Def Min approves changes to Defence Procurement Procedure

The Defence Ministry Thursday approved changes to the Defence Procurement Procedure to make it industry-friendly and facilitate faster procurement of operationally urgent requirements of the armed forces.

In its continued efforts to build military capability and modernise the armed forces through a responsive defence procurement system, the Defence Acquisition Council (DAC), chaired by Defence Minister Nirmala Sitharaman, approved significant changes to the Defence Procurement Procedure (DPP) 2016 in its third phase of reforms, officials said.

Major changes in this phase are focused on making the procedure industry-friendly and simplifying certain unwieldy aspects to ease the conduct of business and facilitate smoother and faster procurement of operationally urgent requirements of the armed forces, they said.

Some of the major decisions include simplification of the best price determination process wherein latest government policies on GST and custom duties have now been taken into account in order to evaluate the lowest bidder and the existing price bid format has been simplified for ease of assimilation and submission by vendors, the officials said.

"This step is likely to encourage more Indian vendors to participate in the process as it gives them a duty advantage compared to foreign bidders," a defence ministry official said.

The submission of bank guarantees from Indian private sector banks authorised by the RBI in addition to all public sector banks, has been approved in order to ease financial transactions enabling competitive pricing, the officials said, adding that this would help cut overhead costs of seller incurred while obtaining these guarantees from banks and enable faster financial transactions.

With an aim to facilitate production and achieving delivery timelines, the DAC has also approved aligning the date of delivery with the date of advance payment instead of the date of contract which entails that the seller has adequate mobilisation funds available to him to commence production and ensure delivery as per laid down schedule.

"The vendors would also be saved from penalties in case advances are delayed for reasons beyond their control. This step would provide immense impetus especially to indigenous manufacturers alleviating them from initial financial stress as also ensuring timely delivery of equipment to the armed forces," the official said.

Other changes approved include simplifying the unwieldy aspects of the procedure such as devolution of approval and vetting of various reports within the Defence Ministry to the armed forces thereby speeding up the process and streamlining the 'Fast Track Procedure' for speedy procurement of operationally urgent requirements.

The Defence Ministry has also commenced the exercise of implementing Business Process Reengineering in defence capital procurement from May 20I8.

The aim of these amendments was to enhance efficiency and reduce timelines, officials said.

The reformation and simplification of the DPP has been one of the key areas of focus of the ministry, especially in the last one year, the officials said.