The new procedure which takes effect from June 1, 2013.

In the Foreward to the document, the Defence Minister AK Antony expressed the hope that the defence industry as well as the procurement agencies will find the DPP-2013 to be a ‘progressive step’ aimed at giving impetus to indigenisation, creating level playing field between the private and public sector and expediting the procurement process as a whole.

According to the new procedure, priority has been given explicitly to the ”Buy Indian”, “Buy and Make Indian” and “Make” categorisation, besides bringing further clarity in the definition of the “Indigenous Content” and simplifying the “Buy and Make Indian” process. Besides this, the validity of the “Acceptance of Necessity” (AoN) has been reduced from two years to one year with a stipulation to freeze the Service Qualitative Requirements (SQRs) before the accord of the AoN. A higher delegation of financial powers to the Service Headquarters and the DPB has also been made. Together, these measures are expected to make the procurement procedure more efficient and reduce delays.

Other significant changes include incorporation of the new offset policy guidelines which were promulgated in August 2012 and revision of the chapter on Ship Building which had been introduced in the DPP 2011. The Ministry has also undertaken the exercise of further simplification of the Make procedures and revision of the “Fast Track Procedures” which is likely to be completed in the near future.

Major change that has been brought in relates to the introduction of the “Preferred Categorisation” which incorporates in the order “Buy Indian”, “Buy & Make Indian”, “Make Indian”, “Buy and Make”, “Buy Global”. While seeking the approval for Áccord of Necessity (AoN) in a particular category, say, “Buy Global”, it will now be necessary to give justification for not considering the other categories in the order of higher preferences. This is expected to give a stronger impetus to indigenization as stated in para 20a.

Stipulations related to the indigenous content have been clarified and made more stringent. Indigenous content requirements will now extend all the way to the lowest tier of the sub-vendor. Hence, import content in the products supplied by the sub-vendors will not qualify towards indigenous content according to para 4.

Besides this, the requirement of the prescribed indigenous content, like 30% in the “Buy Indian” category is to be achieved on the overall cost basis, as well as in the core components like the basic equipment, manufacturers recommended spares, special tools and test equipments taken together. In addition, the basic equipment must also have minimum 30% indigenous content at all stages including the one offered at the trial stage. It has further been stipulated that an indigenization plan will be provided by the vendor. These stipulations will ensure more meaningful efforts towards indigenization.

While a penalty has been stipulated for not achieving the required indigenous content at a given stage, a scope to make up the deficiency at later stages has been provided.

Likewise, in the “Buy and Make Indian” cases, there is no stipulation regarding the minimum indigenous content in the Buy component and the Indian vendor is given the elbow room to achieve the prescribed indigenous content in the overall delivery. This enables the Indian vendor the time to absorb ToT, set up manufacturing facility while concurrently meeting the service requirements.

A method for assessment of indigenous content, based on self certification by vendors, has been given in Appendix ‘F’ to Chapter I while keeping provision for audit by the Ministry of Defence or its nominated agency, if found necessary.

A major set of changes aimed at making the procurement process speedier includes the stipulation to finalize the SQRs before seeking the accord for “Acceptance of Necessity” as per para 17 of the chapter and reducing the validity period of an AoN from 2 years to one year. This will bring down the processing time of individual cases significantly.

Procurement cases are also expected to be speeded up on account of enhanced delegation of powers of the SCAPCHC from Rs 50 crores to 150 crore and the power of the DPB from 150 crore to 300 crores according to para 18.

In order to encourage timely submission of the bids by the vendors and to discourage last minute requests for extension of time, it has been stipulated in para 33 that any request for extension of the bid submission date must be made at least two weeks prior to the bid submission date with adequate justification.

Impetus to indigenization would also require simplification of the “Buy and Make Indian” and “Make” procedure. The exercise to simplify the “Buy and Make Indian” procedure has been completed doing away inter alia with the requirement of short-listing the vendors through the Project Appraisal Committee while keeping the validity of the AoN to two years permitting comprehensive consultations with the Industry as per para 25a. This is expected to bring more projects under the “Buy and Make Indian” category. Simplification of the “Make” procedure is underway and is expected to be completed in few months.

In “Buy Global” cases, it will now be possible for the Indian vendor to give maintenance ToT to another Indian vendor of their choice as per para 28. The MToT partner is no longer required to be nominated by the DDP.

The appendix F and G to the RFP i.e. the Payment Terms and Commercial Offer have been recast as “Commercial Clauses” and “Evaluation Criteria of Price Bid Format”. These include use of the International Commercial Terms (INCOTERMS 2010), bringing payment terms for Indian Bidders on par with those for the foreign bidders, specificity in stages and modes of payment and removal of excise duty in determination of L-1.

Apart from these major salient features of the DPP 2013, a number of other changes have been made which are procedural in nature and aim at bringing clarity and efficiency and in the procurement procedures. Further measures to strengthen the Indian Defence Sector are under consideration and will be brought about after due consultation with all stake holders. According to sources in the Defence Ministry it is expected that this document will be well received by the Industry, the users and other stakeholders at large in the Indian Defence Sector.