CAG Report Summary
Capital Acquisition in Indian Air Force
The Comptroller and Auditor General of India procurement cases. In some cases, such as
(CAG) released a performance audit of Capital Doppler Weather Radars and Attack
Acquisition in the Indian Air Force on Helicopter, technical bids were rejected when
February 13, 2019. The audit examined 11 vendors failed to meet all the ASQR
contracts of capital acquisition signed between parameters. However, in the case of MMRCA
2012-13 and 2017-18, with a total value of and Heavy Lift Helicopters, bids were
approximately Rs 95,000 crore. In addition to technically qualified even when they did not
examining systemic issues in the acquisition meet critical ASQRs.
process, the CAG also reviewed the
Commercial evaluation: A Contract
procurement process of 36 Medium Multi-Role
Negotiation Committee (CNC) is constituted to
Combat Aircraft (MMRCA) through an Inter-
evaluate the price bid and negotiate the final
Governmental Agreement with the
contract. Before opening the price bid the
Government of France. Key observations and
CNC is required to estimate the benchmark
recommendations of the CAG include:
price, which is used to assess the various bids.
Planning and tendering process: The The CAG noted that in eight cases, the
process of acquisition of air assets starts with benchmark price was significantly different
the formulation of user requirements known as from the bid price. It observed that repeated
the Air Staff Qualitative Requirements off-the mark pricing reveals inability to
(ASQR). CAG observed that the formulation estimate the market price.
of ASQR is the most crucial stage in the
Organisational issues: The CAG noted that
defence acquisition process as it determines the
delays in acquisition were essentially due to a
quality, price, and competition. The CAG had
complex and multi-level approval process.
recommended in 2007 that ASQRs should be
From the initiation of the case to the signing of
stated in terms of functional parameters, which
the contract, each procurement case goes
are measurable. However, it noted that instead
through 11 stages. The CAG stated that the
of using functional parameters, the Indian Air
current acquisition system is unlikely to
Force (IAF) made the ASQRs exhaustive and
support the operational preparedness of the
included technical details. This led to
IAF and recommended that the Defence
situations where none of the vendors was able
Ministry may undertake structural reforms of
to meet the ASQRs. Further, the ASQRs were
the entire acquisition process.
repeatedly changed during the procurement
process. In this context, the CAG repeated its Acquisition of MMRCA: The CAG
recommendation that ASQRs should be stated examined the procurement process of the
in terms of functional parameters. Further, it MMRCA. It observed that IAF had proposed
recommended that technical experts with in August 2000 to acquire 126 Mirage 2000 II
knowledge of the systems being considered aircraft. This proposal was discarded in 2004,
could be involved in the acquisition process. and in 2007 a decision was taken to acquire
126 Rafale aircraft from Dassault Aviation.
Solicitation of Offers: Offers are solicited
However, the commercial negotiations with
from various vendors by issuing a Request for
Dassault could not be concluded. In 2015, a
Proposal (RFP). Vendors respond to the RFP
decision was made to procure 36 Rafale
by making technical and commercial bids.
aircraft through an Inter-Governmental
CAG noted that there was limited competition
Agreement (IGA) with the French government.
during this process. The number of vendors
While comparing these two deals, the CAG
who responded to the RFP were less than those
stated that price of the 2015 deal was less than
invited to bid. This was because of various
the price of the 2007 deal, by 2.86 per cent.
reasons including delays in the acquisition
Further, the CAG noted that the 2007 deal
system and narrowly defined ASQRs. CAG
included a Bank Guarantee from the French
recommended that the Defence Ministry
government. This meant that in case of default
should explore open competitive tendering in
by the vendor, the French government would
case of non-strategic items (such as basic
provide payment. However, the 2015 deal did
trainer aircraft, and weather radar).
not include a Bank Guarantee.
Technical evaluation: The CAG noted lack
of consistency in technical evaluation across
Vinayak Krishnan February 26, 2019
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