Draft DPP 2020 Pitches for Leasing of Military Equipment

The new draft of Defence Procurement Procedure (DPP) 2020 has proposed to acquire military equipment on lease for the first time. The draft was released by Defence Minister Rajnath Singh and it envisages further increase in indigenous manufacturing and reducing timelines for procurement of defence equipment. The Draft proposes multiple new features and aims at higher indigenous content, incentives for local materials and software as part of Make in India scheme.

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

Unveiling the Draft Defence Procurement Procedure 2020 on March 20, Defence Minister Rajnath Singh said, “I had constituted a review committee in August 2019 to revise the present DPP-2016. It gives me immense pleasure and satisfaction to announce that the draft of DPP 2020 has been prepared.” He further added, “The draft of Defence Procurement Procedure (DPP) – 2020 has been uploaded on the MoD website for further suggestions from the industry before getting finalised for promulgation”.The Draft is already available on the Ministry of Defence (MoD) website (https://mod.gov.in/dod/defence-procurement-procedure) for suggestions from all stakeholders by 17^th April, 2020.

“In new Draft, we have simplified the procedure and reduced the timeline to ensure probity, transparency and accountability,” the Defence Minister said. He further 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 & platforms and hasten the defence acquisition process by further simplifying the procedures & reducing the overall procurement timelines.”

Boost to Make in India

Speaking about the aim of the Draft proposal 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, “The DPP 2020 is aligned with the vision to empower private industry through Make in India initiative with ultimate aim of turning India into a global manufacturing hub.”He also stressed that indigenous content stipulated in various categories of procurement has been enhanced to support Make in Indian initiative.

The major changes proposed in the new DPP are:

Acquisition of Military Equipment on Lease

As per the draft proposal, the ‘Leasing’ has been introduced as a new category for acquisition in addition to existing ‘Buy’ and ‘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, etc.

Indigenous Content Ratio Hiked

In view of the experience gained by the domestic industry, the Draft proposes increasing the Indigenous Content (IC) stipulated in various categories of procurement by about 10 per centto support the ‘Make in India’ initiative. A simple and realistic methodology has been incorporated for verification of indigenous content for the first time.

New Category Buy (Global – Manufacture in India) has been introduced 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.

Procurement of Software and Systems

A new Chapter has been introduced 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.

Post Contract Management

Typically Defence contracts run over a long period, as such, a new Chapter for Post Contract Management to facilitate and provide clear guidelines for issues arising during the contract period, has been included.

Reduced Timelines for Procurement

Timelines for procurement have been reduced by reworking the process for accord of Acceptance of Necessity which would be single stage for projects less than Rs.500 crore and in case of repeat orders. Trial methodology and Quality Assurance Plan will be part of RFP.

Field Evaluation Trials by Specialised Trial Wings

Field Evaluation Trials to be conducted by specialised trial wings and the objective of trials will be to nurture competition rather than elimination for minor deficiencies.

Product Support

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), etc to optimise life cycle support for equipment. The capital acquisition contract would normally also include support for five years beyond the warranty period.

Modified offset guidelines propose to give emphasis on export of products rather than components. Higher multipliers have been proposed for procurement from MSMEs and units established in Defence Industrial Corridors. Higher multipliers proposed for Transfer of Technology to private Companies / DPSUs / OFB and DRDO.

The first DPP was promulgated in 2002 and has since been revised a number of times to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.

By Ravi Shankar