Defence Procurement Procedure (DPP)

Why in news?

• Raksha Mantri unveiled the draft Defence Procurement Procedure (DPP) 2020 that aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment.

About Draft Defence Procurement Procedure (DPP)

• The major changes proposed in the new DPP are:
  • Indigenous Content ratio hiked
    • In view of the experience gained by the domestic industry, the Draft proposes increasing the Indigenous Content (IC) stipulated in various categories of procurement by about 10% to support the ‘Make in India’ initiative.
    • A simple and realistic methodology has been incorporated for verification of indigenous content for the first time.
  • Use of raw materials, special alloys and software incentivised as use of indigenous raw material is a very important aspect of ‘Make in India’ and Indian Companies are world leaders in software.
  • Assurance of procurement on a single vendor basis from Aero Engine manufacturing unit and chips from FAB manufacturing units established in the country.
  • New Category Buy (Global – Manufacture in India) has been introduced with minimum 50% indigenous content on cost basis of total contract value. Only the minimum necessary will be bought from abroad while the balance quantities will be manufactured in India. This would be in preference to the ‘Buy Global’ category as manufacturing will happen in India and jobs will be created in the country.
  • Leasing introduced as a new category
    • Leasing has been introduced as a new category for acquisition in addition to existing ‘Buy’ & ‘Make’ categories to substitute huge initial capital outlays with periodical rental payments.
    • Leasing is permitted under two categories i.e, Lease (Indian) where Lessor is an Indian entity and is the owner of the assets and Lease (Global) where Lessor is a Global entity.
    • This will be useful for military equipment not used in actual warfare like transport fleets, trainers, simulators, etc.
  • A new Chapter is introduced for procurement of software and systems related projects as in such projects, obsolescence is very fast due to rapid changes in technology and flexibility in the procurement process is required to keep up with the technology.
  • A new Chapter is introduced for Post Contract Management to facilitate and provide clear guidelines for issues arising during the contract period as typically defence contracts last for a long period.
  • Timelines for procurement reduced by reducing the process for accord of Acceptance of Necessity which would be single stage of projects less than Rs.500 crore and in case of repeat orders. Trial methodology and Quality Assurance Plan to be part of RFP.
  • Field Evaluation Trials to be conducted by specialized trial wings and the objective of trials will be to nurture competition rather than elimination for minor deficiencies.
  • A comprehensive Chapter introduced for ‘Make’ to cover procurement from manufacturers in India including start-ups and innovators and from research projects of DRDO.
  • Product support
    • The scope and options for Product Support have been widened to include contemporary concepts in vogue, namely Performance Based Logistics (PBL), Life Cycle Support Contract (LCSC), Comprehensive Maintenance Contract (CMC), etc to optimise life cycle support for equipment.
    • The capital acquisition contract would normally also include support for five years beyond the warranty period.

Prelims Question

Q.With reference to the draft Defence Procurement Procedure (DPP) 2020, which of the following statements is/are correct?
1. It introduces a new category - Buy (Global – Manufacture in India)
2. It introduces ‘leasing’ as a new category for acquisition
Select the correct answer using the code given below:
a. 1 only
b. 2 only
c. Both 1 and 2
d. Neither 1 nor 2

Answer to the Prelims Question