Problematic defence acquisitions?

By: | Published: September 20, 2018 3:37 AM

Professionalising the Acquisition Wing, while minimising intra-organisational conflicts of interest, may hold key to implementing successful defence acquisition programmes

Another factor that can complicate defence acquisitions vis-a-vis normal “civil” procurement is the greater need for user involvement in a typical defence acquisition process.

One of the more well-researched academic papers on acquisition capacity-building argues it takes procurement officials about five years just to appreciate various complexities and nuances of defence acquisition matters, while it can take them another 10 years to develop adequate expertise in the subject for obtaining high-impact outcomes in a buying organisation. In contrast, and perhaps inspired by the Central Vigilance Commission’s circulars on rotation of “sensitive” (read “procurement”) personnel in government departments and PSUs in India, the average tenures of mid-level public procurement officials in the Ministry of Defence (MoD)—both civil and services’ officials—are usually 2-3 years only. So, if one subtracts the first 6-10 months taken to settle down into a new workplace, and the last 6-10 months planning for the next one, a typical acquisition official in the MoD may perhaps have as little as 18 months within which s/he can constructively contribute to, and match the rigours of, what is clearly quite a lengthy, complex, specialised and demanding procurement process.

This capacity problem originating from short tenures can become a handicap for the Indian side while negotiating complicated long-term procurements with “well-heeled” international governments and highly-professional international suppliers, since the Indian team composition could be variable every six months, whereas the counter-party personnel stay invested in the same military projects over much longer periods of time.

Another factor that can complicate defence acquisitions vis-a-vis normal “civil” procurement is the greater need for user involvement in a typical defence acquisition process. The high-level technical issues associated with defence acquisitions require, a priori, higher-than-normal user involvement in a typical defence procurement case, but unconstrained user influence over individual buying decisions can sometimes result in higher-than-normal conflicts of interest (CoI) as well, in the form of multiple midway changes to technical specifications or to contract clauses, negotiation asymmetries because of supplier engagement of retired user/buyer personnel—a “seller” who is effectively an “ex-user”/“ex-buyer”—and so on.

A typical example of such potentially CoI-enhancing influence within India’s Defence Procurement Procedure (DPP) is the high proportion of user representatives in Contract Negotiation Committees tasked primarily with finalising commercial and contractual terms of engagement. In contrast to this, defence contracting decisions in the US and in France, both of which have comparatively well-functioning and more effective acquisition systems, are executed by highly-skilled legal and contract-management professionals.

In the case of offset contracts also, the Indian system stands out because of user-led Offset Evaluation Committees: a feature that appears to be counter-intuitive, given the largely indirect nature of India’s offset regulations—“indirect” here meaning that counter-obligations of the (international) defence supplier are usually unrelated to domestic manufacturing of components forming part of the weapon or platform eventually being supplied to India’s MoD. In contrast, both Israel and South Korea that have succeeded in using offsets to develop strong domestic defence manufacturing and export capacities have had offset-handling and offset decision-making procedures that are comparatively user-/buyer-independent/insulated, thus resulting in better negotiated, and thus much more impactful offset contracts.

Over the last few years, MoD has shown immense interest in reforming India’s defence procurement procedures: a number of committees were set up for suggesting structural reforms, and some of their important recommendations have successfully been converted into actual changes to the defence procurement landscape—one such striking example being the new Strategic Partnership (SP) Model, even though the SP Model still reads more like a Statement of Intent as compared to the more substantive/procedural changes to the “Make” procedures in 2016, or the earlier 2013 amendments on indigenous content determination.

While MoD is currently focused on a more fundamental rethink of its acquisition systems as suggested by various expert committees—a process that may well take another 3-5 years to show visible results—a quick, short-term improvement could perhaps be made by immediately ramping up “contracting” capabilities within the Acquisition Wing itself. This specialised wing within India’s MoD has high-level representation from Defence Finance and from the Services to advise it on financial and technical aspects, respectively, and the need is perhaps to create a small office to assist the Director General (Acquisition) that can better manage the process of marrying user requirements not only with financial propriety and with procedural requirements, but also with India’s defence production priorities and with legal and contractual robustness, thus inculcating a more rigorous policy-based professionalisation of entire end-to-end defence procurement life-cycle.

If defence procurement is to be rightly seen more as an “acquisition of defence capabilities” rather than merely “purchasing” some platforms and weapons—as has historically been the case—then this new office could perhaps be entrusted with supporting the Acquisition Wing with more holistic advise for enhancing defence R&D/innovation and for sustainably fostering defence manufacturing in India, within the context of individual procurement decisions, as clearly appears to be the present policy and executive intent.

-Sandeep Verma is an IAS officer. Views are personal

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