Structural Reforms in Defence Procurement Organisation

Issues Details: 
Vol 10 Issue 2 May - June 2016
Page No.: 
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As the Indian MoD gears up for reforms in defence procurement, suggestion from Gen JP Singh a renowned expert in the field
Lt Gen JP Singh, PVSM, AVSM (Retd)
Tuesday, June 21, 2016

Defending the Nation is one of the Government’s primary responsibilities. To realise this, it needs to provide the Armed Forces with requisite capabilities. The sole intent of defence procurement is to provide Armed forces with robust capability to enable them to protect the nation’s security and also advance national interests, both in the short and long terms. Affordability and obtaining the best possible value for money by setting aside a balanced defence budget and management thereof is extremely vital.
Capability besides trained manpower, majorly consists of military hardware and equipment required to carry out various tasks in different types of terrain in accordance with their Service doctrine and procedures. Mere acquisition of technologies and military equipment des not essentially meet the overall requirement of capability development within the force. What is of the essence is also the support required to sustain the capability. Support is essentially a range of activities that maintain a capability throughout its life cycle, ie, from acquisition to disposal. As a thumb rule, the cost of supporting a defence capability throughout its life is often three to four times the cost of initial procurement. Value for money is the optimal combination of time, cost and effectiveness, within available resources. It is a relative concept, which involves the comparison of potential and actual outcomes of different procurement options.
We are preparing for the next war.Therefore the challenge is to equip our soldiers to counter a broad range of threats across the most likely scenarios without compromising their ability to deal with a less probable but potentially much more serious conflict i.e. both conventional as well as asymmetric threat spectrum. The Defence Strategic Direction (RM’s Operational Directive), ideally derived from the National Security Strategy and Strategic Defence and Security Review,ought to articulate an assessment of likely conflicts/scenarios. Thereafter, capability audit should lead to capability gap analysis (CGA). Balance of investment over next 15 years must be linked to the CGA. This will broadly involve:
•             Initial Prioritisation.
•             Procurement Lifecycle.
•             Costs across Procurement Lifecycle
•             Balance of Investment, ie, Cost vs Capability Improvement.
•             Pan Armed Forces Finances- equipment versus people versus training.
•             Executive Decisions.
The National focus is on the newly released Defence Procurement Procedure (DPP) 2016, a manual which ostensibly recognizes the unique features of defence procurement in Indian context. The focal inflection of the DPP is to simplify and open the executive mind to more rational application of procurement procedures. It lays explicit import on Make in India concept with primacy to Indian Design Development and Manufacturecategory, compress procurement cycle, leverage manpower and engineering capabilities of indigenous Defence Industrial Base (DIB), enhance role of MSME, raise offset threshold, give bonus to enhanced performance parameters and make the business environment transparent and responsive. DPP 2016 reflects much needed change in thinking within the Ministry of Defence and lays a lot of emphasis on initial planning and swifter implementation.
The success of DPP 2016 is in its implementation. MoDneeds to back up the change in thinking reflected in the new DPP with inclusive reformsin defence acquisitions especially procurement structures. It must address 3 main root causes:
Overheated Programme
•             Requirements are over specified and not prioritized
•             Costs and schedules are consistently underestimated
•             Budget is not balanced to acquisition programmes/ plans.
Interface between Stakeholders
•             Blurred roles and accountabilities.
•             Lack of  transparency and accurate financial data.
•             Uncontrolled and uncosted changes to requirements.
Difficulty in Planning and Executing Make in India Projects
The Defence Procurement Board and Defence Production Board have overlapping roles. The present structure lacks synergy especially in MAKE projects, which should be the prime route to acquire system/platforms.
As of date not a single MAKE project has reached any degree of maturity. These Boards need complete restructuring to improve acquisition and life cycle sustenance capabilities.
• Management and information tools/systems are inadequate.
• Difficulty in posting and retaining specialist staff to meet organizational    needs.
The MoD has set up a Committee to review the existing procurement structure and recommend a new Defence Procurement Organisation. This Committee must seize this opportunity by suggesting a transformational structure rather than incremental changes.
A macro procurement model for the services is suggested. An illustration of the present structure in the Army is as follows:
The Army presently has 3 PSOs, 14 Directorates and over 200 SMEs occupied in Capital and Revenue procurement. This does not include ad hoc trial teams set up at field formations. Though they are a committed set of professionals, they are not suitably organized and integrated with other enablers to deliver the desired results. In consequence, the star rating of procurements and life cycle support system in the Army is at best one and a half.
The Apex body to deliberate and draft the “Defence Requirement and Budget Document” should be the Defence Board. The Board should comprise the Raksha Mantri, Chairman COSC (preferably permanent), Defence Secretary, CISC, Secretary Defence Finance and the SA to RM. The IDS, suitably reorganized withSubject Matter Experts (SMEs) should largely provide the inputs.
The Requirements and Budget Document would be analysed by the first respondent(Generators and Developers), namely the three Services and Joint Forces Command (JFC). Respective Capability Development Enterprise (CDE) of each Service and JFC should do the analysis of the base document. The CDEs would comprisea composite body of Subject Matter Experts (SMEs). The Services will have to transform their existing Procurement and Support organizations into planning and enabling CDEs. 
The first responder after analysing the “requirement and budget” document containing the national defence requirement and budget availability over next 10 year plan, would send the proposed solution to the Apex Board. The Defence Board would then appraise the proposed solution by the Services.Thereafter, the “agreed solution and budget” document by the Defence Board would be passed to the Enable and Acquire vertical.
Enable and Acquire vertical would be the most vital executive arm of the procurement and life cycle sustenance.  It can be designated as Defence Procurement and Support (DPS)Board. Minister of State for Defence Procurement (create one) should head it. Under him would be Services VCOASs, Secretary Defence Production and Procurement, Secretary DRDO, DG Defence Finance. Each of these entities must be very carefully structured and populated with composite SMEs and in built flexibility to engage experts on need basis, more importantly from the defence industry and think tanks.
The major focus of the newly constituted Committee on Defence Procurement Organisation should be on composite structuring and mandating each entity of the DPS Board. It should commence by creating a balanced secretariat of the Minister. The Secretariat should have staff and monitoring cell from all stakeholders. The Committee must adopt a transformational approach. It must submit its report in time. Thereafter, the GoImust resolve to implement it without any delay. This will create a truly integrated MoD and will generatedesired momentum to modernize the Armed Forces through Indian Defence Industrial Base.

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