The defence ministry had put out a Request for Information (RFI) to invite bids from vendors willing to undertake operations of 505 Army Base Workshop (ABW) under the Government Owned Corporate Operated model by Indian private sector.
The proposed GOCO model would allow the contractors to use army’s infrastructure and manpower to carry out repair and overhaul work. Under it, the contractor would be responsible for the daily operations of the workshops, sourcing of spares and meeting targets, while the ownership of the workshops would remain with the army.
The contractors will carry out overhaul of tank T-72 and T-90, repair of tank T-72 and T-90 Class B rotables including engines and base repair of major and minor assemblies of tank T72 and T-90.
The bidder was expected to have relevant experience to carry out similar projects including projects done in the defence sector involving services, manufacturing, overhauling, repair, maintenance modifications/upgrades or supply chain in last seven years.
Only private entities were eligible to respond by 1 June. Defence public sector undertakings (DPSUs) and Ordnance Factory Board (OFB) were not eligible to participate in this project.
Overview of Project GOCO
ABWs are an important part of the industrial base of Indian Defence forces. Eight ABWs were established during the Second World War to carry out repairs and overhaul of weapons, vehicles and equipment to keep the Indian Army operationally ready. These ABWs play important role in reset and regeneration of combat capability of Army.
ABWs carry out base repairs and overhaul of weapons, vehicles and equipment to keep the Indian Army operationally ready both during peace and war. They also undertake manufacture and indigenization of spares. In a bid to enhance the combat potential of the Armed Forces, a Committee of Experts (CoE) under the Chairmanship of Lt Gen DB Shekatkar (Retd), was constituted in 2016 to identify and recommend methods to meet the objective of an agile but effective military to meet current and future threats that the country faces.
Based on the recommendations of this Committee, a decision has been taken by the defence ministry to outsource the functioning of the ABWs to private sector players towards operating the workshop in the Government Owned Corporate Operated model. 505 ABW, Delhi Cantt is to be the first ABW to be put on the GOCO Model.
Overview of the 505 ABW
505 Army Base Workshop has historically overhauled and carried out base repairs of tanks as well as engines and major/minor assemblies of tanks. It currently overhauls 70 x T-72 tanks annually and its associated engine, assemblies etc. 505 ABW is scheduled to start all these activities for tank T90 from FY 2020-21. Spares required for the overhaul activity are currently sourced from Ordnance Factories, DPSUs, ex Trade and from OEMs (ex Import).
Consultants Report
PricewaterhouseCoopers (PwC), which in January 2020 was selected as a consultant and attract private players for the project, has submitted a report to the army.
PwC has given several examples of countries like the US operating similar models with high-tech infrastructure and suggested that these could be replicated here as well, officials said. PwC also gave examples of assembly lines run by Indian private companies and suggested that the workshops could be revamped on similar lines. However, army officials told the consultancy firm that it would not be possible to have a similar setup like the US because of the limited budget and that there was no requirement of establishing additional infrastructure, as the existing machinery was enough to meet the requirements.
For and Against the Model
Officials who are opposed to the move have claimed that it could increase the cost and that private companies in India did not have the skills to carry out this work. The model will also deplete the army’s capabilities built over years to overhaul equipment. Private firms are pushing for bringing in their own manpower, citing requirements of a younger and technically more qualified workforce. Officials also fear private operators to poach serving officers to manage the facilities. If the GOCO model is implemented, the private contractors will replace all infrastructure. The cost of the additional infrastructure will be added to the annual production cost.
Those supporting the model, however, say privatisation was important. They army then does not have to run workshops in remote areas and that was a way of reducing administrative flab. A question being raised from within the army was whether private firms were capable of providing critical spares for equipment such as tanks. A reason why the GOCO model was being implemented was because questions had been raised about the army’s capability to repair and overhaul its equipment in time. While the army was capable of meeting targets, the delay was caused by the Heavy Vehicle Factory of the Ordnance Factory Board in Avadi, Tamil Nadu, not providing adequate spares on time.
Comments
IMR spoke extensively to Maj Gen Ravi Khetarpal who commanded a Base Workshop in Bangalore and was Chairman & Managing Director of Bharat Dynamics Ltd. These comments are based on his considered views.
ABWs were raised over the years primarily to meet the Army’s requirement of base overhaul of major weapon systems and equipment and were distributed geographically to also meet the socio-economic obligations of the Government.
They were (and are) headed by very experienced senior EME officers who have been progressively trained in leadership and management techniques in MCEME and Army schools of instruction. With over 25 years service in the field army, the urgency and necessity of ensuring reliable weapon systems is well known to them.
The civilian workforce is motivated and highly skilled. However, no mention has been made of their management, handling or rightsizing. Outdated labour laws have always been a drawback in their management and will remain so even in a GOCO environment, unless revised.
The primary focus of every Commandant of ABW has been to ensure laid down annual targets are met. However, the major drawback, over the past seven decades, has perpetually been the non-availability of major overhaul spares, which have not been forthcoming in a timely and streamlined manner either from the OEMs, mainly from abroad, or the OFB factories and DPSUs. This single factor has been responsible for the delays in delivering the weapon systems on time. Under GOCO, how corporations are going to streamline spares and inventory management and ensure that spares come as “complete overhaul kits”, especially from the foreign OEMs, DPSUs and the OFB, over which they have no control, will be worth noting. It would be better to only corporatize inventory management, rather than tampering with the organisational system of ABWs which has well stood the test of time.
Commandants of ABWs have had to function with limited financial powers, budgets and red-tape. Consequently, purchase of non-available spares, modernisation and upgradation of infrastructure, plant and machinery suffered, but not due to lack of enthusiasm or ideas. Catching up now by GOCOs will result in a huge financial burden which will eventually have to be reimbursed by the MoD. Incremental development of infrastructure based on detailed project reports (DPR) already planned, may smoothen the financial hit. Commandants of ABWs need to have their financial powers enhanced with freedom to buy “off the shelf” including central procurement items, to reduce red-tape and consequent delays. Base Repair Depots (BRD) of the Indian Air Force (IAF) are an example.
Corporations will follow the “Cost Plus” model of financial accounting. They will be paid the complete cost of overhaul and spares plus a 15-20% profit to ensure attractive bottom lines. Assets of ABWs, built up over the years, may also be acquired by them at a pittance. Further, there is no mention of downsizing/rightsizing of manpower and, if proposed, the unions will not permit it, as is known from previous experience. Therefore, in reality, this model will eventually be cost-accretive, instead of resulting in a savings to the State.
Indigenisation of critical spares has been a major success story of the ABWs, especially for urgent operational commitments like for snow scooters in Siachen, track links for T-72 tanks, or for miscellaneous requirements of Northern Command, where the OEMs were playing truant or quoting unacceptable prices or timeframes to supply. These will likely take a backseat with GOCOs as the numbers required are very small and may not be cost-effective to manufacture. With the “Make in India” backdrop, indigenisation should also be of prime importance, but does not find a mention in the RFI.
By replacing existing EME manpower with younger civilian manpower by GOCOs, over time, efficacy of EME all ranks to overhaul equipment will deteriorate. The impact of this will be felt in the field army, as EME personnel gain valuable experience and knowledge during their 3-4 year tenure in an ABW as part of their grooming, which they pass on to their colleagues once back in the field.
In sum, rather than GOCO-ing all ABWs, it would be better to corporatise only the spares and inventory management part. With greater financial powers and independence and a guarantee of timely overhaul spares as complete kits, ABWs are fully capable of delivering quality overhauled weapon systems on time and in meeting any additional operationally urgent requirements of the field army.
