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Defence Procurements Suffer due to StaffInadequacies: Need for a Training Institute

The Comptroller and Auditor General (CAG) in its report observed that defence acquisition is ‘a cross-disciplinary activity requiring expertise in technology, military, finance, quality assurance, market research, contract management, project management, administration and policy making’. “The existing system of acquisitions being handled by unspecialised personnel posted for three-year tenures is simply not adequate”, it opined. The CAG was the first agency that looked at the staff inadequacies that plague India’s defence procurement regime. Earlier, the thrust was limited only to organisational and procedural reforms, whereas mediocrity of the staff has been the main reason for non-performance of the acquisition regime.

India has failed to appreciate that procurement of defence equipment is a highly specialised and complex activity needing extraordinary professional skills and unique attributes. Therefore, little thought has been paid to human resources and the staffing system. Procurement of military equipment worth billions of dollars is being carried out by people who are ill-equipped for the job. Sadly, the indifferent quality of personnel continues to be the weakest link to date. This aspect needs immediate attention.

The staff carrying out acquisition related functions is drawn from the three services, the civil bureaucracy and the defence finance. They are neither selected for any particular expertise nor are given any special training to handle defence procurements. They even lack necessary education to comprehend competing technologies and technicalities of complex procurement procedures.

Service Officers

All procurement proposals emanate from the service headquarters. Preparation of Services Qualitative Requirements (SQR), technical evaluations, field trials and identification of acceptable equipment are carried out by the services staff. Despite their criticality, the services have not considered it essential to assign these functions to suitably selected and equipped officers. The services have laid down minimum criteria for a host of lesser posts but none for acquisition duties. Almost all acquisition functions are performed by officers on routine or last-leg postings. For example, in the case of the Army, Weapons and Equipment Directorate is the nodal agency for all new procurements, yet its head is always an officer on the verge of retirement. It only shows the lack of importance assigned to such a central appointment.

SQR form the basis of all procurement proposals. Formulation of SQR entails thorough knowledge of own mission requirements, products available in the world market, competing stabilized technologies and cost-performance matrix. Poorly conceived and imprecisely drafted SQR create confusion, lend themselves to misinterpretations, compromise quality of equipment, prove expensive and cause immense delays. Unfortunately, the services have totally ignored this crucial aspect.

Technical evaluation including field trials is another vital activity as it validates performance claims made by the producers and ascertains suitability of equipment for induction into service. Although trial of new equipment with differing technologies is a highly specialised task, trial units are nominated purely on the basis of their geographical location rather than for any displayed competence of the commanders. It has been seen that most trial units are incapable of conducting purposeful trials.

Civil Bureaucrats

Once technical evaluation is completed and the staff evaluation report is accepted by the Defence Ministry, a Commercial Negotiation Committee (CNC) under a civil bureaucrat is constituted to carry out all processes from the opening of commercial bids of the technically acceptable vendors to the conclusion of contract.

Civil bureaucrats posted to acquisition posts are neither selected for any special qualification nor for any exhibited talent. As a matter of fact no selection is carried out at all. It is not uncommon to see a bureaucrat from Poultry Development or Khadi Udyog departments being posted to the Defence Ministry to negotiate major contracts of intricate defence systems. A senior bureaucrat once remarked that it took him months before he understood military structures and acquired elementary knowledge of defence matters. He rued the fact that he had to bank on his common sense as he was provided no training or guidance. “We are asked to fend for ourselves and ensure own survival”, he added.

Price determination and contract negotiations call for special training. Skills are required with respect to negotiation terminology, styles, techniques, legal implications of various contract situations and contract administration. Most officials go by their gut feeling as they are totally ignorant of various scientific tools.

Defence Finance Functionaries

Defence Finance functionaries play a decisive role as they remain closely associated throughout the whole process from the initiation of a proposal to the signing of the contract. They are required to vet tender documents, appraise commercial proposals, determine fair price, prepare comparative statement of bids to identify lowest bidder, assist in the conduct of negotiations and contract drafting.

Financial issues in acquisition include cost estimating, earned value analysis and total ownership cost reduction studies. The designated role of the Indian Defence Accounts Service cadre is restricted to the provision of accounting cover and audit. Having graduated in languages and humanities, most do not possess even elementary knowledge of economics but are expected to apply economic tools to procurement proposals to help evolve the most suitable alternative. It is grossly unfair to them. India is perhaps the only country where defence economic advisory functions are performed by officials who neither know economics nor defence imperatives. There is a total mismatch between the proficiency required by financial experts in defence procurements and their knowledge of account keeping and auditing. equipment

Peculiarities of Defence Procurements

Procurement of defence equipment is not a routine governmental activity that can be performed by all with desired results. Some of the major peculiarities are as follows: -

Funds involved are very large and the quality of equipment selected has a profound influence on national defence potential.

There is no open tendering. Invitations are sent to a few selected vendors. A fine balance has to be maintained between need for generating competition and security requirements.

Most of the sophisticated equipment has to be imported as the indigenous defence industry is still in a nascent stage.

There are a limited number of producers in the world market and still fewer are ready to part with their top of the line products. The problem gets compounded where technology transfer is sought as an essential part of the package.

Major weapon producers in the world are, in fact, systems integrators only. Various sub-assemblies are produced in different countries. This complicates the issues while negotiating life cycle support for the equipment, as the export policies of all of them have to be factored in.

Countries have different norms for issuance of licence for export. Many impose riders on the usage of equipment. Yet, there are countries whose domestic laws preclude assured subsequent sustenance of the equipment bought.

There are strong political and corporate lobbies at work to push their products. Defence procurements are intrinsically linked to a nation’s foreign policy and diplomatic interests.

As there is an element of secrecy in the procurement process, all decisions come under scrutiny subsequently. Therefore, it becomes essential to follow the procedure diligently. Deviations, if any, have to be accounted for. All decisions have to be and must be seen to be above board and in the country’s interest.

Selection of the most suitable equipment is a complex and time-consuming process as a large number of functionaries are involved.

A Look at Select Nations

All developed countries recognise the fact that acquisition of defence equipment is a highly specialised and complex activity needing extraordinary professional skills and unique attributes. They not only select personnel for acquisition functions after due diligence but equip them with necessary skills through regular training in various disciplines. Three leading nations are discussed hereunder.

The United States of America

As per the provisions of the Defence Acquisition Workforce Improvement Act (DAWIA), all members of the Defence Acquisition Workforce have to be certified for the position they hold. A Defence Acquisition University (DAU) has been established for conducting training courses in 13 career disciplines with three certification levels (entry, intermediate and senior). The mission of DAU is to ‘provide a global learning environment to support a mission-ready Defence Acquisition Workforce that develops, delivers and sustains effective and affordable war-fighting capabilities’. DAU is a corporate university responsible for the training and career development of more than 126,000 acquisition employees.

The breadth of DAU’s curriculum can be gauged from the multiplicity and variety of the fields its training programmes cover. They include information resource management; acquisition management; logistics; auditing; programme management; business, cost estimating and financial management; production, quality and manufacturing; contracting; requirements management; software acquisition management; facilities engineering; science and technology management; systems planning, research, development and engineering; and test and evaluation.

The United Kingdom

The importance of imparting required skills to the acquisition workforce has been repeatedly stressed by all review committees and commissions. As per the Gray Report, significantly greater skills are required in programme and project management; finance; cost estimating; engineering and contracting; and management information systems at all levels of the British acquisition organisation.

According to the Defence Acquisition High Level Blueprint, the success of the acquisition system depends on the skills and professionalism of people within the acquisition community. Similarly, Defence Acquisition Reform Programme (DARP) also suggested raising skill levels across the complete acquisition regime.

Defence Acquisition Change Programme also stressed the need to concentrate on developing key skills necessary to deliver defence acquisition business, especially in cost- time estimation and project management. Written Ministerial Statement of Defence Secretary Bob Ainsworth of 15 October 2009 on Independent Review Defence Acquisition also vowed to accelerate the improvement of the above mentioned key skills of cost forecasting and programme management.

Consequently, the Defence Acquisition Management Education Programme is providing comprehensive training and development opportunities across all disciplines. Skills-planning is in place across the whole acquisition community for all major disciplines. There is also a fellowship scheme to recognise and retain world class specialists with scarce skills. Joint training is carried out with industry to help share and develop best practices. The Defence Academy in Shrivenham is the nodal centre for imparting acquisition training to the acquisition workforce and members of industry.

France

Recognising the importance of technical skills, France is highly exacting in the selection of its defence acquisition staff. It recruits mainly engineers and technical officials. Candidates must hold a degree in engineering, a master’s degree in science/economics or a degree from a business school of repute. In addition, Direction générale de l’armement (DGA), the overarching authority, engages on contract engineers and technical managers with high level of expertise. Initially the contract is for a fixed term of three years. It can be renewed once and the employee can be made permanent thereafter, if found suitable.

DGA is of the view that the acquisition taskforce must have technical orientation as defence equipment incorporates cutting-edge technologies. It is often said that the French acquisition functionaries are as technologically accomplished as the producers of military equipment. The importance that France assigns to the training of the acquisition personnel is apparent from the fact that DGA has a number of engineering schools under its direct control – École Polytechnique; Ecole Nationale Superieure de Techniques Avancees (ENSTA), Institut Supérieur de l’Aéronautique et de l’Espace (SUPAERO), École Nationale Supérieure de Techniques Avancées de Bretagne (ENSTA Bretagne) and Institut Supérieur de l’Aéronautique et de l’Espace (ENSICA). DGA’s armament engineers are graduates from École polytechnique. Subsequent training is imparted at ENSTA Bretagne or SUPAERO.

Need for Specialized Acquisition Staff

A nation’s military prowess and continued defence potential depends upon expeditious procurement of military hardware, which entails heavy expenditure of scarce national resources. This critical task must be assigned to the people who possess the necessary acquisition proficiency and attributes. The entire procurement process consists of highly specialized activities. The following activities reveal their complexity, criticality and significance: -

• Preparation of SQR

SQR are structured operational parameters framed by the services for the equipment sought. Infirmities in the preparation of SQR can result in the abandonment of the case at an advanced stage. It is essential that the persons associated with their formulation be conversant with own mission requirements, products available in the world market, level of indigenous technology and its likely development in the acceptable time frame.

• Formulation Of Requests for Proposals (RFP)

RFP is a tender document issued to selected vendors, inviting them to submit their technical and commercial proposals. It lays down inviolable terms and conditions for evaluation and commercial negotiations. It also forms the basis of the subsequent contract document. There is a great deal of sanctity attached to this document as a sovereign government issues it. A poorly drafted RFP with unspecific clauses can lead to multiple interpretations and result in gross financial liabilities to the Government. Therefore, experts in corporate affairs, international law, foreign trade and legal complexities must be associated with its formulation.

• Technical Evaluation

It is a paper evaluation of technical proposals submitted by the vendors. It is carried out under the aegis of the Services Headquarters (SHQ). The aim is to identify vendors whose proposals satisfy the parameters and who should be called for field trials for validating their claims. It is a sensitive task as different vendors offer dissimilar technologies. It is for the Technical Evaluation Committee to understand the technologies, ascertain their degree of stabilization and evaluate their suitability for own operational environment. Obviously, members have to be technically sound and knowledgeable.

• Field Trials

These are carried out by the services. This is by far the most critical activity of the entire procurement process as its basic aim is to authenticate the performance parameters and ascertain suitability of equipment for induction into service. The trial teams have to be appropriately equipped and trained to evaluate equipment with diverse technologies and determine their inter se merit. They should have the necessary expertise and vision to be able to interpolate exploitation of equipment in diverse combat milieu.

• Commercial Negotiations

Once the lowest bidder is determined, he is invited for commercial negotiations. Invariably, a battery of corporate lawyers, financial experts and executives trained in negotiation techniques represent the vendor. They are quick to gauge the depth of buyer’s comprehension of various facets of the proposal and urgency for the equipment. Staff carrying out negotiations needs special training and skills to do hard bargaining to clinch the most beneficial deal.

• Drafting of Contract

It is a legal and binding document for both the parties. Every sentence has to be worded with utmost care. Invariably, the successful vendor is asked to submit a draft contract, which is accepted by the Ministry of Defence (MoD) after scrutiny. As is to be expected, the contract is invariably loaded in the vendor’s favour. At times, the fine print contains many unacceptable terms, which come to light at a later stage. MoD has no integral expertise in international trade, foreign exchange transactions and international arbitration norms.

Selection and Training of Acquisition Staff