Indian Defence Acquisition: Time for Change

The latest Comptroller and Auditor General (C&AG) Performance Report on Defence Services (No. 4 of 2007) has once again exposed the problems involved in Indian defence acquisition. The report has been critical virtually of all the processes of the acquisition cycle, from planning to the formulation of Qualitative Requirements (QRs), vendor selection, conduct of trial and evaluations and processes of induction. It is in this perspective that a close examination is needed to get into the genesis of the problems and come out with an alternative solution that promotes efficient acquisition, which is moreover in tune with the best international practices.

Defence capital acquisition is a long, complex and arduous process, and needs expertise in “technology, military, finance, quality assurance, market research, contract management, project management, administration and policy making.” In India, this process starts with the Defence Planning Guidelines issued by the Defence Minister, which then leads to the formulation of long-term, medium-term and short-term perspective plans, delineating capital requirements in different time horizons. However, as the Audit Report shows, these perspective plans fall short both on the count of timely completion and guaranteed budgetary commitment, resulting in poor fulfilment of planned capital requirements. In the case of the Army, for instance, since 1992 the planned induction of capital requirements in respect of various Arms and Services varies from 5 to 60 per cent. The poor fulfilment of requirements is ascribed by the C&AG to the unrealistic formulation of Perspective Plans, especially the five-year Services Capital Acquisition Plan (SCAP), which does not take into account the availability of funds and the lead time required for acquisition. From this it is quite evident that in the present set up the Headquarters Integrated Defence Staff (HQ IDS), which is responsible for the preparation of perspective plan in consultation with the Services, lacks the required expertise and authority to fulfil its obligations of preparing realistic Perspective Plans.

The formulation of Qualitative Requirements (QRs) of weapons/platforms/systems is one of the most critical aspects of defence acquisition and has a strong bearing on defence capability and costs. Despite several reviews of procurement procedures, from DPP 2002 to the latest DPP 2006, QRs are still found to be narrow, unrealistic, inconsistent with the available technology, and worse, are anti-indigenisation, anti-inter se prioritisation and vendor-specific. This has led not only to sub-optimal use of resources but also to time overruns. The C&AG Report has strongly recommended that QRs should be “defined in terms of required functions and performance level,” instead of detailed physical and technical characteristics. However, it is not the first time that an oversight agency like the C&AG has requested that QRs be broad-based and generic and thus designed to elicit more competition. Previously, DPP 2002, DPP 2006 and the Parliamentary Standing Committee on Defence have all made recommendations on similar lines, but no substantial progress appears to have been made. It has to be noted that QR formulation is intricately linked to various other acquisition functions like solicitation of offers, trials and evaluations, etc. In other words, an inefficient QR makes vendor response restrictive and trial and evaluation process time-consuming, subjective and unfair. The 18 Army Contracts that were examined by the supreme Auditor show that out of 84 Requests for Proposal issued, only 24 vendors (less than 30 per cent) were pre-qualified after trials and, in none of the cases the number of successful vendors exceeded by two. Similarly, the time taken for trial and evaluation is found to be “unduly long” and lacked “objective and fair assessment”. Keeping the above factors in mind, the current practice elicits the important question whether QR formulation should be left exclusively in the ambit of the Armed Forces/HQ IDS or whether should any other organisation, say a highly-professional acquisition organisation, have some role in defining the QRs?

At present, the Services Headquarters and HQ IDS are responsible for the formulation of QRs for the individual and common uses items, respectively. However, given the history of inappropriate QRs, leading to the vicious cycle of poor acquisition, an alternative approach needs to be worked out which would facilitate “faster, better and cheaper” acquisition and is at par with the best international practices. Given the structure of acquisition organisation in India, the present Acquisition Wing of the Ministry of Defence (MoD) is theoretically best placed for the job. However, in the present set up, the Acquisition Wing is not a body responsible for the whole range of acquisition tasks. At present, it is merely performing the procurement functions (a part of acquisition process), leaving the rest to other functional heads, like IDS for planning, DRDO for research and development, Armed Forces for QRs, industries for production, Director General for Quality Assurance (DGQA) for quality assurance and test and evaluations. Moreover, in its present form, the Acquisition Wing is not quite a professional organisation. With a meagre staff, drawn from the MoD and the Services for short tenures, the complex task of capital acquisition is performed without adequate expertise. The personnel involved in acquisition lack “adequate training or exposure to project management, procurement or contract management.” This handling of complex defence acquisition worth thousands of crores of rupees without proper expertise and by a set of scattered bodies cuts a sorry figure when compared to the best international practices adopted by some of the major weapon- producing countries.

In the developed countries, Defence acquisition is increasingly performed by large and highly professional and integrated bodies like France’s Delegation General for Armament (DGA), Britain’s Defence Equipment & Support organisation (DE&S), etc. These professional bodies are responsible for all crucial aspects of the acquisition cycle, from planning, design, delivery, and upgrade to the final disposal of assets. The role of the Armed Forces in these countries are restricted to only providing the broad operational requirements, leaving it to the special bodies to attain these within the given time, cost and technology parameters. Acquisition is performed by qualified professionals, drawn in sufficient numbers from a range of specialisations like Law, Finance, Management, Technology, and they are retained sufficiently for long periods to see through major projects. Besides, they are given continuous education and training to become world-class leaders in their respective fields.

In India, by contrast, defence acquisition is performed by different organisations accountable to different functional heads. As a result, each acquisition process has to go “through numerous approvals and submission points”. This not only creates cross-validation with respect to overall planning and requirements but also generates different views and approaches among the organisations at each stage of acquisition, making it difficult to perform the critical acquisition functions in an efficient manner. Similarly, the Acquisition Wing provides little value addition as it merely performs the procurement functions and is remotely placed from the planning process, defence R&D, Defence Production, Quality Assurance and Test & Evaluation, leading to lack of a single point of accountability which is critical for efficient acquisition.

To overcome the present deficiencies surrounding the Indian acquisition system, it is time to create a separate integrated and professional acquisition organisation by incorporating all the acquisition functions under one head. The benefit of creating such a separate integrated acquisition organisation, which is in sync with the best international practices, lies in the fact that it will not only provide timely and cost-effective acquisition but will also ensure a single point of accountability. As the Acquisition Wing of the MoD was established with the aim of integrating all the acquisition functions, it can be empowered to lead this integrated organisation with a wider mandate. However, to bring all the acquisition functions under the Acquisition Wing is a huge challenge, as it involves a complete restructuring of the existing organisational structures and a change in existing equations. But given the history of poor acquisitions, as pointed out by the C&AG, a radical change needs to be brought in to make Indian defence acquisition ‘faster, better, cheaper’, and more integrated, and at par with best international practices.