Defence Industry

New Defence Procurement Organization – payoffs?
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Issue Net Edition | Date : 31 May , 2017

According to recent media reports, government is mulling setting up a new autonomous organization, ‘Defence Procurement Organization’ (DPO), to be created within the MoD to deal exclusively with procurement for the Armed Forces as recommended by a committee headed by Dr Pritam Singh, former Director of Indian Institute of Management (IIM) Lucknow. Some media reports are referring to this new organization as Defence Acquisition Organization (DAO). Either way, the aim is to provide single point responsibility for acquisition of capabilities for the Armed Forces, provide interface to build industry capability and promote defence exports, make policies, plan acquisitions and execute projects for the Armed Forces.

It may be recalled that in 2001, government had set up the Defence Procurement Board (DPB) in the MoD. The DPB included members of the Army, Navy and Air Force cutting all channels and going straight to the Defence Minister or Defence Secretary, replacing the earlier practice of the three Services going through the procurement process separately. DPB brought procurements by Services under one umbrella, aimed at holistic and integrated 15-20 year defence perspective plans through a rigorous intra and inter-service prioritization, backed by the procurement board. The Services welcomed the DPB hoping the long delays in procurement decisions in a fast-changing battlefield scenario will be cut down. But that unfortunately did not happen.

Concurrently the Defence Acquisition Council (DAC), under the Defence Minister was constituted for overall guidance of the defence procurement planning process; based on the Group of Ministers (GoM) recommendations on “Reforming the National Security System,” MoD vide its order dated 11 Oct. 2001 set up broad structures and systems to deal with acquisitions pertaining to the Capital Account. The objective of the DAC was to ensure expeditious procurement of the approved requirements of the Armed Forces in terms of capabilities sought, and time frame prescribed, by optimally utilizing the allocated budgetary resources.

To overcome the perennial problem of delays in defence procurement, unspent budgets, allegations of corruption and botched deals, the expert committee set up under Dr Pritam Singh actually submitted its report to MoD in February 2017. The media at that time quoting a member of the expert committee stated, “We have given this new organization full ownership of the acquisition process by bringing legal, financial, costing and technical experts under one roof. Independent of the MoD, they will not be constrained by government rules. This professionalization of the process will bring down the time taken to complete defence acquisitions. We have also recommended adequate internal checks and balances to reduce corruption.” The nine-member expert committee was formed by the MoD in May 2016  with the mandate for ‘Restructuring of the Acquisition wing to make it more effective’.

The Dr Pritam Singh headed Committee was embroiled in controversy when the head of the committee, former Director General (Acquisition) Vivek Rae, resigned in October 2016 after fundamental differences with other members over the proposed DPO. Rae reportedly wanted this new organization to be a part of MoD while other members were determined to keep it independent of the government. In its recommendations, the committee had proposed that the new organization be fully responsible for the entire process of acquisition after the operational requirements are identified by the defence services, and more importantly operating independently of MoD, it be manned by people with specific qualifications including experts from outside the government who are fit to serve in these positions. The report had also said “at the highest level, there will be a seamless integration between the MoD and this organization” where the “decision-making will be collective and collegiate”. Converting all acquisition schemes and programs into projects, the new organization was to combine several functions currently undertaken by different agencies, and more importantly completely subsume the capital acquisition wing of the MoD into this new organization.

This last bit of the new organization ‘completely subsuming the capital acquisition wing of the MoD’ may have sounded the death knell of the original recommendations of the committee of setting up an autonomous body “independent” from the MoD. Recent media reports now mention the DPO will be coming up “within” the MoD. The logic is very simple – capital acquisition in MoD is where the ‘billions’ are and there is no way MoD would let go of it. The U-turn was inevitable and Vivek Rae needlessly resigned ignorant of the power of the deep state, the fact that the governmental defence-industrial complex remained defunct for decades despite joint secretaries of MoD and Department of Defence Production on all boards of DRDO, DPSUs and Ordnance Factories; that we even have acting defence ministers to ‘handle’ capital acquisitions, plus the bureaucrat anthem – defence ministers come and defence ministers go but we are will rule forever.

As per MoD sources, establishment of the DPO is a strategic imperative for long-term self-reliance, which would be the second big-ticket defence reform after the strategic partnership (SP) policy is finalized to boost the private sector’s role in defence production. In the DPO, the MoD is looking to streamline mega arms acquisitions as well as leverage them to build a robust defence industrial base (DIB) in the country. According to another MoD official, “Vested with some autonomy, the DPO will function as the powerful executive arm of the defence minister-led DAC. After the DPO is approved by the Cabinet, it will take around two years to take full shape. It will also have legal, costing and contracting experts, who are largely missing in the existing system”.

As per media reports, the DPO / DAO will be headed by a Chief Executive Officer (CEO) who will be appointed by the Appointments Committee of the Cabinet. There will also be eight Directors who will also be appointed by the Cabinet; these will include one Director each for Land Systems, Naval Systems, Aviation Systems and Information Technology. Other than the CEO and Directors, all other employees are to be hired by the DPO / DAO. The organization will be located outside South Block to allow access to the industry – both indigenous and foreign. The organization may be located outside South Block but the question is if it is being created ‘within’ the MoD, how does it become autonomous and independent of the MoD? There is a small insertion in the media that initially this organization will be set up within the Department of Defence (read MoD) and become independent like the National Highway Authority of India (NHAI). Is this misnomer or if true what is the time gap and manner in which it will become independent? Once steeped in the colours of MoD and manned by the chosen ones, can it then really become an autonomous and independent organization. Take HQ Integrated Defence Staff, the basis of whose raising was its merger with the MoD, but has not been permitted by the latter. The NHAI did not get created in any ministry but was directly established as an autonomous body through promulgation of the National Highways Authority of India Act, 1988 In February 1995, so why not similar process for establishing the DPO?

Other questions that need attention are: if the whole idea was to create an autonomous organization independent of the MoD which appears to have been reversed, could the existing DPB and DAC have been refurbished / reorganized to perform the same function; why no dedicated Directors for domains like Space, Cyber and Electromagnetic; what happens to organizations like the Department of Industrial Policy and Promotion (DIPP) – will it merge into this new organization or continue separately; given the urgency in streamlining defence acquisitions, could the setting up of this new organization be kick started in shorter timeframe than projected two years; will it become a parking space for bureaucrats and DRDO officials devoid of the users (Armed Forces) as is the case of the MoD and DRDO; and, will it shorten or lengthen the acquisition process considering that even the SP model necessarily must follow the processes in DPP 2016, which hardly are conducive to quick procurement. We need to address these issues.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Lt Gen Prakash Katoch

is a former Lt Gen Special Forces, Indian Army

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