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Parameters to select a Strategic Partner for Defence Acquisitions in India
ASSOCHAM would like to submit the following views in relation to the “terms of reference” of Dr. V. K. Aatre Committee relating to:
A. Selection Parameters of Strategic Partnership Model
B. Methodology to be adopted for such selection
Key Selection Parameters
1. Financial Capability
The Strategic Partner (SP) should have adequate financial resources to perform the contract, or the ability to obtain them. Various financial ratios of the prospective strategic partner should be analyzed for the last 5 years. Further, it is recommended to evaluate the minimum size of capital investment made by the SP in projects in the last 3 years to get a fair idea of the financial capability. The ratios recommended to be assessed are elucidated below:
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2. Financial Prudence
Adequate ratings by CRISIL/ICRA or any other authorized rating agencyshould be evaluated.
3. Technical Capability
Technological capability of a SP is recommended to be assessed by analyzing its range and depth of technology and products. This can be evaluated using:
(i) General Standards: This should encompass the following:
Ability or past record in conceiving, implementing and developing greenfield infrastructure or manufacturing projects
Evaluation of past record of successful absorption of ToT capability to undertake large complex projects ahead of time Certifications like ISO 9001, AS9100, DGAQA, Cemilac certification or accreditations from DSIR,
DRDO Domain-specific track record for the last 5 years
(ii) Special Standards: Specific criteria are recommended to be assessed on a case-to-case basis depending
on the project requirements.
4. R&D Capability
It is recommended to analyse the following:
Intellectual Property (IP) creation,
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Track record in development of technologies and products,
R&D investments made over past five years
R&D center certification and accreditations.
5. Capacity/Infrastructure Capability
It is recommended to evaluate a company’s capacity by checking the number of key projects that it has delivered in the last five years, number of employees and the infrastructure asset base that it has maintained as related to the project.
6. Executive Track Record
It is important to establish SP as a “responsible” firm. It is recommended to assess projects completed, under completion or/and at advanced stages.
7. Ownership Structure
There should be no restriction on the type of ownership structure. It is recommended that the structure should comply with FDI and the licensing policy of the government of India.
Other Selection Parameters
In addition to selection parameters listed in the Dhirendra Singh Committee report, the following is recommended:
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1. A SP can either be a stand-alone Indian company or a consortium.
2. Knowledge processes: The following knowledge processes are also recommended to be added to the list of parameters:
Design & Engineeringcapability
Quality management
Project management capabilities
3. Development of an Ecosystem:It is recommended that maximum Buyer Furnished Equipment is included in contracts with the SP to encourage participation of lower tiers.
4. Exit Clause: There should be an appropriate exit clause which defines the exit process, risks and responsibilities in case either party wants to exit the partnership.
Analytic Hierarchy Process (AHP):
A selection methodology
Detailing the methodology for selection of each parameter will take time to formulate. However, it is recommendedthat the method for selection be based on an Analytic Hierarchy Process (AHP) built on the recommended parameters. This could be a structured technique based on mathematics and psychology. The frame work of AHP is explained below:
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1. Model the problem as a hierarchy containing the decision goal, the alternatives for reaching it, and the criteria for evaluating the alternatives.
2. Establish priorities among the elements of the hierarchy by making a series of judgments based on pairwise comparisons of the elements.
3. Synthesize these judgments to yield a set of overall priorities for the hierarchy. Check the consistency of the judgments.
4. Come to a final decision based on the results of this process.
The steps for scoring are elaborated below:
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Analytic Hierarchy Process
Parameter 1 Parameter 1.1 Range 1.1.1 Weight 1 Parameter1.1 X Range 1.1.1 X Weight 1 =Score
Range 1.1.2 Weight 2
Range 1.1.3 Weight 3
Parameter 1.2 Range 1.2.1 Weight 4 Parameter1.2 X Range 1.2.1 X Weight 4 =Score
Range 1.2.2 Weight 5
Range 1.2.3 Weight 6
Parameter 1.3 Range 1.3.1 Weight 7 Parameter1.3 X Range 1.3.1 X Weight 7 =Score
Range 1.3.2 Weight 8
Range 1.3.3 Weight 9
Parameter 1.4 Range 1.4.1 Weight 10 Parameter1.4 X Range 1.4.1 X Weight 10 =Score
Range 1.4.2 Weight 11
Range 1.4.3 Weight 12
Parameter 2 Parameter 2.1 Range 2.1.1 Weight 13 Parameter2.1 X Range 2.1.1 X Weight 13 =Score
Range 2.1.2 Weight 14
Range 2.1.3 Weight 15
Parameter 2.2 Range 2.2.1 Weight 16 Parameter2.2 X Range 2.2.1 X Weight 16 =Score
Range 2.2.2 Weight 17
Range 2.2.3 Weight 18
Parameter 2.3 Range 2.3.1 Weight 19 Parameter2.3 X Range 2.3.1 X Weight 19 =Score
Range 2.3.2 Weight 20
Range 2.3.3 Weight 21
Parameter 2.4 Range 2.4.1 Weight 22 Parameter2.4 X Range 2.4.1 X Weight 22 =Score
Range 2.4.2 Weight 23
Range 2.4.3 Weight 24
Final Score XXXXX
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