If there is to be timely and meaningful modernisation of the Indian armed forces, the viability of the open tender system and the DPP needs a total review

Four years hav e gone since the tender for 126 medium multi-role combat aircraft (MMRCA) for the Indian Air Force was floated by the Ministry of Defence (MoD) and the six contenders in the race await with bated breath for the final word which is yet to be said. Given the almost imperceptible pace at which the MMRCA tender is crawling especially in the recent past and the track record so far of the process of procurement of defence equipment through the “open tender” system under the Defence Procurement Procedure (DPP), it would be imprudent to place bets on any definite time line for the final selection of a vendor and award of contract. The DPP was introduced in the middle of the last decade and has been revised a number of times, the latest version issued in the current year being designated as DPP 2011.

The global aerospace majors vying for the $10 billion ( Rs. 45,000 crore) contract submitted their offset proposals worth $5 billion ( Rs. 22,500 crore) and details regarding the transfer of technology (ToT) for the first time in August 2008. As the proposals were to be evaluated by a committee set up by the MoD after completion of flight trials, the process could commence only in September 2010 by when flight evaluation reports in respect of all the six aircraft were in.

However, in the initial evaluation of offsets, it was discovered that the proposals submitted by the vendors failed to meet the parameters set by the MoD. Deficiencies in the offset proposals were then communicated to the six contenders who were given the opportunity to revise and refine their proposals to remove inadequacies or anomalies if any. The revised offset proposals were then to be submitted by mid-April 2011, which as reports indicate, have been done. Unfortunately, the benefit of liberalised provisions under DPP 2011 with regard to offsets has not been made available to the contenders of the MMRCA tender. Sequentially, the process ought now to move to the next stage, that of opening the commercial bids. Incidentally, the commercial bids are valid only up to the end of April this year.

After receipt of the report from the committee set up to evaluate the offset proposals, the MoD was expected to have taken a decision to short list the contenders. This was to be done in April 2011 prior to opening of the commercial bids. To be on the short list, it is necessary for the contender to be technically fully compliant as also fulfil offset obligations. While there have been rumours with regard to short listing, at the time of writing, there is no authentic information whether any of the six contenders have been eliminated from the race, based on the proceedings so far.

Short-listing though essential, may be difficult to finalise by the date the commercial bids are due to expire. The timing is also inopportune as short listing at this juncture would be a highly sensitive and tricky issue politically as it could impinge on the friendly ties that the nation is otherwise trying to build internationally. The value of the contract being one of the largest in the history of defence procurement by India, the global aerospace majors have the backing of their respective governments. However, while the US is striving to strengthen its strategic partnership, India is also concurrently embarked on efforts to revitalise relations with Europe and its traditional ally Russia. Dynamics of international relations being influenced by economics, the Indian Government may well get bogged down in a decision dilemma as the mega deal could make all the difference for the well being of some of the contenders of the aerospace industry. Another critical issue no less complex that could further impede the process is that of transfer of technology, comparative evaluation of which could prove to be a task no less daunting for the MoD.