Defence Industry

Pitfalls in Arms Procurement Process
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Issue Vol 25.1 Jan-Mar 2010 | Date : 05 Nov , 2010

Modernization of armed forces is a very capital intensive and long drawn process wherein the armed forces first identify their needs and then acquire the same through some rather complex procedures.

The Chinese armed forces have been under a rather expensive make-over for decades to acquire capabilities, far beyond their appreciated needs. Our other neighbor, Pakistan, has been a favored recipient of US largesse consisting of ultra modern weapons, including F-16s ostensibly to fight the terrorists. The Indian armed forces may, in not too distant future, have to counter threats posed by these modernized forces. In addition we also need to develop capabilities to detect, identify and fight non-state players who have the resources and motivation to disrupt our national rhythm by causing unprecedented destruction and violence.

Allocation for the Defense Budget

Allocation of funds for the defense budget, as a percentage of a nation’s GDP, is a globally accepted norm. In our case this figure, generally around 2 percent of the GDP is very closely watched by our neighbors. Every year, in the run up to the annual budget, numerous opinion makers highlight the need for a higher allocation of funds for the armed forces including a larger allocation for modernization. These assertions to enhance the modernization budget overlook some well established practices as well as pitfalls in seeking higher allocations.

Adequate Availability of Funds

Over the years the government refrain has been that the armed forces need not worry about the percentage of GDP that should be earmarked for the defense budget and instead should simply state their requirement of funds. While such an approach does not allow the armed forces to plan acquisitions yet it works. Let us take the case of purchase of additional T-90 tanks for the army. The number of tanks required was calculated and projected to the government after the necessary internal approvals. Within the shortest possible time the whole process was gone through and orders placed.

Ironically our failure to modernize is neither for want of funds nor due to non-availability of suitable weapon systems in the world market.

There were no repeated queries seeking clarifications or questioning the very requirement or any indication that such a large acquisition can impact other proposals. Russians took some time to adjust to the windfall! Thus it is not the availability of funds, which is holding up the modernization of the armed forces. To identify the problem we need to look elsewhere.

Against the rather grim backdrop of our adversaries acquiring disproportionate military capabilities and our failure to acquire the necessary modern weapons for our armed forces, despite an assurance of adequate fund availability, the following issues merit attention:-

  • For over a decade the armed forces have repeatedly assessed their future weapons and equipment requirements vis-à-vis the ever improving capabilities of our adversaries, identified the hardware required; in some cases even trial evaluated the systems and yet a very large proportion of acquisitions remain incomplete. There are arms like the army air defense for which no major acquisition has taken place in the last two decades. Similarly, for over a decade, we have an ongoing process for acquiring modern artillery with little to show. Our Infantry very urgently needs modern weapons to perform its’ task. That the DRDO has not kept their promises has not helped the matters either.
  • Ironically our failure to modernize is neither for want of funds nor due to non-availability of suitable weapon systems in the world market. This state of affairs has resulted from the repeated inability of the acquisition process to spend the available money. Our inability to spend funds and surrender 30 percent or more of the allocation earmarked for modernization, has become a very predictable feature of the defense budget.
  • Despite this completely unacceptable management of very meager funds, which needs immediate correction, there is a very vociferous campaign to enhance the allocation of funds as a percentage of the GDP. Result of any enhancement of funds, without a major overhaul of the system will still be same-even greater surrenders than ever before.

As a nation with a fledgling defense manufacturing base and a near total dependence on imports for modernization of the armed forces we have a host of very informed views on the problems connected with modernization and what we should do about it in line with other countries, with well established systems and procedures. In this regard the following issues are important:-

From a vendors point of view the whole process is “if you buy my product you are honest ““ if you buy my competitors product you are a thief”.

  • We have an acquisition establishment, which suits our native genius. It is manned by handpicked personnel, known for their professional competence and integrity, with adequate systems and procedures.
  • In our country, while other ministries and establishments annually spend funds similar to or greater than defense spending on modernization yet no one is concerned about these acquisitions. For some reasons far too many people who are not part of the system, some of whom will not be able to tell the difference between a tank and a gun, wish to be part of the acquisition process without accepting any responsibility. They make suggestions, which leave one wondering about the source of their technical military knowledge and tactical genius.
  • Our acquisition procedures are so stringent and precise that any wrongdoing will be very difficult to hide, yet the ‘corridors of power’ are flooded with people who promise the moon to the aspiring vendors. Someone who is familiar with the system will say these ‘brokers’ lie! Of course there are occasions when the whole process on the verge of finalization gets wound up. Reasons for the same can be many!

This paper represents the views of a person who has participated in the process of acquisition and has had a ringside view of how the system works. While there are any numbers of highly respected views about modifying our system in line with the Americans or the French, this paper highlights some issues, which, if attended to, may bring about a positive change in the existing system.

Suspicion, Fear and Trust Deficit

These four words in many ways represent the summation of tenure in the acquisition wing. While processing cases, we do everything except to trust our own handpicked people. From a vendor’s point of view the whole process is “if you buy my product you are honest – if you buy my competitor’s product you are a thief”. The moment a vendor becomes aware of rejection of his product in the Technical Evaluation Committee or failure of his product in the trials or any other negative indication he will start a spate of allegations/complaints – sometimes a letter a day.

It is not uncommon to get a file back from the lower bureaucracy while negotiations are in progress, seeking an explanation for an observation raised two or three years ago”¦

In our system there is no possibility of simply ignoring such complaints. The staff, which is already overworked beyond any established parameters of office routine, spends hours explaining the lack of merit in the complaint. Sometimes these complaints can get very personal and demoralizing. These complaints are routinely processed, sometimes repeatedly, up to very high levels. We need an organization to quietly investigate an allegation and decide once for all that it needs to be ignored or acted upon. Individual accountability must be established systemic failures corrected to allow the system to function efficiently.

Lack of Familiarity with matters Military

The acquisition team of a service has representation of MOD, MOD (Fin), servicemen as Technical Managers and the Service Representative, who heads the concerned directorate. While all other members have their respective charters, roles of two members of this team merit a mention. Any failure to acquire the new systems, irrespective of the reasons, is the failure of the service representative to get his service the long awaited modern systems. In this team it is the bureaucrat, who gets inputs from all other members and is the link with higher decision making bodies in the MOD.

Sometimes this important link simply has no idea of the services hierarchy, the service working ethos and above all the significance of the acquisition that is being processed. There is a need for a short familiarization tenure for all bureaucrats, prior to a posting to the acquisition wing of the MOD. They need to know the aspirations and expectations of the services and relative significance of the major acquisitions that are being planned so that necessary attention can be paid to these projects.

Primacy of Procedures

Procedures are established as means to an end. In the acquisition process the procedure, ever so complicated, with control over bits and pieces by different agencies, some of which are not answerable if the money remains unspent, has become the end itself. For the fear of committing an error all deviations go to very high levels for approval.

Repeated failure of the acquisition wing of the Ministry of Defence, which includes the acquisition directorates of the three services and Coast Guard to spend the funds allocated for modernization, needs to be viewed with concern. Our model of the acquisition has evolved over a period of time and it does not need to be changed.

At times a deal on the verge of finalization is dropped because, despite the system to be acquired being fully compliant, a minor unapproved deviation is detected just before possibly the price negotiations are scheduled to commence. It is not uncommon to get a file back from the lower bureaucracy while negotiations are in progress, seeking an explanation for an observation raised two or three years ago with the possibility of calling off the deal if the same is not settled.

In the past there have been attempts to simplify the procedures but a lot more needs to be done. What we need is a fully automated system, accessible to a handful of appointments who can manage it on their own, without any clerical intervention till the final contract is to be signed. It will also ensure the much needed confidentiality in the process.

Transparency

Transparency is the current ruling mantra in the acquisition process – an offer rejected in the TEC, inform the vendor – a system performance below the expected parameter, inform the vendor. A clear and clean information feedback is a laudable system of working. Regrettably the recipients who are aware of our system of never rejecting any complaint, instead of accepting the feedback gracefully, may, in some cases, start a barrage of no holds barred complaints, which can be wasteful, exhausting and completely unwarranted. We have one of the most exhaustive trial procedures, with so many agencies testing the same equipment that it is well nigh impossible to influence or predict the outcome. We need to simply ignore these complaints,

Delegation of Financial Powers

Delegation of financial powers to the services is one tool, which can really expedite the process of acquisition. These powers though recently raised, will not achieve any aim if all accompanying procedures continue to be in vogue. After all the steps as in the normal acquisitions sometimes getting the financial clearance can bring the time frame to the routine acquisitions. These delegated powers are exercised by the Vice Chiefs, who have the necessary staff and resources to ensure expeditious acquisition of items required by the services. The financial powers can really contribute to modernization if the amount is substantial and exercise of powers, with simple procedures is permitted.

Conclusion

Repeated failure of the acquisition wing of the Ministry of Defence, which includes the acquisition directorates of the three services and Coast Guard to spend the funds allocated for modernization, needs to be viewed with concern. Our model of the acquisition has evolved over a period of time and it does not need to be changed. What we need to do is create conducive working environment isolated from extraneous influences, based on automated systems and manned by people who understand the requirements of the armed forces. We need to seriously review our attempts at too much of transparency. The delegated powers of the services should be further enhanced backed up by procedures, which do not face the usual bottlenecks faced by the acquisition process.

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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.

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