Make the ‘Fast Track Procedure’ for Defence Capital Acquisitions Deliver

By Vikram Taneja

October 15, 2014  

‘There were inordinate delays in procurement through Fast Track Procedure thus defeating the very purpose of adopting such procedure on grounds of urgency. Internal lead time for normal procurements was also too high as sixty percent of the cases took more than three years to sign the contract.’ [i]

Comptroller and Auditor General of India

Fast Track Procedure

Fast Track Procedure (FTP) [ii] for meeting urgent operational requirements of capital equipment for the Services was promulgated by the Ministry of Defence (MoD) on 28 Sep 2001. The objective of this procedure is to ‘ensure expeditious procurement for urgent operational requirements foreseen as imminent, or for a situation in which a crisis emerges without prior warning’. The timelines in the FTP have been compressed and the entire procedure is designed to fructify between 112 to 159 days. The requirement is generated duly concurred by the Service Chief and Acceptance of Necessicity (AoN) is granted by a specially convened Defence Acquisition Council (DAC) within seven days. In case the equipment sought to be procured is already on order or in service, option of invoking the option or repeat order clause is exercised. In case new equipment is being procured, no new Qualitative Requirements are required to be approved through the General Staff Equipment Policy Committee (GSEPC); the equipment can be procured based on broad based Operational Requirements (OR) approved by the Service Headquarters. The approved ORs are forwarded to the DAC along with the AoN. After the AoN has been granted, the Request for Proposal (RFP) is required to be processed within ten days of the approval on a single stage two bid system. System of approval of RFP more or less remains the same and it is issued by the concerned Technical Manager with the concurrence of the Director General (DG) Acquisition in the MoD on a limited tender basis. 

The technical bids so received are examined for any waiver of ORs and finally approved by DG Acquisition. There is no requirement of any trial in this case and an Empowered Committee is formed to witness demonstrations in the vendor’s premises. The Empowered Committee has been vested with the powers to negotiate and conclude contracts in the shortest possible time, and is mandated to have adequate representation from different wings of the MoD and Service Headquarters to ensure that requisite expertise and authority for procurement action is available. Thereafter the commercial aspects of the contracts are addressed by a Contract Negotiation Committee (CNC) which functions more or less on similar lines as in the case of regular procurements. In case of projects over Rs 300 Crores, a committee comprising Secretary (Defence R&D), Secretary (Defence Finance) Additional Secretary of the Department of Defence and Deputy Chief at Service Headquarters would scrutinize each case from the procedural angle within three days before the contract is signed or order is placed. The contract will be signed after the Competent Financial Authority approves the case.

Since the inception of FTP in 2001, not even one case has fructified within the laid down timelines despite well articulated safeguards [iii] thus defeating the very purpose for which it has been intended. The procedure has seen only one case through for the Army and Indian Air Force each while the Navy has not fielded any case so far through the FTP. It has been seen on the basis of past experience, that it takes anywhere between 24 to 36 months on an average for a fast track contract to be awarded. A case in point is the procurement of Electronic Warfare System required for North East and Jammu and Kashmir whose procurement was initiated in 1999 and it was put through FTP in 2001. However, after 2001, it took 75 months only to sign the contract. Such delays are not acceptable and need to be remedied.

Procurement of Urgent Operational Requirements in the United Kingdom

In comparison, the procedure for procurement through Urgent Operational Requirements (UORs) in the United Kingdom (UK) is more evolved and pragmatic. The salient features of the same are given below:- 

UORs arise from the identification of previously un-provisioned and emerging capability gaps as a result of current or imminent operations or where deliveries under existing contracts for equipment or services require accelerating due to an increased urgency to bring the capability they provided into service.

The need to temper the requirement to expedite delivery with the need to ensure supportability in the later stages of exploitation is kept in consideration in the UK UOR. Hence it is normal for UOR’s to deliver ‘the 80% solution” balancing risk against the imperative to urgently satisfy the operational capability gap. A pragmatic approach is taken in the provision of UORs which the Indian system can draw richly from. Such a strategy carries risk and it is the level of acceptable risk that differentiates acquisition through UOR procedures from standard acquisition. Risk analysis as a discipline unfortunately is not practiced in the Indian capital acquisition system.

Procurement Strategy. Every acquisition project, regardless of value or circumstance, involves a robust procurement strategy. The level of detail needed is commensurate with the complexity, associated risks and value of the requirement. As soon as a requirement is identified, Commercial Officers akin to project managers, taking account of this guidance, engage with all relevant stakeholders to develop the optimum Procurement Strategy to ensure that the Business Case proposes a solution that will meet the key performance, cost and time requirements. Thus project management is an integral part of every acquisition case in UK.

Contracting Modalities. In general, the normal rules for handling contractual matters continue to apply when procuring UORs. However, pressures of urgency will inevitably be brought to bear on those charged with delivery of the UOR and it is important to ensure that any other team members do not overstep their authority and unwittingly commit the Department or unnecessarily weaken its negotiating position. Competition remains the corner stone of public procurement and there should be no presumption that competition can be dispensed with for UORs. 

Delivery Considerations. A key consideration of an UOR is the need to deliver the equipment or service into service quickly in order to meet a recognised Capability shortfall or gap. This makes defining the delivery aspects of the Contract essential. As part of the Contract, a clear delivery schedule, detailing due dates and the equipment and/or services is required. Commercial Officers should resist any attempt to place Contracts where a firm delivery schedule is not agreed. 

Suggested Measures to make the Fast Track Procedure more Responsive

Time Frame. Given India’s newfound emphasis on indigenization, FTP will remain the only category which will be able to provide the Services an access to global markets for urgent procurements of its capital requirements in times to come. No attempt should therefore be made to increase the time period of the procedure as is the popular view in this regard. Any increase in time will result in defeating the very purpose for which the FTP was instituted. The focus should be on simplification of the process itself.

Empowered Committee. The composition of the empowered committee as talked about in the Defence Procurement Procedure (DPP) has not been laid down. This results in diffused roles and responsibilities and eventually causes delay. The empowered committee should be so formed that the power to negotiate and conclude contract including the commercial negotiations is vested in it. In the existing FTP, the role of a separate CNC thus can be negated. In case the empowered committee has already negotiated and concluded the contract, examination by the CNC yet again will only add to the delay hence this provision should be done away with. 

Composition. The proposed over arching empowered committee may be constituted as under:

Indigenous Buy. In this case, the Empowered Committee discussed above may be headed by a Joint Secretary or equivalent officer assisted by representative from the Acquisition Wing, Maintenance and Quality Assurance Agency, User representatives and those from the Weapon and Equipment Directorate in Service Headquarters. 

Procurement ex Import. In case of procurement ex imports, the Empowered Committee may be headed by an Additional Secretary or equivalent officer with members from Technical Manager, Finance and Acquisition Manager and Advisor Cost in addition to members indicated above. This Empowered Committee should have the powers to negotiate and conclude contracts in situ and the requirement of an oversight committee can be met through electronically in case the contracts are more than Rs 300 crs.

Vendor Development. As many as 40 percent cases in the past three years which were processed through FTP were short closed due to poor or no response from the vendors. According to the Comptroller & Auditor Generals audit of Capital Acquisitions, ‘Identification of vendors in respect of most of capital acquisitions finalised during the period of audit was inadequate. It was found that the number of vendors who responded to the Request for Proposal was far less than those to whom the same was issued. The market survey was limited and there was no system of vendor rating or information on past performance of the prospective supplier. To take the example of the equipment ‘Spotter Scope with digital camera’, Request for Proposal was issued to 54 vendors while response was received from only four vendors’. 

Conclusion

Delay in capital acquisitions is attributed mostly to the inadequacies in the General Staff Qualitative Requirements (GSQRs) and protracted field trials both in the domain of the Services. FTP is one viable recourse available to the Services which has neither of these two stages built into it yet it has not been a success. Merely articulating a procedure therefore will not necessarily result in fast track capability building. Immediate steps need to be taken to harmonise the existing procedure with the global best practices in Supply Chain Management such as Collaborative Planning Forecasting and Replenishment, Strategic Sourcing and development of an Enterprise Resource Planning architecture for capital acquisition in India [iv].

Views expressed are personal.

References 

[i] Comptroller and Auditor General of India ,Report number 4 of 2007 ( Defence Services), Chapter 1, Defence Capital Acquisition, Army.

[ii] FTP has been enunciated in Chapter IV of DPP 2013.

[iii] DPP 2013, Para 74 (a) ‘Broad time frame for completion of different procurement activities should be adhered to. Major deviations from this time frame should be brought to the notice of the DPB, for necessary corrective measures’.

[iv] DPP 2013, Para 74 (a) ‘A defence procurement network, electronically connecting all agencies involved in defence procurement, to build up a data base and information system, should be set up’.

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