DEFENCE PROCUREMENT: Defence Acquisition Procedure (DAP) 2020 Released

DAP 2020 Can Bring Change if Mindsets Do

On 28 September, 2020 defence minister Rajnath Singh unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi. DAP 2020 has been aligned with the vision of the Government of Atmanirbhar Bharat to empower Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.

The first Defence Procurement Procedure (DPP) was promulgated in the year 2002 and has since been revised periodically to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.

With the new Foreign Direct Investment (FDI) policy announced, DAP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting interests of Indian domestic industry. DAP 2020 focuses on simplifying the defence acquisition procedure and institutionalising monitoring mechanism with concurrent actions using digital technologies & data base for selection of best equipment in a transparent and competitive manner giving adequate opportunities to capable vendors.

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Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. The new DAP has 12 chapters instead of 8 chapters as per DPP 2016. There are new chapters on: 

•             Acquisition of Systems Products and ICT Systems: Acquisition of Systems and Information & Communication Technology (ICT) products is in a few aspects different from the regular acquisition projects.  The software and hardware elements of these projects usually require periodic up-gradations and intense obsolescence management to maintain tactical dominance in C4I2, EW and Cyber domain.   To provide an efficient and agile acquisition mechanism for acquisition and up-gradation of such products, certain provisions are incorporated in this Chapter, to be read in conjunction with relevant provisions of Chapter-II of Defence Acquisition Procedure.

•             Leasing: Concept of Leasing has been introduced to substitute capital expenses with small rental payments for defence equipment not directly involved in warfighting.

•             Other Capital Procurement Procedure: This chapter would lay out procedure on other capital expenses such as: overhauls, refits, upgrades and replacement of items of Capital nature. The procurement under this chapter will be as per list of items (as amended from time to time), which will be drawn up by HQ IDS and respective SHQs and promulgated by DG (Acquisition) in consultation with MoD (Finance).

•             Post Contract Management: This involves ensuring compliance with the terms and conditions of contract, managing contractual amendments, quality assurance, timely payment and deliveries, and resolving claims and disputes.

In the categories of procurement, the categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%. This reservation will provide exclusivity in participation to domestic Indian industry. Impetus has been given towards developing indigenous defence industry by increasing IC percentages (%) in categories of procurement. The revised IC percentages are as follows:

Project Management Unit

One of the important announcements as part of the Defence Reforms announced in the Atmanirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process. The PMU will also support in setting up realistic GSQRs and simplification of trial procedures.

Another key focus areas of the review was to implement Ease of Doing Business. with emphasis on simplification, delegation and making the process industry friendly with certain specific provisions incorporated:-

•             Procedural Changes: Single stage accord of AoN in all cases upto Rs 500 crores has been instituted thereby reducing time. FTP cases, post accord of AoN, will be progressed as per delegated powers thereby reducing the procurement cycle considerably. In Planning Process, LTIPP has been re-designated as Integrated Capability Development Plan (ICDP) covering planning period of ten years instead of 15 years.

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•             Request for Proposal (RFP) and Standard Contract Document (SCD): Certain measures to provide clarity and alignment of requirements as also enabling provisions have been incorporated in the RFP and SCD in terms of Flow Chart drivenguidelines, provision of in-storage preservation and termination of contracts in cases where projects are not progressing as per pre–defined milestones.

A separate dedicated chapter has been incorporated in the DAP 2020 for acquisition of systems Designed and Developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation. Aspects of Spiral Development have been incorporated.

The Government of India.s new DAP 2020 document will certainly instil a confidence and will meet aspirations of stakeholders across the spectrum.

Comments

Defence Acquisition Procedure is based on the concept of “Womb to “Tomb” and has certain unique aspects such as supplier constraints, technological complexity, foreign suppliers, high cost, foreign exchange implications and geo-political ramifications, and therefore is not a standard open market commercial form of procurement. While maintaining highest standards of transparency, probity and public accountability, a balance between competing requirements such as expeditious procurement, high quality standards and appropriate costs needs to be established. As a result, decision making pertaining to defence acquisition remains distinctive and complex.

Atmanirbhar Bharat initiative, further accentuated by policy reforms in the defence sector as part of Phase IV ‘New Horizons of Growth’ is focussed towards enhancing self-reliance in defence production, indigenisation of spares, overhauling of trial and testing procedures based on realistic Services Qualitative Requirements (SQR) and requisite monitoring by Project Management Unit (PMU) for time bound procurement. There is a need to institute enabling provisions for utilisation and consolidation of design, development and manufacturing infrastructure available in the country. A need has also been felt, for identifying strategic partners for promoting defence production in the private sector. The FDI policy statement of enhancing FDI through automatic route from 49% to 74% in defence should enable ‘Manufacture in India’ a lucrative option for foreign equipment manufacturers.

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. Cutting down permissible timeframes for various activities and institutionalising robust mechanisms to monitor for probity at various stages of the acquisition process are the attributes of this DAP.

While the Defence Acquisition involves long gestation periods, where as the needs of the Armed Forces being non negotiable, flexibility in the procedure has been provisioned for, to ensure timely availability of important equipment. But the proof of the pudding will be in the eating.

DAP 2020 may be a product of extensive analysis, deliberations, interactions and focused formulations, to further ‘Self Reliance’ of the country in the defence sector and implement ‘Ease of Doing Business’ with emphasis on simplification, delegation, reduced timelines and making the process as industry friendly as possible, but again, mindsets also need to change.

Category              DPP 2016             DAP 2020
Buy (Indian-IDDM)          Min 40%               Min 50% 
Buy (Indian)       Min 40%               Indigenous design – Min 50%
                                Otherwise – Min 60%
Buy & Make (Indian)      Min 50% of Make         Min 50% of Make  
Buy(Global- Manufacture in India)           –         Min 50% of Buy plus Make
Buy (Global)       Min 30% for Ind vendors   Min 30% for  Indian vendors