Defence Minister Unveils Draft of Defence Procurement Procedure 2020

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New Delhi: The draft Defence Procurement Procedure (DPP) 2020 unveiled by Defence Minister Rajnath Singh on March 20 aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment.

These and several other such innovative measures were part of the draft finalised by a high-level committee headed by DG Acquisition, Ministry of Defence that was set up in August 2019.

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Speaking on the occasion, the Minister said, “Our aim is to make India self-reliant and a global manufacturing hub. The government is constantly striving to formulate policies to empower the private industry including MSMEs in order to develop the eco-system for indigenous defence production. The defence industry of India is a strategically important sector having huge potential for growth. It needs to be the catalyst for India’s economic growth and realisation of our global ambitions.”

Singh said, “With the experience gained by the industry and the Ministry of Defence (MoD), it is now time to take further steps to strengthen ‘Make in India’ initiative, refine Life Cycle Support of procured equipment and platforms, and hasten the defence acquisition process by further simplifying the procedures and reducing the overall procurement timelines.”

Among the major changes proposed in the new DPP include hiking Indigenous Content (IC) ratio stipulated in various categories of procurement by about 10 per cent to support the ‘Make in India’ initiative. A simple and realistic methodology has been incorporated for verification of indigenous content for the first time.

It focuses on use of raw materials, special alloys and software incentivised as use of indigenous raw material which it said is a very important aspect of ‘Make in India’ and Indian companies are world leaders in software.

It gives assurance of procurement on a single vendor basis from Aero Engine manufacturing unit and chips from FAB manufacturing units established in the country.

The policy has introduced the New Category Buy (Global – Manufacture in India) with minimum 50 per cent indigenous content on cost basis of total contract value. Only the minimum necessary will be bought from abroad while the balance quantities will be manufactured in India. This would be in preference to the ‘Buy Global’ category as manufacturing will happen in India and jobs will be created in the country.

Under this new policy, leasing has been introduced as a new category for acquisition in addition to existing ‘Buy’ & ‘Make’ categories to substitute huge initial capital outlays with periodical rental payments.

Leasing is permitted under two categories i.e, Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and Lease (Global) where Lessor is a Global entity. This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators.

There is a new chapter for procurement of software and systems related projects as in such projects, obsolescence is very fast due to rapid changes in technology and flexibility in the procurement process is required to keep up with the technology.

It has a new Chapter for Post Contract Management to facilitate and provide clear guidelines for issues arising during the contract period as typically defence contracts last for a long period.

The timelines for procurement has been cut down by reducing the process for accord of Acceptance of Necessity which would be single stage of projects less than Rs 500 crore and in case of repeat orders. Trial methodology and Quality Assurance Plan to be part of RfP.

Under this policy, field evaluation trials would be conducted by specialised trial wings with objective to nurture competition rather than elimination for minor deficiencies.

A comprehensive Chapter has been introduced for ‘Make’ to cover procurement from manufacturers in India including start-ups and innovators and from research projects of DRDO.

The scope and options for Product Support have been widened to include contemporary concepts in vogue, namely Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC), Comprehensive Maintenance Contract (CMC) to optimise life cycle support for equipment. The capital acquisition contract would normally also include support for five years beyond the warranty period.

The draft of DPP 2020 has been prepared by a Review Committee headed by Director General (Acquisition) based on the recommendations of all stakeholders, including private industry. In order to accrue advantage of domain specialisation of various subject matter experts, eight sub-committees headed by Lt Gen or equivalent officers were constituted to assist the review committee.

These committees carried out extensive deliberations and interactions over a period of six months to formulate their respective charters.

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