The new Comptroller and Auditor General (CAG) report on the army's purchase of bulletproof vehicles illustrates many of the pitfalls that plague defence procurement. CAG Report No CA 4 of 2008 (Defence Services), which was tabled in parliament on Thursday, examines the MoD's Rs 35.76 crore purchase of 200 Rakshak vehicles in 2005, and 9 armoured Scorpios in 2007, which protect military commanders while they drive around J&K.
The report concludes that both purchases were unnecessarily hurried, saddling the army with underpowered Rakshaks, which perform so sluggishly that they endanger the lives of the soldiers that they are meant to safeguard.
The report observes, "Audit examination disclosed that in both the cases, the procurement process was non-competitive, technical trials were diluted by waiving requirements that compromised the quality of the vehicles."
With the CAG, the army, and MDS itself in agreement that the Rakshak vehicles are underpowered, the obvious question is: what procedures were violated? Business Standard is in possession of the MoD's Request for Proposals (RFP), in which it laid down the performance it wanted from the vehicle. Two years of army trials conclusively established that the Rakshak met those specifications.
Clearly, what failed was not the Rakshak. Instead, as the CAG report points out, the MoD's RFP itself was flawed, asking for a vehicle that would inevitably turn out to be underpowered, once bulletproof armour added to its weight. The RFP number 33(7)/2001-D(GS-IV), issued on 25th July 2001, stipulates that the vendors could not offer a new, more powerful vehicle. The vehicle had to be in service with the military.
The CEO of MDS, Brigadier Khutab Hai, is emphatic that the army was given exactly what it asked for, explaining, "During two years of trials, the Rakshak met every parameter spelt out in the MoD's RFP. If the MoD wanted higher specifications, or a more powerful vehicle, we could easily have provided that. But the RFP bound us to an in-service vehicle."
The RFP is a vital first step in any defence procurement, laying down what the vendors must provide. Thereafter, the winner of the contract is not the best product on offer; according to the current "L-1 tender" system, the cheapest product that meets the GSQR must be bought for the military. In a hypothetical contest between a Maruti priced at 2 lakh rupees and a Mercedes priced at 2.5 lakhs, the Maruti must be bought if it has met the RFP in trials.
Even the army has tacitly acknowledged that the Rakshak RFP was flawed. For the next round of purchases of bulletproof vehicles, the army's Weapons and Equipment Directorate has written to the vendors asking for an upgraded vehicle, with more power, a smoother suspension and a better steering. When asked why it had complained about the 200 Rakshaks already bought, the army told the CAG that they were only "suggestions from users to improve efficiency".
Confused and unclear RFPs have elicited complaints from several vendors. In last year's performance audit on defence procurement, the CAG pointed out that RFPs often demand products that exist nowhere. The CAG highlighted many other cases where the MoD issues piece-meal RFPs, denying itself the economy of scale. An example is the on-going procurement of a family of over 8000 light vehicles. The MoD has issued an RFP for only 228 so far.
Vendors, both domestic and international, from the private and the public sectors, all complain that the MoD remains unequipped for defence procurement, its desks manned by officers who get posted out just as they begin to learn the ropes. A Group of Ministers (GoM) has recommended, in April 2000, creating a dedicated body for defence procurement. Last year the CAG reinforced that, recommending a specialist body of Acquisition Managers who could develop the expertise needed for smooth and judicious defence procurement.
