Indian Defence Review

Better Buying Power (BBP) is a US Department of Defence (DoD) initiative which is about implementing best practices in defence spending with the objective of delivering better value to the taxpayer and the soldier in field. Conceived in 2010, the initiative has been revised in 2012 and 2014, though the core principles have remained unchanged.

BBP 1.0 was about doing more with no more. It focused on incentivizing industry for efficiency and adopting government practices that encourage efficiency.

BBP 2.0 organized the initiative into seven focus areas. It shifted emphasis from best practices to professionalism and use of better tools to make sound acquisition decisions.

BBP 3.0 encourages innovation and technical excellence to ensure that the military has the dominant capabilities to meet future security challenges[i].

BBP would make a lot of sense for any military force, but the key to achieving success in the field lies in formulating a pragmatic roadmap for implementation of initiatives contained therein. This article attempts to analyse some of the recommended practices in the core focus areas of BBP, in the context of Indian defence acquisition enterprise.

Affordability is one of the central tenets of the BBP. This initiative is about determining whether the desired weapons/Information systems/service capabilities can be afforded in future budgets, before the programme to acquire them is initiated.

Determining affordability begins with comparing the cost estimates of bridging capability gaps with future budgetary allocations. At very macro level, the monetary effect of five years defence plans, which emanate from the Long Term Integrated Perspective Plan (LTIPP) should conform to the cumulative budgetary allocations for the relevant years.

For the Tenth Defence Plan (2002-07), the Ministry of Finance (MoF) had indicated in broad terms how much money could possibly be made available and for the Eleventh Defence Plan (2007-12) the MoF had indicated the growth rates. For the Twelfth Defence Plan (2012-17), the Ministry of Defence (MoD) itself decided the growth rates for preparing the plan. However, all three Defence Plans exceeded the indicated/assumed resource availability. The approved LTIPP for 2012-27 is based on the assumption that the allocation for defence would equal three per cent of the gross domestic product during this entire period, without any formal or informal commitment to that effect from the MoF[ii].

Unaffordable plans based on costs, which are very gross estimates, coupled with extremely long and variable maturation periods lead to a fairly high degree of unpredictability in our resource utilization profile.

Another core idea of the BBP is the ability to understand and control future costs from a program’s inception. A beginning has been made in this regard and the Defence Procurement Procedure now includes life cycle costs for determining the L1 in the Make cases.

However, the future Total Cost of Ownership is not determined in all cases. Systems are not in place even to determine the current total cost of ownership of major weapon systems in terms of resources and manpower for in-service utilization, training, maintenance, repair, overhaul, and discard. Cost consciousness needs to be introduced in our systems in a big way if we have to control future costs. We could also learn from the concept of ‘Should Cost’.

The DoD has attempted to change their acquisition culture from one focused on spending available budget, and accepting costs as a given – to one where managers scrutinize each element of cost under their control and assess how it can be reduced without reductions in value received. Under the ‘Should-Cost’ initiative, specific efforts are executed to drive out cost, and these vary depending on the nature of the program and stage of the lifecycle[iii].

Incentivize Productivity and Innovation in Industry and Government is another key focus area of the BBP which includes several initiatives like ‘Align profitability more tightly with Department goals’,  ‘Employ appropriate contract types, but increase the use of incentive type contracts’,  ‘Expand the superior supplier incentive program across DoD’, ‘Increase effective use of Performance-Based Logistics’, ‘Remove barriers to commercial technology utilization’, and  ‘Improve the return on investment in DoD laboratories’.

Reports suggests that the DoD has done a reasonably good job of aligning profits with performance, but doing the same in our country would require a cultural transformation. Americans have long realized, that profit is the reason that the firms exist, and they should not use profit as a cost cutting measure. However, profit should not be excessive, and when higher profit levels are tied to better performance, it becomes an effective tool to make the defence industry lean, competitive, innovative and productive[iv].

We need to get used to the idea of incentivizing industry for efficiency and performance. We could also make a beginning by measuring return on investment in DRDO laboratories and simultaneously explore feasibility of outsourcing research and development. The Small Business Innovation Research program is worthy of emulation.

Eliminate Unproductive Processes and Bureaucracy. The DoD also realizes that unnecessary and low-value added processes and document requirements are a significant drag on acquisition productivity and must be aggressively identified and eliminated.BBP 3.0 says, “Left to their own devices, staffs in both the Services and OSD will tend to inject themselves in the acquisition chain of command. Such staff ‘oversight’ has the unintended effect of removing responsibility from the chain of command – where it belongs”. This idea like all others can tremendously improve efficiency.

There is also a need to measure performance of the acquisition system and establish a cause and effect relationship between the periodic changes that are made to the DPP and the value they bring to the acquisition system.

Promote Effective Competition. The DoD uses real competition as the single most powerful tool to drive productivity. In our scenario, ‘level playing field’ which the industry keeps demanding has to become a reality, if we want to promote effective competition. For that to happen, we need to make procedural as well as structural changes in the MoD to make sure that the Ordnance Factories and the Defence Public Sector Undertakings do not have the first rights, but are good enough to compete for orders. Deming said that the worst thing that can happen to a business is absence of competition and the same is applicable in totality to our public sector defence enterprise.

Improve the Professionalism of the Total Acquisition Workforce. The DoD encourages the acquisition workforce to conduct itself with excellence, responsibility, integrity and accountability and has institutionalized mechanism in place to train its large acquisition force. However, in sharp contrast our acquisition related assignments are filled by officers for whom the assignment is just one of the career stops.

At the cutting edge, colonels who graduate from the College of Defence Management occupy almost all important acquisition related assignments for a short period; before they move on to take command assignments in the next rank. The situation is almost same for Brigadiers as well. One hundred managers with one year’s experience should never be considered to be the same as five managers each with 20 years’ experience[v]. Despite a lot of attention and observation by high-powered committees on institutionalisation of acquisition training, and creation of a dedicated cadre, nothing worthwhile has fructified on ground.

BBP 3.0 is a handsome collection of initiatives which are aimed at bringing affordability in defence spending, professionalism in acquisition workforce, and technological excellence with the ultimate aim of delivering dominant capabilities to the soldier in field. These initiatives are pertinent to India as much as they are to the US for whom they have been specially drafted. The only difference lies is in the nature of change that their implementation demands. For the US, implementing them is an ongoing process of continuous improvement, but for us implementing these initiatives demands a radical change and a cultural transformation.

Courtesy: http://www.claws.in/