INFUSING GREATER EFFICIENCY PROCUREMENT PROCESS AND

IN

THE

STRENGTHENING BASE IN THE COUNTRY.

DEFENCE

MANUFACTURING

EXPEDITIOUS PROCUREMENT FOR ARMED FORCES TO MAINTAIN OPERATIONAL READINESS

Indigenizatio n
Level playing field

SPEEDY PROCUREMENTS
Simplification of procedures

Reduced processing timelines

Clearly structured Appx F (Payment terms recast as Commercial clauses) and Appx G (Commercial offer recast as Evaluation Criteria of Price Bid Format). RFP format for shipbuilding included.

CHAPTER I :BUY AND BUY & MAKE CATEGORIES

Preferred order of categorisation (P 20a). Inclusion of additional information in SoC submitted to DAC/DPB (P 20b).

SQR & AoN Validity (P 17, P 20). Indian entities for MToT (P 28). Indigenous content 30% for Buy (Indian) and 50% for Buy &

Make (Indian) categories has been defined clearly. (4a, 4c).

A method for assessment of indigenous content, based on self certification by vendors, has been given at Appendix F to Chapter I (P 7).
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 Indigenization Indigenous content requirement will now extend all the way to lowest tier of sub vendor. (P4 Appx F, Ch I). Provision for audit by MoD/MoD nominated agency has been made, if found necessary (P5 Appx F, Ch I).

Penalties for not achieving stipulated indigenous content levels at each stage with a scope to make up for the deficiency at a later stage (P 8,10,11,12).
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CHAPTER II : MAKE CATEGORY Proposed advance planning and consultation (Para 10(a)).

CHAPTER III : SHIP BUILDING PROCEDURE

Base and depot spares cost in offsets. Provision of modification cost up to 4% of basic cost of vessel permitted in competitive bidding (Addition of Para 59(k) to Chapter III). Provisions for procurement of OBS and B&D spares defined (OBS-MRLS with sufficiency clause, and B&D 15% of the Basic cost of the vessel). Model RFP format of Shipbuilding included. Applicability of Offset obligations in shipbuilding cases. Contract cost defined in Model RFP.
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 Preferred categorisation in the following order :

Buy (Indian) Buy & Make(Indian)

Make(Indian)
Buy & Make Buy(Global)

While seeking AoN, necessary to give justification for not considering other higher preference categories.

 Min 30% indigenous content on cost basis.

Overall indigenous content at least 30% of the total contract value. Min 30% indigenous content also required in :
Basic cost of equipment. Cost of MRLS. Cost of SMT and STE taken together ; Provided min 30% indigenous content is ensured in Basic cost of equipment at all stages of contract, including the FET stage.

 Purchase from an Indian vendor (including JV /production arrangement with OEM).

Min 50% indigenous content on cost basis. Implies indigenous content in the total of
Basic cost of equipment, Cost of MRLS, Cost of SMT and STE. Must be at least 50% of the total contract value. Min 30% indigenous Indian content in the first basic equipment made/assembled in India and in subsequent deliveries thereof.

 Would include high technology complex systems or critical components/equipment for any weapon system to be designed, developed and produced indigenously. A minimum 30% indigenous content on cost basis shall be required in such cases in the successful prototype.

 Finalization of SQRs before seeking AoN 17 Chapter 1).

(Para

Reducing validity of AoN from 2 years to one year except Buy and Make (Indian). Request for extension of the bid submission date - at least two weeks prior to the bid submission date with adequate justification (Para 33).

 Enhanced delegation of financial powers

Financial powers of DPB for according AON enhanced from Rs 100 crores to Rs 300 crores.

DAC has tripled financial powers of SHQs from current Rs 50 crores to Rs 150 crores.

 Indigenous content has been clarified. Doing away with requirement of short-listing vendors through the PAC - Buy and Make (Indian) procedure simplified. Instead of PAC, after accord of AoN, SHQ, shall hold consultations along with DDP and DRDO Reps with the 1st stage short-listed vendors. These consultations may relate to PSQRs, delivery timelines and technology absorption aspects. (Para 25a). Simplification of the Make procedure is underway and is expected to be completed in few months. FTP is also being revised.

 Payment Terms and Commercial Offer Appendix F and G to the RFP have been modified as : Commercial Clauses - updated and rationalised to create a level playing field. Evaluation Criteria of Price Bid Format - made more elaborate to reduce subjectivity.

 MToT hitherto reserved for OFB and DPSUs through the nomination process.
Provision of ToT to Indian Public/Private entity, for providing Maintenance Infrastructure, would be applicable for BUY (Global). Decision would be debated in SCAPCHC and approved by DAC.

 To utilize the expertise gained by the industry in the last decade in defence sector. Industry to get meshed in the supply chain for sourcing by major Global defence OEMs.

To progressively reach a stage where the industry could, on its own and through its own R&D efforts, start manufacturing the defence equipment required by the armed forces.
Finally, the Indian industry must aim at acquiring the capability to develop futuristic technologies. That will be the real coming of age for the Indian industry.

 Offsets and multipliers for MSMEs. Preferred Order of Categorization Major industries may form JV for indigenous production. Opportunity for participation as IOPs, provision of components, spares and SMTs/STEs.

Indigenous Content extended to lowest tier of sub vendors. Opportunity for vendors making components to compete against cheaper foreign components. Percentage Indigenization SMTs/STEs. includes MRLS and

Ultimately, Industry to provide bulk of defence requirements as also get meshed in the global supply chain.

 Indigenous content in Buy & Make(Indian) 50% . Rationalization of Taxes and Duties. Difficult to hold price for long finalization of cases . duration in

Calculation of Discounted Cash Flow (DCF) to select L1. Chapter III: Shipbuilding - totally aligned to Govt Shipyards and does not recognize shipyards in private sector.

 Buy Global as a categorization be abolished. In extreme cases FTP may be employed for procurement. Indigenization only 30% in Buy & Make (Indian) cases. ERV has to be extended for all categories of current and ongoing procurements/ contracts.

Progressive Milestone Payments through Letter of Credit.

Changes in Payment terms wrt excise & taxes.

Issue of public version of LTIPP.

ENABLE INDUSTRY TO SEEK TECHNOLOGY PARTNERS FOR FUTURE PROGRAMS

PROMOTE INDUCTION OF KEY TECHNOLOGIES REQUIRED

Public Version of LTIPP

INVESTMENT PLANNING BY INDUSTRY JV FORMATION (FDI ON CASE TO CASE BASIS FOR CRITICAL TECH)

 THOSE WHO ARE NOT HAPPY WITH DPP-2013 MAY READ AND COMPARE WITH DPP-2002. THE INDIAN INDUSTRY HAS AN OPPORTUNITY. GRAB IT.

We hope that the defence industry as well as the procurement agencies will find DPP-2013 to be a progressive step aimed at giving impetus to indigenisation, creating level playing field between private and public sector and expediting the procurement process as a whole. We will continue in our endeavour to refine and improve the procedure and welcome and suggestions for improvement. - HONBLE RM SHRI AK ANTONY