New Defence Acquisition Procedure to reduce time delays, enhance ease of doing business: Check salient features

Defence Minister Rajnath Singh unveiled on Monday a new Defence Acquisition Procedure (DAP) that features steps to turn India into a global manufacturing hub of military platforms, reduce timelines for procurement of defence equipment and allow the purchase of essential items by the three services through capital budget under a simplified mechanism.

Under the new policy, the offset guidelines have also been revised to give preference to defence majors offering to manufacture products in India instead of meeting the offset obligations through other means, officials said. The DAP also incorporates new chapters on information and communication technologies, post-contract management, acquisition of systems developed by the state-run defence entities like the DRDO and Defence Public Sector Undertakings (DPSUs), they said.

In what is seen as a significant move, the DAP featured measures to reduce delay in procurement of essential items by the three services as it proposed a new enabling provision to acquire them through capital budget under a simplified procedure in a time-bound manner.
Singh said the DAP has also included provisions to encourage foreign direct investment (FDI) to establish manufacturing hubs both for import substitution and exports while protecting the interests of Indian domestic industry.

Salient features of DAP 2020:

* Reservation in Categories for Indian Vendors: The categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%. This reservation will provide exclusivity in participation to domestic Indian industry.

* Enhancement of Indigenous Content.
(a) Overall Enhancement in Indigenous Content (IC)

(b) IC Verification: A simple and practical verification process has been instituted and  IC will now be calculated on ‘Base Contract Price’ i.e. Total Contract Price less taxes & duties.

(c) Indigenous Military Material: Promoting use of indigenous military material with provisions for examination of platforms and other equipment/ systems and reward for vendors for using indigenous raw material

(d) Indigenous Software: Provision for exploring options for operating base applications like Fire  Control  System,  Radars,  Encryption, Communications etc on indigenous software in Buy (Indian- IDDM) & Buy (Indian) cases has been included.

* Rationalisation of Trial and Testing Procedures.

(a) Testing equipment based on its employability and for other conditions appropriate certifications confirming functional effectiveness may be obtained.

(b) Scope of Trials will be restricted to the physical evaluation of core operational parameters, other parameters may be evaluated based on vendor certification, certification by accredited laboratories, computer simulations of parameters.

(c) Avoid duplication of trials and waiver will be granted based on Certificates of Conformance. Ensure simultaneity of various Trials and wherever feasible, entire trials be conducted by a Combine Trial Team in order to save time.

(d) Requisite opportunity will be afforded to participating vendors to rectify shortcomings/faults during the Trials with permission to carry out repairs.

(e) Request For Proposal will apprise vendors to submit draft Acceptance Test Procedure (ATP), to be finalised by QA agency during Technical Trials itself. The sample size for destructive tests including the aspect of cost to be borne by the seller will be stated upfront in the RFP for a vendor.

(f) Inspections: No repetition of inspections will be done especially during the acceptance of equipment. Third-Party Inspections will also be carried out.   

* Make & Innovation.

(a) Make I (Government Funded up to 70%).     Laying down a cap of Rs 250 crore/DA and selection of DAs based on bidding criteria.

(b) Make II (Industry Funded) for production of indigenously designed & developed weapons/equipment/systems/platforms along with sub-components/assemblies.

(c) Make III (Indigenously Manufactured) category for the manufacture of equipment/platforms or spares/assemblies/sub-assemblies for enabling import substitution. 

(d) Procurement of prototypes developed through ‘Innovation’ under various initiatives like iDEX, Technology Development Fund and Internal Services Organisations has been facilitated.

* Design & Development. A separate dedicated chapter has been incorporated in the DAP 2020 for acquisition of systems Designed and Developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation. Aspects of Spiral Development have been incorporated.

* Address Voids: Certain existing voids have been addressed in the form of new Chapters as under:-

(a) ‘Information Communication Technology’. Peculiar issues related to the procurement of ICT intensive equipment especially of Interoperability & Built-in Upgradability, enhanced security requirements and change management have been included.

(b) Leasing. A new category introduced to enable operating of assets without owning thereby, substitute huge initial capital outlays.

(c) Post Contact Management: To formalise procedures post-signing of the contract with respect to inspections, levying of Liquidity Damages, Contract Amendments etc.

(d) Other Capital Procurement Procedure: A new procedure has been included as a new chapter in DAP and structured as an enabling provision for Services to procure essential items through Capital Budget under a simplified procedure in a time-bound manner.

* Industry Friendly Commercial Terms.

(a) Price Variation Clause has been incorporated for large and protracted contracts in order to avert inflated initial quotes by vendors and arriving at a realistic price of the project.

(b) Payments to Vendors: Suitable provisions like parallel processing of documents by SHQ/PCDA through digital verification, within laid down timelines, has been included to ensure timely payment to vendors. Payments to Indian industry have been aligned with foreign industry.

* Offsets: The Offset guidelines have been revised, wherein preference will be given to the manufacturing of complete defence products over components and various multipliers have been added to give incentivisation in the discharge of Offsets.

* In fact, DAP 2020 which has been formulated post interactions over a year, is an enabler & industry-friendly procedure aligned with Government of India’s vision of Atmanirbhar Bharat & impetus to Make in India. DAP 2020 document instils confidence and will meet the aspirations of stakeholders across the spectrum.