Sunday, June 23, 2024

Optimising Defence Acquisition Procedure

By Vice Admiral SN Ghormade (r) 

Military preparedness of any nation can be assessed through four factors (i) Security environment involving internal and external dimensions, (ii) Budgetary allocations, (iii) Defence Industrial Base (iv) Acquisition procedure. The fourth point, Defence Acquisition Procedure (DAP), is a crucial part of our military preparedness, in which there is a definite need to simplify and expedite the process. 

This is mainly because the DAP is a complex decision-making process that must balance the competing requirements of expeditious procurements, development of the indigenous defence sector, and conformity to the highest standards of transparency, probity, and public accountability. As a result, several acquisition decisions may become contentious, resulting in delayed induction of critical military hardware. Further, the document has, over the years, become more voluminous and with a large number of terminology and jargon which makes it difficult to comprehend for the uninitiated.  

The Defence Research and Development Organisation (DRDO), established for research and development (R&D), has not delivered to the extent desired. The involvement of private industry, academia and various other organisations to contribute towards indigenous research and development by DRDO recently should have been implemented much earlier.

This results in the persistence of critical capability gaps in the Armed Forces for a long time. Encouragement of private Indian industries to take on R&D with pipeline orders, if successful, would ensure greater chances of addressing the capability gaps. 

Focussed Attention At the Highest Level

The future of warfare would require India to stay ahead of the technology curve by developing niche technologies. Technological advancement is ever-continuous and transforming rapidly to bring in disruptive technologies that change the face of warfare in ways that are hard to predict. 

The current global environment is witnessing an explosive growth of autonomous systems, both mobile and stationary, which are poised to revolutionise warfare. Unmanned and autonomous systems will create fundamental shifts in how the Indian Armed Forces, and the Indian Navy, in particular, conduct their operations.

Therefore, we must seamlessly mould the elements of ‘innovation ‘, indigenisation’ and ‘self-reliance’ and create a sustained defence ecosystem. There is a need to have flatter decision-making rather than a hierarchical one by resorting to collegiate decision-making.

This necessitates focused attention at the highest levels of Government, requisite funding of R&D, private sector involvement with attractive fiscal provisions, provision for ease in exports, simplification of processes, compression of timelines, and synergising of all stakeholders. There is diffused responsibility and no accountability during the acquisition process due to the involvement of many agencies. We need to utilise the strengths of both the public and private sectors along with the DRDO. The agility in decision-making of the private sector and the infrastructure strength of the Public sector must be utilised to make it a whole of nation effort.

Process Vs Product Dilemma 

It is often seen that the ‘process’ frequently outweighs the critical requirement, wherein a capability is made available only 10-15 years after the initial commencement of the process. DAP stresses on probity more than operational factors like logistics, training and time-bound procurement. 

Though probity and transparency are important, we must give operational aspects the attention they deserve. While the physical movement of the file itself takes a definite amount of time, it is incumbent on all stakeholders to do their part expeditiously to complete acquisition procedures in the shortest possible timeframe. 

Collegiate decision-making has to be resorted to wherever possible. Strict adherence to stipulated timelines for each stage: Request for Proposal (RFP), Trials, Staff Evaluation (SE), and Contract Negotiation Committee (CNC) is a must to positively conclude a case in 12 months. The DAP 20 is a guideline document. It does not restrict the agencies to act quickly whilst following the procedures by compressing timelines but maintaining integrity and honesty.

Concurrent Progress Of Activity 

As stipulated in DAP, various steps for capital acquisition are followed sequentially. However, there is enough opportunity to make it a concurrent activity to compress procurement timelines. For example, the constitution of the CNC and Benchmarking process may commence while progressing SE. In cases where Field Evaluation Trials (FET) are not applicable, Benchmarking may commence at the Technical Evaluation Committee (TEC) stage. 

Best Value Approach

The lowest bidder model (L1) still rules the day, resulting in minimally acceptable technology in the armed forces. There is a Best Value (BV) approach available in other countries, such as the United States of America (USA), where the contract is awarded based on the best overall value is not practised here. BV procurement is an alternative to the traditional design-bid-build contracting method. It permits the Government to consider the additional value (better post-contract support and future upgrade) a contractor may offer with their bid price, thus determining the bid which delivers the best deal.

Through the L1T1 model, DAP also provides the option of seeking a better product (higher technical and operational performance) and not the cheapest. The L1T1 model introduced in 2016 allows Enhanced Performance Parameters (EPP) to be included in the product, and the vendor providing this EPP capability may still win the contract despite not being L1. The provision of Enhanced Performance Parameters (EPP) of DAP has not been exploited much due to the complexity involved. 

There is a need to simplify this procedure and go beyond by incorporating the BV approach, where all relevant factors such as cost, performance, quality and schedule are considered, and potential trade-offs be made between cost and non-cost factors rather than just buying from the lowest price, technically acceptable offer.

Challenge: Determination of the BV offer would be challenging due to different interpretations of the same offer by the CNC members. It would entail including definitive criteria in the RFP for selecting vendors providing the best value. However, if done the right way, this is achievable.

80% Services Qualitative Requirements (SQRs)

In Design and Development (D&D) cases, accepting 80% capability may entail a change in the SQRs. It is recommended that accepting the equipment with 80% capability (certified by a team comprising of DRDO and SHQ representatives) should be undertaken at the Acceptance of Necessity (AoN) stage itself, and SQRs need not be changed as this would be achieved subsequently. Having some capability is always better than no capability. However, critical requirements must be part of the 80%. This also allows for Spiral Development.

Spiral Development Model

The spiral development model must be followed for the induction of new technology. The DAP 20 (as amended in 2022) permits accelerated procurement from Innovations for Defence Excellence (iDEX) winners. More recently, this has also been extended to Technology Development Fund (TDF) cases. If this procurement is permitted in multiple tranches, the services can procure limited numbers even when the requirements are not fully met, but the technology shows promise – to help incrementally improve the product, which is achieved through Spiral Development.

As per the current regulations, there is no liability on the SHQ to procure from all firms when there are multiple iDEX winners. The other firms are to be given a certificate stating their product has been trial evaluated and is fit for military use. This is counterproductive due to two reasons. Firstly, the vendor base gets restricted for future procurements. Secondly, the government grant provided for the development effectively goes to waste. SHQs may be permitted to procure limited quantities from other firms as well. This will – in the long term – help build the ecosystem.  

Relation With The Industry

There is a need to view the relationship with the defence industry – as not merely that of a transactional buyer-seller relation but rather that of proactive partners working alongside and assisting each other. The need is to engage with all stakeholders to generate new ideas and follow aspirational trajectories in pursuing these ideas so that one pole vaults rather than leapfrog or trudge along these curves.

Therefore, more financial investment (R&D Budget allocation) would be required for this purpose, including funding to/from Private Sector. Various schemes like TDF, iDEX, Make, etc., must be effectively harnessed. It is imperative that while giving the challenges/requirements for development, the future use cases must be kept in mind and have the requisite approvals well in advance. 

Promotion Of MSMEs/SMEs

To promote private players, including Micro, Small and Medium Enterprises (MSMEs) Small and Medium-sized Enterprises (SMEs) and, given the complexity and technology-intensive nature of Naval systems, the Indian Navy has instituted monthly interaction through in-house NIIO Naval Innovation and Indigenisation Organisation (NIIO) and  Technology Development and Acceleration Cell (TDAC) with the private sector to form a partnership model rather than a mere customer-supplier relationship. This is done so the industry knows the Navy’s emergent needs in all segments, including next-generation technologies. This can be followed by the other services also.

Innovation/Induction Of New Technologies

The Navy’s aim to induct at least 75 indigenous technologies or ‘products’ into the Indian Navy through Supporting Pole-Vaulting in R&D through Innovations for Defence Excellence, NIIO and TDAC (SPRINT) with minor tweaking in the existing iDEX procedure was launched by the Hon’ble Prime Minister as 75 SPRINT challenges for the industry on the 18th of July last year during the ‘Swavlamban’ seminar of the NIIO. 

SPRINT involves a co-development model, collegiate approach to decision-making, guidance by the partner incubators, ‘informed’ decision-making at the lowest level rather than at the highest level and expeditious processing. Over 1,100 Proposals were received, and more than 110 SPRINT contracts with the Indian industry have already been signed. Some of them are game changers that, too, first time in the world. 

The Indian Naval Students’ Technical Engagement Programme (IN STEP), under NIIO, also engages young minds in premier educational institutions by offering online internships to seek innovative solutions to various problems.

Training & Acquisition Workforce

Acquisition, where there is involvement of a large amount of money, is too serious a business to be left to the untrained acquisition workforce at the Ministry of Defence (MoD), Headquarters Integrated Defence Staff (HQ IDS) and SHQs. Lack of requisite skills hinders dealing with the issues like project management, price negotiations, benchmarking, Transfer of Technology (ToT) negotiations, offsets, legal aspects related to acquisition, Life Cycle Logistics (LCL), Test and Evaluation (T&E), contracting, Quality Control (QC) etc. Most of the incumbents learn on the job. Continuity in such appointments would help to develop the expertise. 

In addition, DRDO is also constrained by a poor human resource (HR) base in terms of quantity and quality of the scientific cadre and suffers from optimisation. 30% of the scientific cadre of DRDO are involved in ‘sundry jobs’ that include ‘handling administration, accounts, stores, building maintenance, canteen, etc.

Defence acquisition is a team sport. Every team player must invest his best effort in an expeditious time frame to meet the Force Level requirements in the nation’s interest. Good acquisition training for all personnel (defence and civilians) involved is necessary. 

Foreign Investment & ToT

Indian economy is on an upward swing, which has the financial wherewithal to invest money in the Military Developmental and Modernisation project. There is international acceptability of India as a responsible democracy; hence, there would be no sanction by any developed country, i.e., USA or European Union (EU) countries, on the ToT. 

The Government could exploit this by simplifying the procedure for Indian industry to form Joint Ventures (JVs) or partner with foreign Original Equipment Manufacturers (OEMs) to seek ToT for niche technologies. A large HR base (cheap labour) resulting in low overheads and manufacturing costs would also attract foreign OEMs to establish their manufacturing unit in India, a ready-made market and to export in the world market at a competitive price. This is a thrust given by the Government also.

Conclusion

Finally, The DAP must be demystified and not laden with more jargon with each rendition. A simple, concise acquisition procedure that is well laid out and user-friendly is the need of the hour. One that will take the indigenous defence industry to the heights and scale our strategic self-reliance vision of “Atma Nirbharta” that our Hon’ble Prime Minister has envisioned for us to achieve in the Amrit Kaal by 2047. 

VAdm. SN Ghormade (r) is a former Indian Navy Vice Chief 


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