Interview : MGO
Defstrat: Is the budgetary allocation considered adequate for acquisitions under Revenue Funds?
MGO : In revenue procurement there are two important issues which impact procurements ie., delegation of Financial Powers and adequate budgetary allocation. Post promulgation of DFPDS 2016 and delegation of powers for proc of 10 (I), the issue of delegation of financial powers has been largely addressed. I think the issue of budget allocation will also be soon addressed by additional allocation and optimisation at all levels.
Defstrat : Please tell us about some of the major initiatives adopted by MGO branch to encourage indigenization.
MGO : A new SOP on Indigenisation was promulgated in 2017 with the aim to provide major impetus to Indigenisation in the revenue domain. It includes a number of initiatives.
For example, provision to club three years’ requirement of an item if the annual quantity does not make up EOQ for development. In cases where the development costs are substantial or technically complex, assurance of orders for five years to the developed vendor is being ensured. Similarly, full reimbursement of development costs is assured if the item is being developed through DoI.
Provision of NCNC development of items by industry, simplification of procedures for obtaining of samples and drawings by industrial firms are some other initiatives.
We have held annual national level seminar ‘AMICOM’ at New Delhi in concert with CII for interactions with the Industry to interact and address mutual concerns. Release of ‘Olive Pages’ at the seminar that contains the requirement of the Indian Army in r/o items currently being imported by the IA of a particular domain is to help the industry.
We have conducted Board of Officers at all CODs to examine all ex-import inventory and find Indian COTS equivalents. 30 per cent of the import inventory of CODs has been scrutinised and approximately 40 per cent of that categorised as COTS/Indigenous.
We have ensured conversion of ‘Mil Specs’ of imported batteries and tyres to COTS specs to enable proc from indigenous trade. We are also actively allowing the use of Army testing and trial facilities for indigenisation. Impetus to DOI activities in last two years has resulted in steady improvement of the indigenisation output. Against 500 items indigenised over last two 10 yrs, 1000 items have been taken up for indigenisation in the last two years itself. Approximately 500 new industrial firms have entered def manufacturing through DOI. Development of vendor base through frequent interactions for SCME has yielded results.
Defstrat : As per a number of media reports there are major shortages in ammunition holding. Is there substance in these reports? What steps have been initiated by the MGO Branch to ensure operational readiness at all times?
MGO : Since the late 70s, there were incremental voids in the ammunition. Some ammunition like APDSFS was not procured since 1999, and was then was procured in very less qty. However, post Uri incident i.e. Sep 16, the present Govt has been serious in addressing the shortcomings. But the situation is not alarming. Minimum stock of ammunition and armament is always maintained by the Army to ensure operations readiness at all times. The present state of availability of arms and ammunition has certain deficiencies. These deficiencies have accumulated over prolonged period and cannot be made up in a compressed time frame. Definite measures have been taken to address hollowness in the availability of ammunition.
Five-year roll-on-Indent for ammunition has already been placed on OFB for the period 2014-19. Ammunition Road Map for ex-import/trade ammunition was prepared and approved in June 13. Procurement cases are under process at various stages as of now. To mitigate the acute scarcity of defence ammunition, emergency powers have been delegated to VCOAS. Various procurement cases under these powers are being processed. For example, 19 Contracts were signed under Emergency powers (Schedule 23) between Oct 16 and Mar 17. Supply of the items contracted has already commenced. This will enable to build up considerable stocks.
Subsequently on 30 Dec 16, the Government has delegated financial powers to VCOAS for two years to maintain critical ammunition at minimum 25% of authorized stock and spares for a requirement of 10 days. Procurement cases under these powers are being processed accordingly.
Under ‘Make in India’ initiative, eight types of ammunition have been identified for manufacture for Indian Amy by Indian industry. RFPs have uploaded on 25 and 27 March 2017. Suggestions received from Indian industry have been incorporated in the RFPs and revised RFPs have been uploaded in the month of Dec 2017 & Jan 2018.
Defstrat : What mechanism is adopted by the MGO branch to rationalise budgetary allocations to ensure that all the diverse requirements are met with during the Financial Year, despite constraints?
MGO : Since the budget is limited we have reviewed, reprioritised and optimised our expenditure, wherein, priority has been given to make up deficiency of ammunition, armament, spares required from operational point of view vis-a-vis other requirements. In addition, items supplied by OFB have also been reviewed by identifying core/non -core items and focusing on procurement of core items, DPSUs pricing policy is also under review, so that we get items at optimum price, Procurement through GeM has been made mandatory, certain mil specs items have been converted to COTS/BIS specification for enhanced vendor base and cost effective procurement.
Defstrat : Your Views on the much talked about GOCO model and the affiliated reforms
MGO : The GOCO model envisages the corporatisation of the 8 X Army Base Workshop, of the Army whose primary role is to overhaul the Maj fighting & support equipment of the Army. The Main aim is to maximise the potential as also ensure critical spares as complete kits are made available to ensure complete targets are met with. There is a huge backlog of targets of main equipment especially Tanks/BMPs and Vehicles & Guns especially 155mm Bofors. Mostly items ex import by OFB & DPSUs are not materialising in the expected quantity and time frame which has a crippling effect on equipment due to time delay and ultimately cost overruns and affects operational availability adversely.
The GOCO model aims at Army Base Workshops (ABW) being run as a corporate entity with minimal control & oversight by the Govt/Army. Adequate freedom to the corporate to run as an efficient entity to encourage quality norms with a profitability factor that would make good business sense. The oversight/control by the Army would be purely in terms of quality issues and ensuring targets are achieved in time. Private entities who run the ABWs would the encouraged to provide spares support to the Field Army besides overhaul (OH) targets and deposit repairs.
Some of the major issues that would be addressed are:-
(i) IPR issues by the Government.
(ii) Employment of the civilian work force.
(iii) Costing of OH/repairs.
(iv) Time period for GOCO model to the profitable including break even.
Modalities of implementation would be as follows:-
(i) Establishment of GOCO oversight Committee.
(ii) Selection of Consultants to suggest methodology as also do handholding.
(iii) Establishment of empanelled & steering committee for section of vendors
(iv) Implementation of GOCO as a Pilot (Starting Apr 2019)
(v) Study & analyse program of pilot/mid-course correction if required
(vi) Proceed to Phase 1 of 3 x ABWs (Starting Apr 2020)
(vii) Proceed to Phase II of 4 x ABWs (Starting Apr 2021)
Maj Consulting firms that evinced interest are Boston Consulting Group (BCG), Mckinsey& Co, Delloite, Ernst & Young (E&Y) and Price waterhouse Cooper (PwC)
Defstrat : Please tell us about the major features of the new DPM.
MGO : Revision of DPM 2009 under the aegis of MoD (Fin) is in progress and has not been finalised yet. The recommendations we have made are with an aim to reduce the time of procurement and simplify the procedure at all levels. Some of the salient recommendations are as under:-
(a) Aligning of DPM with GFR 2017, Delegation of Financial Powers DFPDS(2016), provision of Capital Booking Revenue Procedure issues so as to facilitate procurement of introduced, in- service and scaled items by this Manual.
(b) Scope of Procurement. The scope has been amplified to facilitate procurement of upgrades, new versions, variants, outsourcing for software, medical services etc.
(c) Re-defining of Specialist Vehicles as Specialist Equipment. Special vehicles like FATs, HMVs, MPV, Ambulances, Dozers etc have been redefined as Special Equipment, so that requirement of taking Approval in Principle (AIP) from MoD is dispensed with and items do not come under MoF austerity measures. However, this issue has been partially addressed by MoD wherein powers have been given to Service HQ to accord AIP for scaled vehicles.
(d) Issue of NOC from OFB/DPSUs. In order to make OFB and DPSUs more accountable so as to procure items from ex-trade where deficiencies exist, we have recommended revisiting of system of giving NOC. No NOC would be required for items where there are production issues, slippages, demands beyond the stated capacity, quality issues, procurement for ACSFP, UN & Emergency Procurement cases etc.
(e) Setting up of Revenue Procurement Boards (RPBs). MoD has proposed to set up RBPs for approval of Annual Revenue Procurement Plan (ARPP). The issue has been endorsed; however, it has been proposed that approval of ARPP to be taken as AoN.
(f) Resultant Single Vendor Situation (RSVS). As per GFR 2017 all cases tendered on OTE/ LTE, which result in Single Vendor Sit are required to be progressed on STE basis. A waiver of this provision has been proposed with no reduction in powers. However, MoD has recently addressed this issue and has revised the powers of all CFAs in STE cases from 5% to 50% and PAC cases from 50% to 100%.