INFUSING GREATER EFFICIENCY IN THE

PROCUREMENT PROCESS AND

STRENGTHENING DEFENCE MANUFACTURING

BASE IN THE COUNTRY.

EXPEDITIOUS PROCUREMENT FOR ARMED

FORCES TO MAINTAIN OPERATIONAL

READINESS……

• 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.

SPEEDY PROCUREMENTS

Indigenization

Reduced processing timelines

Simplification of procedures

Level playing

field

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).

8

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).

9

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.

10

• ‘Preferred categorisation’ in the following order :

• While seeking AoN, necessary to give justification for not

considering other higher preference categories.

Buy (Indian)

Buy & Make(Indian)

Make(Indian)

Buy & Make

Buy(Global)

• 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’ (Para

17 – Chapter 1).

• 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 – includes MRLS and

SMTs/STEs.

• 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 duration in

finalization of cases .

• 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

INVESTMENT PLANNING BY INDUSTRY

JV FORMATION (FDI ON CASE TO CASE BASIS FOR CRITICAL

TECH)

Public Version of LTIPP

• 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.

- HON’BLE RM SHRI AK ANTONY