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Amateur and Unscientific

Commercial negotiations in defence procurement procedure suffer due to lack of professionalism

Maj. Gen. Mrinal Suman (retd) Maj. Gen. Mrinal Suman (retd)

A defence procurement procedure is a management process by which a nation provides the defence equipment sought by its armed forces in the required time-frame and with the best value for money. Every country evolves its own distinct system that suits its national strategic aims and is in consonance with the prevailing environment. Development and sustenance of indigenous defence industry is a natural fall-out of the process. India is no exception.

Procurement of new weaponry and equipment is a long, complex, arduous and time-consuming process. Multiple agencies have to perform vital functions, both concurrently and sequentially. The Indian defence procurement process follows ‘single-stage two-bid’ process that consists of two distinct phases – technical and commercial.

In the first phase, detailed technical evaluation is carried out of all competing systems to ascertain their compliance with the laid-down parameters and to identify the systems considered acceptable for introduction into service. All systems that meet the specified criteria are considered at par and no inter-se merit list is prepared. The technical phase is primarily handled by the concerned Service Headquarters (SHQ), albeit under the close oversight of the ministry of defence (MoD).

Single-Stage Two-Bid Process
Single-Stage Two-Bid Process

In the second phase, commercial proposals received in respect of all technically successful vendors are examined in detail, financial quotes are compared and the lowest compliant bidder is identified for the award of the contract. Commercial phase is exclusively the domain of MoD. SHQ has no role to play except render advice on issues of technical nature that crop up during the evaluation of commercial quotes and subsequent contractual negotiations with the selected vendor.

India’s commercial evaluation process is conducted in a highly amateurish manner. It draws flak in every procurement case for numerous inconsistencies and incongruities. Take the case of the purchase of helicopters from AgustaWestland. The Comptroller and Auditor General (CAG) of India severely faulted MoD for the slapdash manner in which commercial negotiations were carried out.

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