Overall the capital acquisition system, as it exists, is unlikely to effectively support the Indian Air Force (IAF) in its operational preparedness and modernization, the Comptroller and Auditor General (CAG) has observed on the Rafale deal and called for revisiting the entire process of acquisition to simplify it.
In its report on Capital Acquisition in IAF on the Rafale fighter jets deal, tabled in Parliament on Wednesday, the CAG recommended that the IAF should improve its process of formation of Air Staff Qualitative Requirements (ASQR) to ensure that they correctly reflect the user’s functional parameters.
Audit is of the view that the present Lowest Price Technically Acceptable (LPTA) method of bid evaluation wherein the contract is awarded to the lowest priced offer which is technically acceptable needs reconsideration.
For procuring highly technical products, use of the Best Value method or a quantitative assessment method may ensure better value for money.
The CAG said Audit examined the system of capital acquisition of air assets to assess its ability to meet the required capability at the optimum price and the given time frame.
To acquire the right product at the right price, it is essential that the qualitative requirement truly reflects the user’s functional need; maximum possible competition is generated; and technical and price evaluation is done objectively.
Audit noted that the IAF did not define the ASQRs properly. As a result, none of the vendors could fully meet the ASQRs which were changed repeatedly during the procurement process.
“This created difficulties during technical and price evaluation and affected the integrity of competitive tendering which was also one of the major reasons for delays in acquisition process.
“The objectivity, the equality and consistency of the technical evaluation process was not evident in the Technical Evaluation Report,” the CAG said.
The national auditor also noted that the vendor response to solicitation of offers was low, which restricted competition. The number of vendors who responded to the Request for Proposal (RFP) was far less than the number of vendors who were invited to bid.
The CAG said the Defence Ministry should revisit the entire process of acquisition to weed out redundant activities and simply the process. The acquisition wing, headed by Director General (Acquisition), was envisaged as an integrated defence organisation.
“In reality, this has perhaps not happened, with bulk of the acquisition related activities still carried out in Services Headquarters,” the CAG said.
It said the Ministry faced difficulties in realistically estimating the benchmark price, making it difficult to establish the reasonability of price.
“This also caused delay in price evaluation and contract negotiations. The model used for calculating the Life Cycle Cost of acquisition had several deficiencies and needs to be fine-tuned and improved further,” it said.
The CAG also said there were several delays at various stages of the acquisition process. Against three years envisaged in Defence Procurement Process (DPP), four cases took more than three years and seven cases took more than five years to reach the contract conclusion stage.
“Delays in acquisition were essentially due to a complex and multi-level approval process where objections could be raised at any stage,” the CAG said.