REFORM THE ACQUISITION STRUCTURE

Defence capital acquisition projects routinely fail and this phenomenon is not peculiar only to India. Instances of delayed acquisition projects due to time and cost over runs are observed universally in procurement organisations world over. The advanced Armies, when compared to India, have however evolved their ‘capability definition and acquisition hierarchy’ structures over the years which unfortunately are conspicuously absent from the Indian acquisition executive. Capital project management in India has a suboptimal record of delivering outcomes with the parliamentary standing committee on defence estimating losses accrued due to time and cost overruns in naval acquisitions and developmental projects in 2014-15 at a whopping INR 29000 crore. These losses include the cost overruns owing to the ‘regular’ delays in the indigenous aircraft carrier programme ‘which will now cost INR 19,341 crore compared to its original cost of Rs 3241 crore. In another instance, the cost of the Stealth Guided Missile Destroyer, has been revised from INR 3850 crore to INR 11662 crore with a five year time overrun’.

Risk, Cost and Schedule Management

If we were to examine two recent capital schemes pertaining to Army’s critical equipment, certain definitive failings will clearly emerge. First of the two cases is that of the assault rifles where the Army scrapped a four year old tender for importing 1.8 lakh of these multi calibre assault rifles in June 2015 retracting the INR 4848 crore Request for Proposal (RFP) floated in 2011, thereby losing almost a decade of valuable time in replacing the underperforming INSAS rifle currently in use. The failure of this case can be ascribed to an inability in identifying apparent and estimable risks before fielding this case to the Defence Acquisition Council (DAC). Going by the vast repository of aborted cases in recent past, failure of General Staff Qualitative Requirements (GSQR) in an ex-import procurement given the current ‘Make in India’ milieu is an identifiable risk that should have been assessed and mitigated while fielding the case. The other important case involving a critical life saving albeit low technological equipment which even after half a decade eludes closure is that of the bullet proof jacket. Acceptance of Necessity (AoN) for this case was accorded by the DAC in October 2009 with an envisaged capability deployment timeline of 2012. The RFP was however retracted due to GSQR related issues after a gap of more than two years and fresh RFP could only be issued one year after it was retracted. The trials for this item reportedly commenced somewhere in the end of 2014 and this tender has been scrapped due to the reported failure of all six vendors to meet the GSQR parameters. Both these cases have failed due to lack REFORM THE ACQUISITION STRUCTURE Col Vikram Taneja The Kamov Ka-226 Utility Helicopter 10-12-Vikram Taneja_14_19_ BEING A FLY GIRL.qxd 3/24/2016 10:20 AM Page 1 of risk assessment in drawing GSQRs, categorisation and subsequent trials. Similarly, the grounds for cancellation of the contract for 197 utility helicopters after almost a decade of altercations before deciding to manufacture it in India, fall in the domain of ‘strategic and commercial risks’ which could have been mitigated had adequate risk management exercise been carried out at the planning stage.

The 15 year Long Term Integrated Perspective Plan (LTIPP) of capital equipment is the fountainhead based on which the Services are equipped post DAC approval. Initial fielding of a capital scheme into the LTIPP and later to the DAC warrants a due diligence in the present era of ever shrinking capital budgets. Inaccurate risk, cost and schedule estimates would lead to either a recast of the LTIPP or failures of cases at procurement stage as seen in the case of assault rifles and bullet proof jackets, both provoking unwarranted criticism of the procurement executive. Therefore, the inclusion of a particular acquisition scheme into the LTIPP should be subject to an incisive analysis to facilitate a greater clarity in terms of deliverables, a clearer evaluation of the intrinsic project risk, and a more accurate estimate of its cost and schedule on the basis of detailed research. Only by doing so will the DAC have the wherewithal necessary to take an informed decision for approving a particular scheme. A structure in the form of a capability development group (CDG) tasked to carry out risk, cost and schedule assessment and management before the first approval of the government needs to be put in place in India at the earliest.

81 capital schemes worth INR 1.5 lac crore have been approved in principle by the DAC in the past two years since the present government has come to power. However, it still takes about a decade for any capability envisaged through the DAC approvals to be physically deployed owing to slippages, time and cost overruns. Recasting LTIPP due to changed priorities and imprecise analysis is not uncommon and there are also instances where a number of old acquisition schemes are not rolled over from one LTPP to the other citing their non utility thus indicating a lack of rigour prior to its inclusion in the plan in the first place. No amount of procedural reform can offset the spinoffs that can accrue from the creation of a CDG. India presently has no structure in place which carries out an analysis from the risk cost and schedule point of view at any stage of procurement. Schemes are inserted in the LTPP based on an internal geo strategic and technology scan by the Army Headquarters, augmented by inputs gathered from lower formations consequently bypassing a stringent capability analysis.

What will the CDG Do?

Firstly, CDG will enhance the quality of the delivery of critical capability for the Armed Forces prior to its approval by the DAC through a ‘top-down’ flow based on the strategic guidance provided by the Raksha Mantri’s Operational Directive (RMOD). Capability gaps will be arrived at through comparison of the desired capabilities and assessment of the current capability. Feasibility studies would then lead to further fine tuning of the desired capability after the financial, technological and industrial vetting by experts and integration and prioritisation by the capability managers. Secondly, CDG will provide an assurance to the DAC that funds have been spent in national interest in conformity to the canons of financial propriety. Thirdly, CDG shall prepare details of the capability required along with the initial data relating to cost, schedule and risk developed by the relevant experts resourced within the CDG for this purpose. Fourthly, CDG will communicate to the DAC a rigorous cost benefit analysis to benchmark all additional risks posed by fielding for procurement any equipment not available commercially off the shelf (COTS). Lastly, the SQR Development Group with an industry interface as a part of the CDG will generate SQRs based on approved capability plans. This will address the lacuna in the system and aid in improving the process of development of SQR.

Resourcing the CDG

Presently, there are many areas of concern, ranging from an atrophied capability management and inadequate project management contributing to formulating an LTIPP generated through a bottom up approach in the absence of an articulated National Security Strategy (NSS). Insufficiency of the process leading to DAC approvals for new projects and a fragmented silo based acquisition structure are some other voids plaguing the acquisition system in India. While the Dhirendra Singh Committee report on acquisition reform building upon similar reports released over the last two decades have recommended measures to deliver enhanced outcomes through a more corporatised acquisition organisation outside the structure of the Ministry of Defence (MoD), the Defence Procurement Procedure (DPP) versions promulgated till date do not however dwell in detail on the need for a structure akin to a CDG to address the planning aspect before actual procurement is affected.

To achieve its aim, the CDG will firstly need to be resourced with niche skills such as project planning and management in order to define a capability. The performance of CDG shall impact greatly the later stages of acquisition and hence project management skills during the early stages of an acquisition are vital. Currently, the core HR personnel staffing the Perspective Planning departments comprise Service officers on moderate tenures averaging 18 to 24 months serving in a highly complex domain. Planning and execution of complex military projects by Service officers with little or no proficiency in project management skills is not a practical option and needs reform.

Secondly, CDG shall also be responsible for working out the life cycle costs for material as well as non material capabilities allied to the procurement case such as training of personnel, infrastructure development etc. for which it will need to possess integral cost estimation expertise. Thirdly, CDG will have to allocate increased resources devoted to the area of research and analysis which is a prime source for obtaining cogent information on risk, costs and schedule as well as commercial inputs on procurement options. Fourthly, investment, in terms of risk analysis would greatly benefit mitigation of both technological, commercial and other project related risks. Lastly, to sustain the above resources, allocation of minimum ten percent of the total project expenditure needs to be made to enable a detailed analysis prior to DAC approval of a project which is not being presently done.

Process vs Structure

Despite capital acquisition being a key focus area of the government, Army has been able to conclude contracts amounting to a meagre INR 6000 crore in the current fiscal. To expect the new DPP 2016 to suddenly galvanise procurement may not be entirely justified. The refinements notwithstanding, DPP still remains a manual that merely articulates the ‘procurement process’ that forms a relatively small component of the entire gamut of capability establishment comprising strategy formulation, capability definition, procurement, sustainment and discard. Cursory examination of the recent procurements by the three Services will exhibit that most of these bypass the DPP in favour of the Inter- Governmental Agreements (IGA) and Foreign Military Sales (FMS) route. The long undecided utility helicopter deal has recently been finalised through the IGA with Russia and an Indian private development partner while the M777 Howitzer deal similarly follows the FMS route. DPP on its part in the last few years has not been able to settle Army’s long standing operational hollowness in terms of Air Defence ordnance, critical ammunition, night vision capability and missiles purported to be fulfilled through over a hundred pending modernisation schemes, worth over INR two lakh crore, currently stuck at various stages of approvals between the Army HQ and MoD. As the acquisition community and the industry fervently awaits unveiling of the DPP 2016, it should now be recognised clearly and unambiguously that DPP as a capability building document has its limitations and we now need to look beyond the DPP to address the acquisition structures. Structural reform to the acquisition architecture is the only way forward for achieving a transformational change to the acquisition ecosystem considering that structures will eventually govern the organisational behaviour.

The author is a Senior Fellow at the Centre for Land Warfare Studies (CLAWS)

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