Towards an Empowered Acquisition Structure

Editor-in-Chief’s Note

Col Vikram Taneja’s article focuses on the weaker areas in the defence acquisition framework. He sub-divides the acquisition process into four phases: Initiation, Planning, Execution and Closure. Having explained all the phases he dwells on the programme management aspect that must ensure that the envisaged acquisition plan is achieved within the specified schedules, costs and quality of deliverables. However, though verticals of production, procurement and R&D exist in the institutionalized structure of acquisition hierarchy, there is no separate vertical for programme management.

TOWARDS AN EMPOWERED ACQUISITION STRUCTURE 

The contours of the new Defence Procurement Procedure (DPP) 2016, expected to be unveiled any time soon, can be made out from Ministry of Defence’s (MoDs) policy pronouncements on the subject. On lines of other reform committees, beginning with the Group of Ministers report released post Kargil conflict in 2001, the June 2015 ‘Experts Committee’ on acquisition reform headed by Dhirendra Singh has made certain far reaching recommendations. A good number of these recommendations resonate in the reports of a series of reform committees released over the past two decades, namely the Kelkar Committee 2005, Sisodia Committee 2007, Rama Rao Committee 2008, VK Misra headed Defence Expenditure Review Committee 2009 and Naresh Chandra and Ravindra Gupta Committees of 2012. 

Both the acquisition community and industry are optimistic that the latest DPP as and when promulgated shall indeed contain some of these. Early signs are fairly encouraging as a detailed policy framework to usher in ‘Make in India’ in defence sector is expected to be laid out together with certain other procedural recommendations. Among others, the DPP 2016 is likely to field a reformed ‘Make’ procedure with greater emphasis on design in India as opposed to indigenous manufacture only. The high priority accorded to ‘Indigenously Designed, Developed and Manufactured’ category will help foster a much needed innovation culture in the country.

Image Courtesy: The Economic Times

Diminished level of acquisitions attributable to procedural bottlenecks has led to a deficiency of vital military hardware resulting in capability deficiencies and depleted war reserves with the Services. While government endeavour towards reformation of process and making up equipment voids are indeed laudable, these efforts will at best have a transitory impact towards a sustained capability building, thus falling short of addressing the concerns of the Services’ unless a reformed structure is institutionalised.

Dividends envisaged from any new procedural recommendations can only be realised to their full potential through institution of a transformed acquisition structure conforming to international best practices. Appropriate structures and models have over the years proven their efficacy in equipping and arming the Services. Today, India credits it’s indigenous ‘ship building’ Navy to the ‘structures and models’ conceived and nurtured by the Navy leadership in the 1960s. The processes are utilised by the institutionalised structures and eventually, the structures govern organisational behaviour.

Image Courtesy: DefenceNews.in

A less talked of yet futuristic recommendation of the Dhirendra Singh committee professes establishing a reformed acquisition structure. The report states that ‘steps should be initiated without further ado, to set up a specialised structure outside the formal structure of the Ministry of Defence which would evolve into an organisation with a much larger mandate over a period of time’. The report further goes on to add that ‘specialists who have experience in managing projects with built in uncertainty of time and costs, would need to become part of the procurement organisation’.

Lack of accountability has been one of the major failings of the existing capital acquisition system owing to the procedural requirement of filtering each procurement case through a scrutiny of eleven phases of evaluation by seven different committees and thirteen departmental organs from Services Qualitative Requirements (SQRs) to post contract management. Varying benchmarks applicable to different classes of industry in terms of foreign, indigenous, government, private and SMEs have led to further uncertainty and there has been a call for a level playing field; an issue that still eludes resolution despite representations from Industry associations. A fundamental issue, which if addressed can break the acquisition deadlock, is however the ‘absence of alignment of intent of the DPP with the structure of its execution and the lack of accountability towards capability establishment’.  This needs to be remedied.

The stated objective of the DPP is to ensure expeditious procurement of the approved requirements of the Armed Forces in terms of capabilities sought and timeframe prescribed, by optimally utilising the allocated budgetary resources. While achieving the same, it needs to demonstrate the highest degree of probity and public accountability, transparency in operations, free competition and impartiality. In addition, the goal of achieving self reliance in defence equipment is to be kept in mind”.  The DPP is not explicit about the agencies responsible to achieve the desired capabilities within the specified timeframes thus making it harder to bring in accountability into the system.

Image Courtesy: The Economic Times

The process of establishing each capability within the Defence can be treated as a project with four distinct phases, the ‘Initiation’ phase, the Planning phase, the Execution phase and the ‘Closure’ phase. The acquisition process when sequentially viewed starts with the SQRs being typically subjected to an Acceptance of Necessity prior to solicitation of offers from vendors.  This phase can be considered as the initiation phase of the project.  A series of technical and commercial evaluations result in the award of the main and offset contracts which can be considered as the planning phase of the project.

This is followed by contract administration and entry of the equipment into service, which is the execution phase. Subsequent post contract management establishes and consolidates the capability desired can be the closure or transfer phase of the project.  This procedure therefore is no different from a project with the standard four phases of Initiation, Planning, Execution and Closure.

An integrated defence capability program can be seen as a large number of land, maritime and aerospace projects managed by individual project managers.  A group of such projects, that may achieve a lower level capability outcome, can be considered as a single portfolio and a number of such portfolios would be managed by portfolio managers.  All portfolios that roll out a composite land, air or maritime capability can be considered as programs and would be managed by program managers.  The amalgamated outcome of these programs would be the defence capability at any given time and would be typically managed by the program sponsor such as the Defence Acquisition Council (DAC).  At all levels the focus is on three issues viz  ‘Schedule’, ‘Quality’ and ‘Cost’; all three enshrined in the stated aim of the DPP.

Image Courtesy: MoneyControl.com

Specialist functions that typically perform various roles in the project are the procurement function managed in the MoD by the Director General Acquisitions vertical, the manufacturing function headed by the Defence Production vertical and the Research & Development (R&D) function led by the Defence Research vertical.  The flow of specialist functional authority is top down in these verticals limited to individual silos.

A program management vertical typically interfaces with the specialists as a functional team thereby achieving the desired project outcome.  The interface of this vertical with the specialist vertical is lateral and project authority flows laterally across the verticals. The project management vertical takes complete responsibility for the project outcome while the functional verticals take responsibility for the project outputs.  This type of organisation is called a matrix or a two dimensional organisation and has wide global military and civil applications.  Clearly, this feature does not exist in the currently specified capital acquisition organisation in India where even within the Service Headquarters diverse silos functioning under different hierarchies contribute to individual outputs without accruing the advantage of lateral integration.

The existing procurement structure headed by the DAC consists of three specialist silo based verticals of production, procurement and R&D each responsible for their specific outputs of a capability build up plan. It does not have a program management vertical which would be responsible for the outcome of a capability build up plan that is achieved within specified schedules, costs and quality although this is a stated aim of the DPP.  Thus a structure to ensure fulfillment of the stated aim of DPP does not exist on ground and needs to be instituted.

Direction generale de l’armement (DGA) facilities in Balma, near Toulouse, south-western France. Image Courtesy: Firstpost.com

World class procurement organisations more prominent among them being the Direction générale de l’armement (DGA), the French procurement organisation and Australia’s Defence Materiel Organisation (DMO) follow a programme management approach to acquisition. A multi-speciality project management team in these organisations takes the ownership of an acquisition or a sustainment program and see it through from its conception to sustenance and final discard from Service.

Australian DMO presently manages about 300 major and minor acquisition and sustainment projects steered by expertise of trained project management specialists servicing an annual budget of approximately USD 12 bn.

Image Courtesy: Wikipedia.org

The acquisition apparatus in India in comparison handles about half the number of capital cases for the Army at a given time with commensurate budgetary allowance using a complex system of approvals based on a conventional Whitehall System managed by generalists drawn from the central staffing scheme common to all government ministries and departments. Enduring structure and process re-engineering coupled with program management expertise within the Australian DMO has been able to bring the capability establishment within 95 percent of the allocated budget, delivering over 96 percent of capability for all projects.

There is a broad consensus within the acquisition community that a progressive procurement organisation of today needs to be embedded with specialisations in diverse fields involving appreciation of technology, trial procedures, commercial negotiations, legal issues in contractual matters, estimation of costs, financing structures, project analysts and data scientists to affect capital procurement of the magnitude that India does. The new DPP therefore needs to define responsibility for development and execution of plans at all levels and in order to bring in accountability in the extant acquisition structure through program management.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of BharatShakti.in)