CAG report exposes flaws in VVIP chopper deal | idrw.org
The process of acquiring VVIP choppers for the Indian Air Force IAF) deviated from the laid down procedures and caused delays, a Comptroller and Auditor General (CAG) report said on Tuesday.
The CAG report, tabled in parliament, said as the acquisition was delayed the IAF continued to face operations disadvantage on account of use of ageing helicopters.
"The benchmarked cost adopted by the contract negotiating committee was unreasonably high compared to the offer cost," it said.
The Central Bureau of Investigation is looking into alleged kickbacks in the $750 million (Rs.3,600 crore) deal for 12 AgustaWestland AW101 helicopters for the IAF's elite Communication Squadron, which ferries the president, prime minister and other VVIPs.
A case has also been registered against former IAF chief Air Chief Marshal SP Tyagi.
The scam came to light when the Italian government arrested chopper maker Finmeccanica's CEO Giuseppe Orsi in February for allegedly paying bribes to clinch the deal.
On the evaluation of the choppers, the CAG said that trials for the AgustaWestland model were conducted on representative Merlin helicopters and not on the actual craft whereas the other contender, Sikorsky, had offered its S-92 for try-outs.
"Even at the stage of trials, the AgustaWestland chopper was in a developmental phase. Evaluation of helicopter following different methodologies could not give desired assurance that equal opportunity was provided to both shortlisted vendors.
"Thus, the recommendation and assurance given by the Chief of Air Staff in October 2007 to conduct trials abroad lacked justification," the report said.
The CAG also questioned the offsets obligations carried out by AgustaWestland, saying there was "ambiguity in the contract regarding the type of services and export orders to be executed by IDS Infotech (its Indian offsets partner)".
"AgustaWestland gave a year-wise break up of work from 2011 to 2014 to be executed by IDS Infotech under this offset programme even though the work had been completed well before the conclusion of the contract in 2010," the report said.
The Anglo-Italian firm had projected seven programmes to be completed as part of the offsets contract but "these allowed offsets were not compliant with the DPP.
"Besides many Indian offsets partners selected for discharge of offsets obligations were not eligible," the CAG added.
The CAG further blamed the Defence Ministry and the Air Force for causing an inordinate delay in the acquisition process through their "failure" to devise realistic qualitative requirements for the procurement of the choppers.
The qualitative requirements for the VVIP helicopters were revised by the ministry and IAF, leading to restricted competition in the tender process and resulting ultimately in a single-vendor situation, the CAG observed.
According to the report, IAF had told the ministry in 2004 that a service ceiling of 6,000m was an "inescapable operational necessity as many areas in north and northeastern regions of the country would be accessible only with a service ceiling of 6,000m".
"It (IAF) had also opined that making the cabin height of 1.8m a mandatory requirement would lead to a single vendor situation as in that case only the (AgustaWestland) AW 101 would comply with the (criterion)," the report said.
But the CAG noted that in a meeting convened in May 2005 by the Defence Secretary and attended by the Deputy Chief of Air Staff, "it was decided inter alia to lower the altitude requirement to 4,500m (from 6,000m) and make the cabin height of at least 1.8m (from 1.45m) a mandatory requirement."
The CAG pointed out that the Defence Ministry, in a April 2013 reply, had stated that the service ceiling was set at 4,500m with the approval of the Chief of Air Staff in March 2005 to bring it in conformity with the service ceiling of Mi-8 choppers.
"The ministry's reply is not consistent with the assertion by IAF in their brief to the Defence Secretary in Jan. 2004 that the requirement of 6,000m was an 'inescapable operational necessity'," it said.
The CAG also observed that the ministry's reply about the Mi-8"²s service ceiling being 4,500m was not consistent as the IAF had stated it was unable to operate at elevations above 2,000m.
The auditor also rejected the ministry's assertion that all six vendors who were issued tenders in 2006 were capable of providing helicopters with a cabin height of 1.8m.
"The ministry's reply is not acceptable as at least one European competitor, EADS, to whom a Request for Proposal was issued did not have any helicopters with the required cabin height of 1.8m," it said.
The CAG said the "fact remains that by making the cabin height of 1.8m a mandatory requirement, the competition was restricted, resulting in a single vendor situation".
"The purpose of re-framing qualitative requirements to avoid a single vendor situation could not be met because even after the revision, the acquisition process led to a single vendor situation and the (AgustaWestland) AW-101 was selected," the CAG said.