New Defence Acquisition Procedure 2020: All you need to know

On September 28, 2020, the Defence Minister of India, Rajnath Singh unveiled the new Defence Acquisition Procedure (DAP)-2020 Document. The DAP 2020 has come into effect starting today, i.e. October 1, 2020. 

DAP 2020 is in line with the vision of creating Aatma Nirbhar Bharat and aims to empower the domestic industry in India through the Make in India initiative. 

Defence Minister Rajnath Singh releases New Defence Acquisition Procedure at Defence Acquisition Council meeting in South Block. CDS General Bipin Rawat, Army Chief General MM Naravane, Chief of Naval Staff Admiral Karambir Singh&IAF chief Air Chief Marshal RKS Bhadauria present. pic.twitter.com/WP1mPQoaY8

— ANI (@ANI) September 28, 2020

Key Pointers

1- The DAP 2020 will come into effect from October 1, 2020. 

2- As per Rajnath Singh, the Formulation of DAP 2020 has been done after incorporating comments and suggestions from a wide spectrum of stakeholders. 

3- With the announcement of new Foreign Direct Investment policy, DAP 2020 has listed several provisions to encourage FDI to establish manufacturing hubs for both imports and exports, thereby, protecting the interest of domestic industry in the country. 

Reforms articulated in Aatma Nirbhar Bharat Abhiyan, have been incorporated as: 

1- Notify a List of Weapons/Platforms for Ban on Import: In DAP 2020, several provisions have been made to ensure that any listed document is not procured ex import post timelines notified. 

2- Indigenisation of Imported Spares:

1.  Request for Information: This will go through the willingness of the potential foreign vendors to undertake the manufacture and set up an indigenous ecosystem at the spares/sub-component level.
2. New Category of Buy (Global – Manufacture in India): Under this, manufacturing 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.
3. Co-production through IGA: Co-production facilities will be set up which will not only achieve ‘Import Substitution’ but will also reduce 'Life Cycle Cost'.
4. FDI in Defence Manufacturing: With the new FDI policy announced, several provisions like Buy (Global – Manufacture in India), setting up of manufacturing/maintenance entities through its subsidiary in India have been incorporated to protect domestic industry in the country.
5. Time-Bound Defence Procurement Process and Faster Decision Making: Under Aatma Nirbhar Bharat Abhiyan, several defence reforms were announced. A PMU will be established to support contract management, facilitate obtaining advisory and consultancy support in specified areas to streamline the Acquisition process. Issues addressed under these reforms are: 

1. Realistic Setting of GSQRs of Weapons/Platforms: The process of formulation of GSQRs has been refined and emphasis has been laid on identifying verifiable parameters based on analysis of ‘Comparative’ equipment available in the World and Domestic markets.
2. Simplification of Trial Procedures: In its 2020 document, DAP laid stress on the need to conduct trials with an objective to nurture competition based on the principles of transparency, fairness and equal opportunities to all and not as a process of elimination.

3- Ease of Doing Business: This was one of the main areas to focus by laying emphasis on simplification and delegation, making the process industry-friendly with certain specific provisions incorporated. These are:

a. Procedural Changes: 

1. To reduce time, the single-stage accord of AoN in all the cases up to Rs 500 crores has been instituted. 
2. FTP cases, post accord of AoN, will be progressed as per delegated powers thereby reducing the procurement cycle considerably.
3. LTIPP has been re-designated as an Integrated Capability Development Plan (ICDP), covering the planning period of ten years instead of earlier 15 years.

b. Request for Proposal (RFP) and Standard Contract Document (SCD): To provide clarity and alignment of requirements, several provisions have been incorporated in the RFP and SCD. The guidelines have been issued in a flow chart having provisions of in-storage preservation and termination of contracts (where the progress is not made in the projects). 

Features of DAP 2020:

1-  Reservation in Categories for Indian Vendors: Several categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design & Development, OFB/DPSU and SP model will only be reserved for the Indian Vendors who meet the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%, providing exclusivity in participation to domestic Indian industry.

2- Enhancement of Indigenous Content: 

a. Overall Enhancement in Indigenous Content (IC): 

b. IC Verification: A simplified and practical verification process has been outlined by the government. For this, IC will be calculated on Bas Contract Price or in other words Total Contract Price minus taxes & duties.

c. Indigenous Military Material: The use of indigenous military material will be promoted with provisions for the examination of platforms and other equipment. Also, vendors will now be rewarded for using indigenous raw material.

d. Indigenous Software: Several provisions for exploring options for operating base applications on indigenous software in Buy (Indian- IDDM) & Buy (Indian) cases have been included.

3. Rationalisation of Trial and Testing Procedures:   

a. The equipment will be tested based on their employability. For other purposes, appropriate certifications confirming functional effectiveness can 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. Duplication of trials will be avoided. Also, the waiver will be granted based on Certificates of Conformance. 

d. Requisite opportunity will be provided to the participating vendors to curb shortcomings during the Trials with permission to carry out repairs.

e. Request For Proposal (RFP) will apprise vendors to submit a draft Acceptance Test Procedure (ATP) which will be finalised by the 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. No repetition of inspections will be done especially during the acceptance of equipment. Third-Party Inspections will also be carried out.

4- Make and Innovation:

a. Make I- It will be funded by the government up to 70%. A cap of Rs 250 crore per is laid down. The selection is purely based on bidding criteria. 

b. Make II- It will be Industry Funded for the production of indigenously designed and developed weapons/equipment/systems/platforms along with their sub-components/assemblies.

c. Make III- It will be Indigenously Manufactured for the production of equipment/platforms or spares/assemblies/sub-assemblies for enabling import substitution.

5- Design and Development: A dedicated chapter has been introduced in the DAP 2020 document for the possession of the systems designed and developed by DRDO, DPSUs and OFB. 

6- Address voids: Several existing voids have been addressed in the new policy document. They are: 

a. Information Communication Technology: Issues related to the procurement of ICT intensive equipment have been addressed.

b. Leasing: This is a newly introduced category substituting huge initial capital outlays.

c. Post Contact Management: Formalising the procedures after signing a contract. 

d. Other Capital Procurement Procedure: A new chapter has been introduced on the procurement of essential items through Capital Budget under a simplified procedure in a time-bound manner. 

6- Industry Friendly Commercial Terms: 

a. Price Variation Clause: It has been outlined for large contracts to avert inflated initial quotes by vendors and arriving at a realistic cost of the project.

b. Payments to Vendors: To ensure timely payments to the vendors, certain provisions have been introduced in the new DAP 2020 document. Payments to Indian industry have been aligned with foreign industry.

7- Offsets: Offset guidelines have been revised by the government. As per the new guidelines, the preference will be given to the manufacture of complete defence products over components and various multipliers have been added to give incentivisation in the discharge of Offsets.

Background

The first DPP (Defence Procurement Procedure) was promulgated in 2002. Since then, it has been revised several times to provide impetus to the growing domestic industry in the country and has achieved self-reliance in defence manufacturing. The DPP has now been renamed as DAP (Defence Acquisition Procedure). 

Source: PIB

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