Money Over Matter | Bring in Performance Matrix

New procurement procedure has muddled the policy further

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

The services seek military equipment either to counter an anticipated enemy threat or to enhance own operational capability for envisaged missions. The services spell out minimum performance attributes corresponding to the task/tasks to be performed by the equipment sought. These attributes are collectively referred to as Services Qualitative Requirements (SQR). They form the basis of India’s defence acquisition philosophy. Hence, importance of diligent formulation of SQR cannot be over emphasised.

SQR flow from India’s operational doctrines and plans; prospective enemy’s capabilities, his probable plans and tactics; likely pattern of employment of the equipment in the obtaining terrain and climatic conditions; current and anticipated technology levels; and availability of the systems in the world market. As SQR spell out users’ requirements in terms of functional characteristics in a comprehensive, structured and concrete manner, their formulation is the exclusive prerogative of the concerned Service Headquarters (SHQ).

SQR have to be broad-based so that they result in a multi-vendor situation. It implies that SQR have to be pitched at run-of-the-mill levels to ensure participation by multiple vendors. As the state-of-the-art systems cannot be sought, the services get saddled with mediocre equipment which may be approaching obsolescence.

All vendors who meet SQR are considered at par and the lowest bidder gets the order. If a particular system performs in excess of the laid down SQR, it gets no additional credit. As a high-tech high-performance system can never be cheaper than a common-place system, the services miss out on getting superior equipment that may be available for an acceptable increase in cost.

Procurement of military equipment on the basis of SQR has been the bane of India’s acquisition regime. It is an archaic system and most countries have already discarded it.  During the year 2011-12, 41 procurement proposals had to be withdrawn on account of inadequacies of SQR. Therefore, the environment was expecting DPP-2016 to adopt a more progressive system of incorporating users’ requirements. Disappointingly, the current system of SQR has been retained, albeit in a more convoluted form.


SQR-Related Changes in DPP-2016

Two significant modifications have been introduced in DPP-2016. In place of having only one category of essential parameters, SQR have been split into ‘Essential Parameters-A’ (EP-A) and ‘Essential Parameters-B’ (EP-B). EP-A will form the core of SQR and will generally correspond to the contemporary equipment available in the market. These parameters will be tested and validated at the Field Evaluation Trial (FET) stage itself.

EP-B will consist of the parameters that may not be available originally in the equipment fielded for FET but can be developed and achieved by the vendors using available technologies. These parameters need to be tested and validated within a specified time frame as stipulated in the contract. Provision for partial quantities of the items being procured to meet different/higher specifications for specific operational requirements will be incorporated in the Statement of Case itself.

Approval of the Defence Acquisition Council (DAC) will be necessary to invoke provision to incorporate EP-B in any procurement proposal. EP-A and EP-B are non-negotiable requirements to be met by the vendor, prior to the commencement of equipment delivery. In procurement cases involving EP-B, it will be essential for vendors to demonstrate their ability to develop the item further to meet EP-B with their existing capabilities at the bid submission stage itself. An undertaking will also be required while entering into a contract.

To guard against default, an additional bank guarantee (valued between 5 and 10 per cent of the contract value of equipment required with EP-B) will be needed (in addition to the standard performance bank guarantee). The quantum must be mentioned upfront in the Request for Proposals (RFP). Failure to meet EP-B within the contracted time frame will lead to the forfeiture of all bank guarantees (performance bank guarantee, additional bank guarantee and advance bank guarantees, if any). It will also attract other penal provisions as may be prescribed by the government.

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