View: Changing the archaic norms of determining contract award

On September 29, 2021, a powerful and much needed statement was made by the Army Chief. He minced no words when highlighting the need to change archaic norms in Defence Procurement if the country is to progress towards modernisation of its defence forces.

In pursuit of the best technology, one certainly cannot follow the lowest (L1) bidder system, which generates the lowest technology provider amongst successfully trial evaluated equipment. This prevalent concept rules out the best technology which may be only marginally losing out in the price war as also, no equipment provider when faced with a L1 scenario would dare to venture out with the ‘best’ equipment. The prevalent system, therefore, encourages mediocrity and has its implication on investment in R&D and progress towards modernisation. It raises the basic question, do we want an equipment that ONLY meets our declared criteria, or is the criteria only an instrument of guidance for equipment provision and its trial. .

Leaving the entire gamut of getting acceptable equipment to the framing of General Staff Qualitative Requirement (GSQR) is a fallacy, especially when the framing itself is plagued with:

a) Getting together a criteria which focuses on essentially getting a multi-vendor situation. This implies the lowest acceptable amongst what is available,
b) Inputs from industry which may not have the equipment in most cases and are dependent on technology partners and thereby have inadequate knowledge and either play safe or over-kill leading framing of inadequate GSQRs or failure in trials
c) Dependence on publications which generates an incomplete picture
d) Interpretation and perceptions of requirements, especially which come into play in long drawn out cases
e)Technology changes that far transcends the pace of procurement.

The current provisions in the DAP viz Enhanced Performance Parameters (EPP), that were enshrined in DPP-2016 and continued in DAP-2020, to address this issue, has enthused no one. The exact scope for EPP is defined in the RFP, vendor declares it in his technical bid and being successfully tested, will be awarded a credit score of up to 10%, for evaluation of L1, with each individual attribute not exceeding 3%. This 3% weightage in cost is too miniscule for the vendor to incorporate niche technology in the equipment. Another criterion, Essential Parameters-B, states, parameters not available originally in the equipment fielded for trials, can be developed, and would be tested before delivery after the contract has been given. The military is worried about the equipment not making the criteria after years of effort has been put in for processing the case. Both are actually ‘no-movers’.

The newly introduced Chapter-VIII of DAP-2020, pertaining to acquisition of systems products and ICT systems, shows the way towards future procurement. With Combined Quality Cum Cost Based (CQCCBS) Selection Method, with 60% weightage given to technology, the contract award is facilitated towards higher end technology providers. . The application of a similar concept of CQCCBS into other areas of critical equipment procurement, to ensure that the best is available for the armed forces, with a balance between technology and cost, is necessary. It’s time that the L1T1 concept is undertaken expeditiously. The problem is Price Indexing of Technology, which may lead to allegations of bias in our representation plagued defence procurement.

The question arises on the term, 'Price Indexing of Technology (PIT)' why a matter appearing so simple (L1T1) has not been implemented. The problem is that the matter is both complex and invites representations in the process of procurement. To explain the complexity,

a) For each one of the major equipment a System Analysis Design would be evolved with attributes and commensurate weightages. In a system of systems products like a tank, there are a multitude of principal attributes each having multiple sub-attributes which may devolve further. One would determine the attributes, rank them, and give commensurate weightages which are relative and cannot in simple geometric progression. To give a simple illustration; what is more important in a tank, fire power, protection, or mobility; by how much is it more important to the other. And all are inter-connected. In fire power, what is more important and more-so what are the relative weightages for each of the destruction instruments, main gun, secondary gun, missile, and there may be more. What is relatively important and weightages in each of the above instruments for, range, accuracy, penetration, rate of fire, barrel life and many more. Do remember the attributes for gunnery are also linked to the attributes of fire control systems and sighting systems which would in themselves have a major analysis of selection and weightages. The permutation and combinations with associated linkages in a complex platform are mind boggling. Computation assists, but computation must be programmed with inputs and the decision for inputs is complex when human interpretations and perceptions besides varied environmental necessities, as in the Indian case, creep into the whole matrix.

b) The issue does not stop there. The attributes and weightages, as evolved for the System Analysis Design (SAD) matrix, will be further devolved into relative cost, to bring the cost and technology component to a common base for determining contract award. This is Price Indexing of Technology (PIT). The issue is the relative costs awarded and its implications on selection of equipment. The SAD and PIT are subject to interpretation and perceptions and therefore, can be interpreted by ulterior motive propelled representations as discriminatory. Mitigating measures will have to be evolved and the process will have to be done in advance and in a transparent manner, while managing the environmental pressures and opinions.

Problems and complexities notwithstanding, we must move ahead with the L1T1 method of contract award like the CQCCBS. For this separate expertise would have to be generated in form of teams for each type of major equipment who would have to be; technical experts in each sub-systems, operational exponents of the equipment, finance team, computation experts in the field of SAD and qualitative control. Adding industry representation directly through the major stakeholders or through the industry associations of SIDM, FICCI, CII will lend transparency in the process and mitigate alleged biasness. Environmental and stakeholder opinions can be sought by such a team through computationally enabled comprehensive questionnaires. There are foreign courses, specific to military equipment in this field, to which officers earmarked for longer tenures can be fielded. It would also be a good idea to involve retired officers who have undergone the process in the FICV & TCS projects in which the Expression of Interest evaluation was based on such a method.

The complete capital budget procurement system of defence equipment needs a revamp to meet current and future requirements. In this, the system must encourage domestic industry to strive and provide the best available equipment for the armed forces. The L1T1 process, with suitable safeguards, is one besides others required, to move together into future modernisation needs. The industry is a partner in Capability Building and must be trusted and enabled to provide the best.

The writer is a Combat Arms Officer, retired as the Addl DG Weapon and Equipment of the Indian Army. Presently he is heading the Aerospace & Defence practice in Primus Partners.