Defence Minister unveils Defence Acquisition Procedure 2020
The Defence Acquisition Procedure 2020 incorporates several measures to boost domestic Defence industry and Make in India.
Defence Minister Rajnath Singh unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi on September 28, 2020.
The Defence Procurement Procedure (DPP) was first promulgated in 2002. Since then, the procedure has been revised periodically to provide a boost to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.
The Defence Minister had approved the constitution of the Main Review Committee under Chairmanship of DG (Acquisition) Apurva Chandra in August 2019 for preparation of the Defence Acquisition Procedure (DAP).
• The Defence Acquisition Procedure (DAP) 2020 will be applicable with effect from October 1, 2020.
• The formulation of DAP 2020 has been done over more than one year, incorporating comments and suggestions from a wide spectrum of stakeholders as under.
• The procedure has been aligned with the government's vision of creating Atmanirbhar Bharat and empowering the Indian domestic industry through the Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.
• With the announcement of the new Foreign Direct Investment policy, DAP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting the interests of the Indian domestic industry.
Specific reforms enunciated in Atmanirbhar Bharat Abhiyan, have been incorporated as under:-
(a) Notify a List of Weapons/Platforms for Ban on Import- Relevant incorporation has been done in the DAP to ensure that NO equipment as mentioned in the list is procured ex import post timelines notified.
(b) Indigenisation of Imported Spares.
(i) Request For Information-RFI stage will explore the willingness of the prospective foreign vendors to progressively undertake manufacture and set up an indigenous ecosystem at the spares/sub-component level.
(ii) New Category of Buy (Global – Manufacturer in India)-The new category incorporates ‘manufacture of either the entire/part of the equipment or spares/assemblies/sub-assemblies/Maintenance, Repair and Overhaul (MRO) facility for the equipment, through its subsidiary in India.
(iii) Co-production through IGA-This enables the establishment of co-production facilities through IGA achieving ‘Import Substitution’ and reduce Life Cycle Cost.
(iv) Contractual Enablement- Buyer’s Right to optimise Life Cycle Support costs and system enhancements through the indigenous ecosystem incorporated.
(c) FDI in Defence Manufacturing- With the announcement of the new FDI Policy, suitable provisions have been incorporated like new category ‘Buy (Global – Manufacturer in India)’ done to encourage foreign OEMs to setup ‘manufacturing/maintenance entities’ through its subsidiary in India while enabling requisite protections to the domestic industry.
(d) Time-Bound Defence Procurement Process and Faster Decision Making- As part of the Defence Reforms announced in the Atmanirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline the acquisition process. Other issues included in these reforms are:-
(i) Realistic Setting of GSQRs of Weapons/Platforms- The process of formulation of SQRs has been further refined with greater emphasis on identifying verifiable parameters based on the analysis of ‘Comparative’ equipment available in the World and Domestic markets.
(ii) Simplification of Trial Procedures- DAP 2020 emphasises the need to conduct trials to nurture competition based on the principles of transparency, fairness and equal opportunities to all and not as a process of elimination.
One of the key focus areas of the review was to implement ‘Ease of Doing Business’ with emphasis on simplification, delegation and making the process industry-friendly with certain specific provisions incorporated such as procedural changes and Request for Proposal (RFP) and Standard Contract Document (SCD).
DAP 2020: Key Features
1. Reservation in Categories for Indian Vendors-The categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of ownership and control by resident Indian Citizens with FDI not more than 49 percent. This reservation will provide exclusivity in participation to domestic Indian industry.
2. Enhancement of Indigenous Content.
(a) Overall Enhancement in Indigenous Content (IC).
(b) IC Verification- A simple and practical verification process has been instituted. IC will now be calculated on ‘Base Contract Price’ that is e. Total Contract Price less taxes & duties.
(c) Indigenous Military Material - Promoting the use of indigenous military material with provisions for the examination of platforms and other equipment/ systems and reward for vendors for using indigenous raw material.
(d) Indigenous Software- Provision for exploring options for operating base applications like Fire Control System, Radars, Encryption, Communications, etc on indigenous software in Buy (Indian- IDDM) & Buy (Indian) cases has been included.
3. Rationalisation of Trial and Testing Procedures.
(a) Testing equipment based on its employability and for other conditions appropriate certifications confirming functional effectiveness may be obtained.
(b) Scope of trials will be restricted to the physical evaluation of core operational parameters, other parameters may be evaluated based on vendor certification, certification by accredited laboratories, computer simulations of parameters..
(c) Avoid duplication of trials and waiver will be granted based on Certificates of Conformance. Ensure simultaneity of various Trials and wherever feasible, entire trials be conducted by a Combine Trial Team to save time.
(d) Requisite opportunity will be afforded to participating vendors to rectify shortcomings/faults during the Trials with permission to carry out repairs.
(e) Request for proposal will apprise vendors to submit a draft Acceptance Test Procedure (ATP), to be finalised by QA agency during Technical Trials itself. The sample size for destructive tests including the aspect of cost to be borne by the seller will be stated upfront in the RFP for the vendor.
(f) Inspections -No repetition of inspections will be done especially during the acceptance of equipment. Third-Party Inspections will also be carried out.
4. Design & Development -A separate dedicated chapter has been incorporated in the DAP 2020 for the acquisition of systems designed and developed by DRDO/DPSUs/OFB, which includes simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation.
5. Address Voids- Certain existing voids have been addressed in the form of new Chapters as under:-
(a) Information Communication Technology- Peculiar issues related to the procurement of ICT intensive equipment especially of Interoperability & Built-in Upgradability, enhanced security requirements and change management have been included.
(b) Leasing- A new category introduced to enable operating of assets without owning thereby, substitute huge initial capital outlays.
(c) Post-Contact Management -To formalise procedures post-signing of contract concerning inspections, levying of Liquidity Damages, Contract Amendments etc.
(d) Other Capital Procurement Procedure -A new procedure has been included as a new chapter in DAP and structured as an enabling provision for Services to procure essential items through Capital Budget under a simplified procedure in a time-bound manner.
6. Industry Friendly Commercial Terms
(a) Price Variation Clause has been incorporated for large and protracted contracts to avert inflated initial quotes by vendors and arriving at a realistic price of the project.
(b) Payments to Vendors. Suitable provisions like parallel processing of documents by SHQ/PCDA through digital verification, within laid down timelines, has been included to ensure timely payment to vendors. Payments to the Indian industry have been aligned with the foreign industry.
7. Offsets -The Offset guidelines have been revised to give preference to the manufacture of complete defence products over components and various multipliers have been added to give incentivisation in the discharge of offsets.
The DAP 2020 is an industry-friendly procedure that is in line with the centre's vision of Atmanirbhar Bharat snd it will provide great impetus to 'Make in India'. The DAP 2020 document aims to instill confidence and will meet the aspirations of stakeholders across the spectrum.