian) is a relatively new category and is presently going through the evolution process, but in the years to come it shall be the most sought after category particularly in view of Make in India campaign of the Government. Therefore, these procedures may not necessarily be changed wholesale but be looked at and tweaked from the point of view of improved efficiency and faster acquisition. However, ‘Make’ procedures for Indigenous Design and Development of a product, as given at Chapter III and which has been in vogue for over 10 years, has totally failed as it has not produced any results, till date. Procedures are painstakingly complex and they need to be changed all together to start getting results from such an important procurement category.
Yet another issue that impacts faster and timely acquisition is ‘High Failure Rate of Procurement Cases’ resulting in retraction of RFPs. A procurement case is pushed back by many years when an RFP is retracted. It adversely affects the operational preparedness of Armed Forces. It also adversely affects the vendors as their investments go down the drain resulting in financial hardships from which they, particularly the smaller companies, are often not able to recover. It is therefore extremely essential that procurement cases once commenced are taken to their logical conclusion. There is a need to analyse reasons for such high failure rates so that policies and procedures are tweaked to ensure that retractions are minimized, if not eliminated altogether. It is heartening to note that MoD is serious about discouraging retraction of RFP as Para 40 of RFP Format given at Schedule I of DPP-2013 that dealt with Policy regarding withdrawal of RFP and foreclosure of the procurement cases has been done away with from Draft RFP Format given in Schedule I of DPP-2016. Some more such policy initiatives are required to do away with this highly undesirable practice of closing a procurement case.
Although it may be too early to suggest changes but there are issues that need to be flagged for consideration of decision makers at MoD or for the Expert committee or any other body, if constituted to look at the procedural aspects.
Chapter II of DPP-2016: ‘Buy’ & ‘Buy & Make’ Procedures
Conducting Technical Evaluation. Technical evaluations of the technical proposal by a TEC have been in vogue ever since and even before DPPs came into being. It seems to be an important activity as DPP-2016 allocates 14 weeks for its completion and approval. Earlier DPPs allocated more time. However, the question that needs to be answered is whether it is really essential to conduct a TEC. Statistical Data on TEC Reports will indicate that this paper evaluation is actually an exercise in futility. More often than not, all vendors who respond to RFP also clear TEC. However, when it comes to providing the equipment for trial and evaluation, more than 50 percent don’t turn up. Sometimes only one vendor deposits his equipment.
It is also for consideration that when very extensive user trials and other evaluations are carried out, which invariably separates the wheat from the chaff, why waste time on paper evaluations when it is known that the vendor would always write ‘Complied’ for each and every RFP parameter, even if he
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does not have an equipment to offer. It may therefore be worthwhile to go for user trials and evaluations directly and vendors asked to deposit their equipment for trial after receipt of techno-commercial offers from them. If at this stage, only one vendors offers the equipment or only one vendor passes in the trial and evaluation, it should not be considered as’ Single Vendor Situation’ as RFP has been responded to in a competitive environment. In any case, DPP-2016 permits single vendor situation even at bid submission stage.
Formulation of SQRs. SQRs are presently formulated by User Directorates. Officers at Line Directorates neither have the requisite qualifications nor the experience or the expertise to write SQRs. As a result SQRs formulated, more often than not, are flawed. They are either too ambitious or too generic resulting in serious problems at a later stage. Faulty SQRs have led to many unsuccessful procurements. Sometimes sub-standard, undesirable equipment gets procured. There is therefore an inescapable need for writing SQRs by professionals which would ensure better competition, quality of equipment, price and far better chances of successful conclusion of procurement process. It may however not be possible to have experts in foreseeable future. To offset the disadvantage, Service HQ has this practice of circulating draft SQRs to numerous agencies, such as DRDO, DGQA, maintenance agencies and many more, so that SQRs can be modified based on the views and comments of the experts. It would be worthwhile to seek views of the vendors as well, who are an equally serious stakeholder in the procurement process. Their R&D personnel should be able to provide quality inputs on technological issues and feasibility of meeting SQR parameters by the industry. Interaction with the Industry may result in a SQR that would ensure higher success rate, quality equipment at better prices.
Conduct of User Trials. User Trial is one of the most important activities in the entire procurement process. Yet, it continues to be one of the weakest links in the entire procurement process. A very large number of procurement cases fail due to poorly conducted user trials and inexperience of Trial Teams. Present methodology of nominating a Trial Unit and CO of that Unit as OIC Trial is certainly not the best way of conducting User Trial. There is every possibility that the CO may have no knowledge of procurement processes. He may not even have heard terminologies such as General Staff Qualitative Requirement (GSQR), RFP, GS Evaluation etc, leave alone understanding the sanctity of these documents and processes. He would also be too busy to devote the kind of time a user trial demands. As a result he leaves the trial to a junior officer who in any case does not understand importance of the trial.
This needs to be corrected. The responsibility for the trials should rest with the Command HQ who should constitute a Trial Team consisting of officers with experience in capital acquisition. Command HQ may nominate a unit for administrative arrangements but all members from trial team should be from outside that Unit. Also, composition of the trial team should be based on the value of the procurement case. For example, for a procurement case needing CCS approval, Officer-in-Charge Trial (OICT) may be of the rank of Major General while procurement case under powers of RM+FM may have a Brigadier as OICT while all other procurement cases may have Colonels as OICT. This will bring in experience, efficiency, urgency and professionalism in conduct of user trials.
Expediting Procurement Process. As per ‘Broad Time Frame for Various Procurement Activities’ as given at Appendix H to Chapter II of DPP, a procurement may take anything up to 115 weeks for signing
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of contract after AON has been accorded and that too in ideal conditions, when there is no interruption in the procurement process. Even in ideal conditions, time taken is invariably much more than 115 weeks. If we take into account various activities that have to be gone through prior to accord of AON such as issue and response of RFI, SQR formulation and its approval and process of AON and categorisation, another 115 week can be safely added, if not more. So we are talking of 230 weeks or more. This is unacceptably long time and has to be reduced. Efforts should be to complete the procurement process in 24 months from RFI to Contract. It is very much possible if efficiency of procurement process is improved. A few recommendations/suggestions for the same are as given below:-
(a) Appendix H to Chapter II should begin with RFI and allocate time for completion of various activities related with RFI, SQR and AON, like it does for all activities after accord of AON. It will allow caculating the actual time taken from RFI to Contract.
(b) Time given in Appendix H for various activities is excessive. For example, allocation of 24 weeks to complete field evaluations is too long a time. This can be done far more efficiently and in a much shorter timeframe. Therefore, timelines for all activities have to be critically looked at and reduced. It is possible to complete various activities in much shorter timeframe, if done more efficiently and systematically.
(c) Tendency to use maximum time limit, as allotted in Appendix H, needs to be curbed. For example, 24 weeks have been allotted for completion of CNC in a resultant single vendor case. More often than not, 24 weeks will be taken, even if it is a simple procurement case where CNC can be completed in 4 weeks. Same is the case for all other activities.
(d) It would be advisable that timeline for various activities involved in a procurement case are discussed at AON stage at SCAPCC, SCAPCHC, DPB, DAC and time allocated keeping in mind the complexity of the case. In a very complex case, more time may be given to an activity than Appendix H timings. Such an activity can be undertaken as a Statement of Case for consideration by SCAPCC/SCAPCHC/DPB/DAC for Categorisation and Accord of AON, as given at Appendix C of Chapter II, has an Annexure I where ‘Proposed Timeline for Procurement’ by user directorate is stated. The format may be amended to have yet another column where approved timeline by AON according authority is to be stated. Approved timelines should thereafter be included in RFP as one of its many appendices. It should then be strictly implemented. Non-compliances should be taken note and necessary corrective actions initiated including admonishing the defaulters, if necessary.
(e) Present practice of carrying out procurement in a sequential manner needs to be looked into. Procurement cycle can be substantially reduced by undertaking parallel/ concurrent activities wherever possible. DPP-2016 recognises the importance of clubbing various activities and has initiated a few policy guidelines for the same. However, room for further streamlining is feasible. For example, DPP provision regarding requirement of an approved GSQR for taking up a case for AON and categorisation needs to be changed. A draft
GSQR may be sufficient to process the case for AON. Thus, formulation and approval of GSQR, process of seeking AON and preparation of draft RFP can take place concurrently. It will save precious weeks. A few such activities have been approved in DPP-2016. More such concurrent activities, such as Obtaining CFA Approval for Expenditure and preparation and vetting of Contract Document, may be identified and suitably incorporated in DPP.
(f) Every procurement activity as given at Para 1 of Chapter II has very large number of sub- activities within that activity. For example ‘Acceptance of Necessity’, as given at Para 1(c) goes through the process of writing of Statement of Case (SOC), consideration and approval of SOC at Service HQ, vetting of SOC by various agencies, detailed consideration, recommendations, approvals at SCAPCC, SCAPCHC, DPB/DAC, to name a few. Same is the case with all other activities as well. These activities need to be reviewed to minimise sub- activities if possible, or do them differently. They also need to be conducted more efficiently so as to reduce the time to complete them.
(g) At present, the procurement process generally commences only when the case is included in Annual Acquisition Plan. No procurement activity is generally carried out till then. It may not be a bad idea to commence procurement process as soon as procurement case is included in 5 years Services Capital Acquisition Plan (SCAP). User Directorate can prioritise their listed procurement cases and commence a few activities such as issue of RFI, formulation and approval of GSQR and commence processes related with seeking AON and categorisation.
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Conclusion
It should be a matter of serious concern to everyone that capital acquisitions take such a long time to complete. Every effort should therefore be made to improve the processes and procedures till we have a system that adequately takes care of aspirations of all stake holders. It is possible and achievable and must be attempted with all seriousness. The article has analysed Chapter II of DPP-2016 and made a few recommendations to make it more efficient. In the next article, ‘MAKE’ Policy and procedural issues as given in Chapter III of DPP-2016 would be addressed.
