Press Note
The DAC met under the Chairmanship of the Hon’ble Raksha Mantri on 11/01/2016 and key provisions of the DPP, as listed under have been approved.
- The revised Defence Procurement Procedure (DPP), envisages to provide a boost to the Indian Government’s ‘Make in India’ initiative, enhance the involvement of the private sector, build indigenous design and development capabilities, promote absorption of world-class technologies, provide premium consideration to high quality products, promote the growth of the MSME sector, reduce time lines across various stages of procurement, among other procedural refinements effected to enhance efficiency and effectiveness of the defence procurement process. The salient features of the approved procedures of DPP are listed below:
- Introduction of a new category of acquisition: Buy Indian (IDDM), to promote indigenous design development and manufacturing. Under this category, indigenously designed equipment with 40% indigenous content (IC), or equipment with 60% IC will be considered for acquisition. This category will be the most preferred acquisition category, above the existing ‘Buy (Indian)’ category.
- ‘Buy (Indian)’ category of acquisition requires a minimum IC of 40%. ‘Buy and Make (Indian)’ and ‘Buy and Make’ categories require an overall IC of 50%.
- Essential parameters have been classified as Essential Parameters A and B. Essential Parameters – B are those parameters which can be developed by vendors, who have been selected and contracted based on Essential Parameters A. This is to increase vendor base by allowing participation of vendors who will make changes to existing product specifications, only on receipt of assured orders.
- RFPs will also contain Enhanced Performance Parameters, to provision for additional capabilities over and above the essential parameters; vendors meeting the same will be provided additional credit score while evaluating their product cost.
- Offset obligations will be applicable only in cases where the acquisition cost exceeds Rs. 2000 crores.
- Provisions to involve private industry as production agencies and technology transfer partners have been made.
- Single vendor cases at the bid submission stage, TEC stage, and Staff Evaluation stage will be processed, with due justification. Retraction of RFP in case of single vendor situations is not the norm.
- TOC will be applicable only in cases above Rs. 2000 crores, instead of the Rs. 300 crores as per the existing norms.
The following provisions have been made under the Make procedure:
- Three sub-categories of Make procedure – Make I (Government funded), Make – II (Industry funded) and Make – III (MSME funded) have been provisioned.
- Make I (Government funded) – involves 90% funding of the development cost, by the Government. Remaining 10% of the development cost would be reimbursed, if RFP for the equipment developed is not issued within 24 months from the date of successful development of prototype. Projects under Make I sub-category, with estimated development costs of less than Rs. 10 crores will be reserved for MSMEs; and will be opened up for non-MSMEs, only if it is not feasible for MSMEs to develop the required prototype.
- All programs under Make I (Government funded) scheme will be eligible for a Mobilisation advance of 20% of the estimated development cost, which will be deducted during the course of the development phases.
- Make II (Industry funded) – involves no funding by the Government for prototype development. However if RFP for the equipment developed, is not issued with two years from the successful prototype development, 100% refund for successful developers, who were selected through due process.
- Make III (MSME Funded) – Same as above Make II (Industry funded category), and will be reserved for projects less than an estimated development cost of Rs. three crores and is reserved only for MSMEs.
- A dedicated Project Management Unit is being constituted at the Service Head Quarters level, and will be headed by a two star rank General. The PMU Head will be responsible for driving all Make projects pertaining to the respective services.
- Only firms with majority stake and controlled by resident Indians will be eligible for projects under Make category. Companies need to be registered for a period of five years; three years in case of MSMEs. Companies need to have a minimum credit rating of B++, issued by recognised credit rating agencies.
- For projects with development costs equal to or exceeding Rs. 5000 crores, a minimum ‘Net Worth’ of 5% of the development cost, subject to a maximum of Rs. 1000 crores. In all other cases (less than Rs. 5000 crores development cost), positive net worth is the minimum eligibility criteria.
