Need to Revisit DAP 2020: The Armed Forces context
By Dr Rajneesh
Kumar
The
Defence
Acquisition Procedure (DAP)-2020 is based on the concept of “Womb to “Tomb” in
defence acquisitions and enshrines certain unique aspects related to structured
guidelines and issues related to the supplier constraints, technological
complexities, issues pertaining to foreign suppliers, high costs, foreign
exchange implications and most important- the geo-political ramifications. India, since beginning, had been dependent upon import
of defence hardware from the erstwhile USSR and the UK, USA, France and Israel.
However, in course of time a realisation emerged regarding saving of precious
foreign exchange by creation of indigenous manufacturing capability with a
sense of national pride, which culminated into the initiatives of “Make in
India” and now “Atmanirbhar Bharat”[1].
The ongoing
creation of indigenous capability is in line with the national ambition of
India soon achieving the stature of a Five Trillion economy. The task takes
into account not only the R&D aspects but also the handling of Intellectual
Property Rights besides promoting the domestic talent and know-how vested into
the Indian youth especially from various IITs, IISc and other centers of
Excellence within the country.
The Government of
India (GoI) came out with comprehensive guidelines for defence acquisition
outlining various inherent procedures, in the form of Defence Procurement
Procedure (DPP) 2007, 2011, 2013, 2016 and finally Defence Acquisition
Procedure (DAP) issued under the signatures of the Hon’ble Raksha Mantri Shri
Raj Nath Singh on 30 September 2020 having the guiding principles for
self-reliance and the Atmanirbhar Bharat.
The DAP-2020
envisaged the enhancement of Foreign Direct Investments (FDI) in defence to the
tune of 74% with enhanced focus on “Ease of doing Business” so as to also
encourage the foreign manufacturers to set up manufacturing units in various
defence corridors created in India. The DAP-2020 laid emphasis upon the
“Self-Reliance” through the streamlined processes of “Make”, “Design &
Development” and “Strategic Partnerships”. The document also forges “Import
Substitution” to reduce the Life Cycle Cost of the defence equipment with
active participation of the MSMEs[2].
However, in course
of carrying out the acquisitions on lines of the DAP-2020 in the spirit of the
“Atmanirbhar Bharat” the defence services and the industry have been facing
certain procedural constraints which necessitated the review of the extant
provisions of the DAP-2020[3].
While the formal process of the review of the DAP-2020 is yet to be announced
by the MoD- the services, various research institutions, Think Tanks and the
industrial echelons have initiated the studies into the system within their
respective domains, to identify the bottlenecks and suggest the way out. While
the studies are still in process at various agencies, it should be understood
that the acquisition process is continuous phenomenon and at no stage one can
claim to have reached a state of perfection. The various issues faced by
various components of the Defence Acquisition are described in the succeeding
paragraphs.
Procedural Inadequacies in Execution of DAP-2020
The armed forces,
MSMEs, Start-Ups and DRDO taken together constitute the defence acquisition
eco-system. All these agencies play their respective roles in the entire
process culminating into the ultimate objective of self-reliance or the
Atmanirbhar Bharat. However, in course of performing their respective roles in
the acquisition process in accordance with DAP-2020, all these agencies have
been facing some or the other constraints, which need to be addressed.
Generally speaking, the key concerns faced by the various agencies are as
under: -
a) Procedural complexities. The armed
forces have expressed dissatisfaction with the procedural intricacies and have
called for a "revolution in bureaucratic affairs" to solve the issue
of delayed decision-making, which is linked to the procedural intricacies. The
multi-stage acquisition cycle, poorly defined processes associated with each
stage of the cycle, the creation of unrealistic SQRs, lack of experience in
areas of costing and commercial negotiations, elusive language of the
procurement manuals, overbearing MoD controls, unsatisfactory contract
management and inadequate pellucidity in decision-making are all contributing
factors to the procedural complexities. Thus, it is seen that many acquisition
programs encounter issues either prior to or following the conclusion and award
of the contract.
b) Absence of clear-cut mechanism for verification of
indigenous content. As per
Appendix B of the DAP, the Bidder is required to submit a Vendor’s certificate
and a Statutory Auditor’s certificate regarding the percentage of indigenous
content in their product[4].
They are also required to self-declare that none of the components in their
product are from land border sharing countries. However, it is unclear whether
the MoD or any quality assurance agency has the mechanism to check whether
components from any non-friendly country have been used or the percentage of
the Indigenous Content (IC) has been worked out based on some tangible
components.
c) Apprehensions for Error. Because rules and regulations are so controlling, many
procedural gaps have found their way into the acquisition process, creating a
"Zero Error Syndrome" and emphasizing the need for quicker
decision-making. Many senior officers within the military have called for a
structural transformation, suggesting that the idea of L1 (lowest bidder)
should be eliminated completely and rather we should prefer the Life Cycle Cost
(LCC) model. The systems of L1and the Enhanced Performance Parameters (EPP) have
been deplored by the armed forces and a viable alternative is thus the need of
the hour. The
Request for Proposal (RFP) floated for the acquisition of 75 Basic Trainer
Aircraft (BTA), 15 Heavy Lift Helicopters (HLH) and 22 Attack Helicopters (AH),
initiated as per DPP-2008, and RFP for 56 Avro Replacement, initiated as per
DPP-2011, had all stipulated that the lowest cost bid will be identified as per
the stated LCC model. The MMRCA acquisition case fell through in 2015 and the
RFP was withdrawn. PC-7 Basic Trainer Aircraft (BTA), Chinook Heavy Lift
Helicopter (HLH) and Apache AH were acquired utilising the LCC model. The
contract for Airbus manufactured C-295 platform as replacement for AVRO has
been signed recently and the acquisition too followed the LCC model[5].
d) Budgetary Dichotomy. While
other challenges can be managed, the problem of inadequate financial resources
cannot be easily addressed any time soon. Reports have suggested that India
would need to double its budget to meet the capital acquisition requirements of
the forces.
Paucity of funds amidst a financially unviable planning actually disrupts the
capability development and acquisition plans on account of paucity of funds[6].
The situation remains challenging despite the Budgetary allocation for Defence
constantly rising in the past Union budgets. To take the examples of the three
recent Union Budgets, we find that and amount of INR 5.25 Lakh Cr was allocated
for FY 2022-23 which increased to 4.81 Lakh Cr in FY 2023-24[7]
and stands at 6.22 Lakh Cr in the Annual Budget of FY 2024-25[8].
The current allocation for the defence forces for the FY 2025-26 stands at
6.81.22 Cr out of which 1,80,000 Crore is meant for Capital procurements which
is approximately 26.43% of the total budget outlay for defence[9].
However, this is at variance from the ground position wherein the AFHQs are
sometimes unable to spend the capital budget outlay for the year despite the
committed liabilities being planned based on milestones of the contracted
delivery provisions apart from the system inherent procedural delays.
e) Standard Contract Document (SCD). Apart from inclusion of the definition of various
contractual terms in the Preamble, some textual changes have been made as in
the case of the clause relating to taxes and duties. Some new clauses have also
been added. These are Monitoring of projects based on contractual milestones,
Title and risk of loss, Payment deductions and damages for shortfall in
AMC/CMC/PBL services, Termination (of the contract), Risk purchase, Buyer’s
right to optimization of life cycle support and system enhancements, and Survival
(of certain clauses) after cancellation or expiration (of the contract).
Besides textual ambiguities, implementation of some of the new clauses may be a
challenge. Be that as it may, the efficacy of the contracts will depend on the
ability of the MoD personnel to customize the SCD clauses according to the need
in individual cases, which may be a challenge.
f) Post contract management. The
DAP-2020 casts the responsibility for contract administration on the AFHQs and
for post-contract monitoring on the MoD’s Acquisition Wing[10].
This provision in a way entails management of issues like the pre-dispatch and
joint-receipt inspections (PDIs and JRIs), change in the vendor’s name, bank
guarantees, payments, delivery schedule, liquidated damages, contract
amendment, IC verification, buy-back, claims, arbitration, termination of
contract, etc. It is felt that the chapter of DAP would be of limited help in
the absence of step-by-step instructions for the contract managers despite
these functions being important. It is felt that the chapter could have been
more useful with detailed checklists and having provisions specifically
highlighting the problems that are likely to be faced at various stages of
processing. These provisions would constitute a set of instructions to deal
with emerging situations.
Executionary issues Faced by the Armed Forces
Headquarters (AFHQs)
The specific
issues faced by the AFHQs, as emerging during informal discussions with all the
stakeholders, can be seen as under: -
a)
The AFHQs
do not possess the expertise to lay down the Operational Requirements (ORs) or
the Air Staff Qualitative Requirements (ASQRs). As a result of this, the ORs
and subsequently turning into the ASQRs, turn out to be mere wish lists
completely devoid of the awareness of the market friendly specifications of the
platforms being manufactured by various OEMs. There is therefore a definite
need to understand the intricacies of the systems in light of the prevalent
capabilities and internationally the best practices before formulating the
realistic ORs and ASQRs. To cope up with this shortcoming, there is a need to
create a specialised cadre for Defence acquisition comprising officers from the
services and MoD having experience and aptitude for this specialised kind of
task.
b)
Inadequate
Financial powers though recently revised. In the current revision, the AFHQs
has been vested with powers to grant AON upto INR 300 Cr while Defence
Procurement Board (DPB) headed by the Defence Secretary is empowered to accord
AON from 300 Cr to 500 Cr with cases above this value being put up to Defence
Acquisition Committee (DAC) headed by the Raksha Mantri through DPB[11].
A further enhancement of financial powers would ease the process at the end of
the AFHQs.
c)
Linked
with the above would be a need to forecast not only the budgetary requirements
but also the level of urgency. Presently there is a tendency to ask for budget
for every type of procurement proposal. Realistically prioritised and
synergized Long Term Integrated Procurement Plan (LTIPP), Integrated Capability
Development Plan (ICDP) and Annual Acquisition Plans flowing from each SHQ need
to be completely in line with the prevailing geo-political threat perception
and the modernisation/upgrade needs. The acquisition plans drafted on the lines
of the Chief of Naval Staff Vision Document captioned CNS Course to Steer-2024
(CTS-2024) which delineates key objectives for creating ä combat ready,
credible, cohesive and future ready Navy”[12],
would go a long way in having more realistic set of requirements with varying
timeframes and degrees of processing efforts based on the situation.
d)
The
processing times are longer and approval processes complex irrespective of the
value of the procurement proposal. The effort involved is almost same in case
of the procurement proposals. On March 20, 2025 Defence Acquisition Council
(DAC) issued guidelines to reduce the timelines to cut down the delays involved
in the defence acquisition procedure and make the whole process swifter,
efficient and more effective, as a testimony to declaring 2025 as the “Year of
reforms”[13]. As it
stands on date, the Fast Track Procedure does exist in the DAP-2020, but a
similar procedure needs to be incorporated to process the cases of smaller
value at a faster pace, with the threshold limit of such proposals being
decided between AFHQs and MoD. For example, there is a need for separate
procedure for procurements valued between 50-110 Crores by AFHQs as the time
and effort involved in all the cases is almost same.
e)
Another
issue is capturing the Performance Based Logistics (PBL) cost in Contract
itself. This would help in incentivizing the OEMs to invest in equipment
reliability besides facilitating an objective budgeting[14].
Infact there is a need to tailor the PBL specific to every contract instead of
having the approach of “One size fits all”.
There is a need to capture the cost of PBL at the time of concluding the
contract to avoid and ambiguity or cost escalation post expiry of standard
warranty[15]. The most effective implementation of the PBL
finds place in the contract inked towards acquisition of the RAFALE fighter jet
ex France and the Russian fleet aircrafts. The same was provisioned in the
contract for AWACS also but was never renewed. The Globemaster Integrated
Sustainment Program (GISP) formed part of the contract inked between India and
USA, and was effective. But it turned out to be expensive. Considering these,
while it may not be feasible to provide for a standardized PBL for all acquisition
contracts, the concept of Follow-On-Support Contract (FOSC) seems more
effective and can be provisioned for in the revised DAP along with the PBL on
“case to case basis”.
f)
Contract
amendment process is cumbersome and time taking[16].
DP Extension and contract amendment procedures are laid down in Chapter XI and
any case for DP extension is to be initiated three months in advance[17].
However, there is no upper time limit in DAP 2020 to curtail the delays in the
processing of the acquisition cases. As an encouraging step to arrest the
delays in DP extension, presently a committee headed by the respective Service
Chiefs is in place and same may be considered to have a mandate for contract
amendments too.
g)
There
is a separate chapter on ship building in DAP-2020[18].
In light of the recently emerging capability and blooming participation of the
Indian private sector in the indigenous aircraft manufacturing ecosystem in
India, a similar chapter on aircraft and system manufacturing should be
incorporated in the DAP to expedite the efforts being made towards promoting
indigenous manufacturing of aircraft and associated systems.
h)
A
separate Chapter-IX has been introduced on Lease and some procurement cases are
being processed on basis of lease, but there is a need to incorporate detailed
provisions for wet lease in DAP 2020.
i)
Though
detailed procedure is laid down[19]
there is no clarity on % of liability clause on insurance in Chapter-IX on
Leasing in DAP-2020.
j)
There
is a general hesitation of services to interact with industry. In 2023
directions have been issued by the CAS to encourage the defence echelons down
to the level of the Base Repair Depots (BRDs) to have interaction with the
industry to promote innovations. In light of this, there is a certain need to
incorporate formal provisions while reviewing in DAP-2020 towards
institutionalising active interaction between Industry, Academia and services
as pre-requisite for all acquisitions.
k)
Provisions
may be made in DAP 2020 for promoting defence testing facilities. Though the
procedure of Design, Development and Production of Military Air Systems and
Airborne Stores (DDPMAS) issued by the DRDO is in place, the same is not so
effective. In light of this it may not be possible to have a standardized
testing facility for all types of aircraft and systems, especially the newly
acquired/manufactured ones, the same may be introduced in phases “on case-to-case basis”.
l)
Provisions
may be institutionalized in the DAP to promote enhanced interaction with
IITs/IISc and other Centers of Excellence (CoE). This apart, there is a need to
create CoE at the Base Repair echelons within the services (e.g. BRDs in the
IAF).
m)
Provisions
may be made in DAP for Technology scouting within the services.
n)
Provisions
required for periodic reviews and mid-course corrections to be incorporated in
DAP.
o)
Promote a culture of IPR
safety through constant interaction and continuous education of all
stakeholders i.e. start-ups, R&D bodies and government.
THE WAY
FORWARD
While
the procedural constraints would continue to be experienced in course of
execution of DAP-2020 it is also prudent to state that even after a thorough
revision, the provisions would always need review, as the acquisition is an
ongoing process and the procedures have to remain relevant with the changing
times.
The DAP-2020 is valid till September
30, 2025, and has by and large been able to address most of the issues faced by
various stakeholders. The defence acquisitions are presently being processed in
the letter and spirit of the procedure outlined in the document. However, the
Manual needs revision to remain relevant in light of the dynamics of the geo
political environment and provide for ease of doing business in course of the
execution thereof.
The revision to DAP-2020 becomes an
imperative in light of the fact that the Government of India stands committed
to attaining self-sufficiency in defence acquisitions mainly by tapping and
encouraging the indigenous talent through promising steps like Acing
Development of Innovative Technologies with Idex (ADITI) and Innovations for
Defence Excellence (Idex) amidst galloping participation by the Indian private
sector adopting the best practices of the foreign OEMs. In the energised morale
through an enabling ecosystem, a comprehensive involvement of all the
stakeholders in facilitating an ecosystem of self-reliance would lead to the
enhanced national pride alongside large scale employment generation within the
country.
[1] Foreword by Raksha Mantri to Defence
Acquisition Procedure-2020, September 30, 2020, https://www.mod.gov.in/dod/sites/default/files/DAP2030new_0.pdf,
Accessed on November 14, 2024
[2] Ibid
[3] Laxman
Kumar Behera, “India’s Defence Industry: Achievements and Challenges”, Issue
Brief, Observer Research Foundation, May 06, 2024, https://www.orfonline.org/research/india-s-defence-industry-achievements-and-challenges,
Accessed on November 14, 2024
[4] Annexure-1
to Appendix B, DAP 2020, Page-18, https://www.mod.gov.in/dod/sites/default/files/DAP2030new_0.pdf,
Accessed on November 14, 2024
[5] SBP Sinha,
“Life Cycle Costing Effective tool to identify the best bid”, Indian Aerospace
and Defence Bulletin, January 29, 2022, https://www.iadb.in/2022/01/29/life-cycle-costing-effective-tool-to-identify-the-best-bid/,
Accessed on November 14, 2024
[6] Amit
Cowshish, “Challenges in Defence Acquisitions”, Vivekanand International
Foundation, August 26, 2022, https://www.vifindia.org/article/2022/august/26/challenges-in-defence-acquisitions#:~:text=While%20other%20challenges%20can%20be,formulate%20financially%20viable%20defence%20plans.,
Accessed on November 14, 2024
[7] Vishal
Kanwar, “Union Budget 2024”, Aerospace Defence, https://www.pwc.in/assets/pdfs/union-budget-2024/aerospace-defence-v2.pdf,
Accessed on November 14, 2024
[8] “Rs 6.22 lakh crore allocated to MoD,
highest among Ministries, in Regular Union Budget 2024-25; 4.79% higher than FY
2023-24”, Press Information Bureau, July 23, 2024, https://pib.gov.in/PressReleasePage.aspx?PRID=2035748, Accessed on November 14, 2024
[9] “A record over Rs 6.81 lakh crore
allocated in Union Budget 2025-26 for MoD, an increase of 9.53% from current
Financial Year”,
Min of Defence Press Information Bureau release, February 1, 2025, https://pib.gov.in/PressReleasePage.aspx?PRID=2098485, Accessed on February 12, 2025
[10] Para 2,
Chapter XI, DAP 2020, Accessed on December 18, 2024
[11] IAP 14501
dated August 09, 2024, pg 21
[12] “Navy
Chief unveils strategic vision for Viksit Bharat” DD News, August 7, 2024, https://ddnews.gov.in/en/navy-chief-unveils-strategic-vision-for-viksit-bharat/#:~:text=The%20document%2C%20titled%20%E2%80%9CCNS%20Course,India's%20broader%20national%20development%20goals.,
Accessed on February 10, 2025
[13] Dinkar Peri, “Defence Acquisition Council gives initial
approval for ₹54,000 crore military hardware purchases, norms to cut down
procurement timelines”, The Hindu, March 21, 2025, https://www.thehindu.com/news/national/defence-acquisition-council-approves-norms-to-cut-down-procurement-timelines/article69354191.ece, Accessed on
March 21, 2025
[14] “The effectiveness of performance-based
contracting in the defence sector: A systematic literature review”, Journal of
Purchasing and Supply Management, Vol 29, Issue 5, December 2023, https://www.sciencedirect.com/science/article/pii/S1478409223000651, Accessed on December 18, 2024
[15] “Military Aircraft Through Life
Sustenance – Performance Based Logistics (PBL) Contract Structure Overview”,
Indian Aerospace and Defence Bulletin, February 23, 2022,
https://www.iadb.in/2022/02/23/military-aircraft-through-life-sustenance-performance-based-logistics-pbl-contract-structure-overview/, Accessed on December 18, 2024
[16] SP Das, “Inordinate
delays in defence procurements: An analysis and way forward”, Issue Brief,
Center for Land Warfare Studies, No. 162, January 2019, https://www.claws.in/static/IB162_Inordinate-Delays-in-Defence-Procurement-An-Analysis-and-Way-Forward.pdf,
Accessed on December 18, 2024
[17]
Appendix B, Chapter XI, DAP 2020
[18]
Chapter XII, DAP 2020
[19]
Articles 6 & 7 of Chapter IX, DAP 2020
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