Acquisition Reform to Streamline, Accelerate and Simplify Procedures
New Delhi announced on 25 April that all modernisation requirements for India’s three military services and coastguard are to be sourced indigenously, irrespective of the nature of the procurement, as part of efforts to bolster the local defence industry.
To enable this, the MoD’s Defence Acquisition Council (DAC) has approved amendments to the Defence Acquisition Procedure (DAP) 2020. The ministry, which outlined a number of steps to facilitate this endeavour, said the import of defence equipment “should only be an exception” and undertaken with specific approval from the defence minister.
To reduce the financial burden on local industries, the MoD said it has removed the requirement for mid-sized and large businesses to provide an Integrity Pact Bank Guarantee (IPBG). Instead, an Earnest Money Deposit (EMD) will be levied as bid security for all acquisition cases granted Acceptance of Necessity (AoN) status and valued at more than INR1 billion ($13 million).
The EMD, which will not be required for micro and small enterprises, will be valid for the selected vendor up to contract signature. For remaining bidders, the deposit will be returned following the selection process. Once a contract has been signed, the IPGB will be covered through the Performance Cum Warranty Bank Guarantee (PWBG).
Moreover, total acquisition orders are to be split between shortlisted vendors, wherever viable, to encourage wider participation and broaden the local defence industrial base, said the MoD. In addition, other technically qualified bidders who have not been awarded a contract will be issued a certificate by the military, stating that the product has been successfully trialled and evaluated. This is aimed to help vendors explore other markets.
New Delhi also said it is simplifying the procurement process under the iDEX procedure of DAP-2020, meaning that the time taken from AoN grant to contract signing will be reduced to 22 weeks, as opposed to about two years.
The government has also simplified the DAP-2020 Make-II procedure, which involves indigenisation of defence equipment through industry-funded projects at the prototype development stage. The MoD said this procedure will now incorporate “single-stage composite trials of prototypes,” thus removing a number of vetting and scaling procedures for initial procurements in delegated cases. “Post simplification, the timelines in Make-II procedure will be reduced to 101-109 weeks from an existing total time-period of 122-180 weeks,” said the MoD.
The announcement follows New Delhi’s decision to allocate 25% of its defence R&D budget for FY 2022/23 to local companies, start-ups, and academia, as part of the Make in India policy, which is aimed at promoting self-reliance and reducing the country’s dependence on materiel imports.
Speaking on 1 February, Finance Minister Nirmala Sitharaman said the aim is to encourage private industry to take up the design and development of military platforms and equipment in collaboration with the Defence Research and Development Organisation and other agencies through the Special Purpose Vehicle model. She also said that an independent body would be set up for meeting a “wide-ranging testing and certification requirements”.
