Govt plans to replace lowest-bid contract award system

The government is planning to do away with the process of awarding contract to lowest bidder while acquiring high-tech defence assets and instead entering into "strategic partnership" with Indian private firms in six critical sectors including missiles.
The Defence Ministry has set up a high powered committee headed by former DRDO chief V K Aatre to recommend guidelines for selecting Indian private firms for strategic partnership in the critical areas which include submarines, aircraft and missiles, Defence Minister Manohar Parrikar said today.
"Instead of asking for tendering and all those things, a process of selecting a right partner is chosen. If you select through L1 (lowest bidder), you may end up with someone who is not capable. My aspect of a success is capability of that partner," Parrikar told reporters here on the sidelines of a FICCI organised seminar.

He was replying to a question whether the new policy will also apply to the over Rs 60,000 P75-I project under which six more conventional submarines are to be built.
Making it clear that there won't be any repetition, he said,"If an X group has been taken in as a strategic partner in one segment, it will not be considered for another. It can participate in partnership for other products".
Explaining the concept, Parrikar gave the example of state-run Mazagon Dock Limited (MDL) which is building six Scorpene submarines and is also vying for the P75-I project. Apart from MDL, one private firm can also be considered for submarines, he said.

"As I said MDL has capability and let one private sector (entity) come in. Who is that private sector, how do you select? It is not toss and neither my decision. So there has to be some mechanism and for that we have the committee under chairmanship Aatre along with some top experts," he said.

He said once the domestic strategic partner is selected, talks with foreign technology provider or FDI partner will be undertaken to carry out the project.
Strategic partnership was one of the proposals of the Dhirendra Singh committee which had recommended a slew of steps to ease the defence procurement policy.

The Aatre committee, which has experts from banking, chartered accountancy among others, have been asked to submit a report within three weeks, Parrikar said.
The six critical segments identified are - Aircrafts and their major systems, warships of stated displacements, submarines and their major systems, armoured fighting vehicles and their major systems, complex weapons that rely on guidance system, C4ISTR (Command and Control System) and critical materials (special alloys and composites).