SIDM Workshop On Intersecting Best Price With Best Technology In Defence Procurement

Leading the drive for enhancing technological capabilities and indigenisation of the Armed Forces, the Society of Indian Defence Manufacturers (SIDM) is organising a workshop on 23 April 2018 to discuss methodology for determining price index for technological and performance parameters for Defence and Aerospace procurements.

This is uncharted territory and new in the Indian context. Defence Aviation Post got in touch with Lt Gen Subrata Saha DG SIDM and former DCOAS to know more about the initiative. Gen Saha explained that the Defence Procurement Procedure (DPP) 2016 had for the first time, introduced a forward looking provision in the Qualitative Requirements or Specifications called Enhanced Performance parameters (EPP). This is meant to enable industry to offer specifications that could potentially further enhance capability of the equipment vis-à-vis the essential parameters. Effectively certain specifications which are smarter than the basic or essential parameters laid down by the Army, Navy or Air force. Corresponding to the enhanced capability there will be a deemed reduction in the commercial bid for the EPP. This would facilitate what is commonly called L1T1, meant to achieve an intersection of best price with best technology.

Gen Saha highlighted that the provision remains un-utilized as the price index of technological or performance parameters has not been defined in the policy. In order to find a solution to price indexing it was important to get views from experts and make suitable recommendations to the Ministry of Defence. This exercise would also help in indexing superior technological capability for evaluation in the Strategic Partnership policy also.

EPP are those parameters that enhance the capability of the equipment, vis-à-vis the essential parameters laid down in the Services Qualification Requirements. Inability to meet the EPP does not preclude vendors form being eligible for the bidding/bid evaluation.

In case a vendor claims to have equipment with superior specifications or EPP then they must provide details of the same in their technical bids, which have to be tested for compliance during the field trials itself. As per the DPP 2016, equipment successfully meeting the EPP are eligible to be awarded a credit score up to 10%, for evaluation of L1 (lowest quote), with each individual attribute not exceeding a credit score of up to 3%, as approved by the authority according acceptance of necessity (AON).

In case procurement involves EPP, then the EPP and their credit scores need to be explicitly detailed in the Request for Proposal (RFP). In such cases, if the equipment supplied by a vendor does not have the EPP, then the commercial quote of the vendor, for the purpose of L1 determination, remains as it is. In cases where a vendor’s equipment meets the EPP, the commercial quotes will be multiplied by a credit factor less than 1 and greater than or equal to 0.9, based on the additional technical score assigned for the EPP, as detailed in the RFP. For example, if a vendor quotes Rs 10 crores for an equipment and meets a certain EPP for which an additional credit score of 2% is being provided, then the commercial quote of this vendor will be considered for L1 determination purpose only, as Rs 9.8 crores (10 Crores multiplied by 0.98) and not Rs 10 Crores; however, for all purposes other than L1 determination, the value of the commercial quote will be considered as Rs 10 Crores only.

The EPP and the maximum credit score has been defined in the DPP. Every EPP attribute cannot qualify for the maximum credit and would have varying values.

Currently there is no method laid down for assigning relative value to an attribute that enhances the performance parameter.

In order to find a way ahead some of the issues that would be analysed in the SIDM workshop on 23 April are:

What should be the criteria for defining a parameter as EPP?

Should EPP relate to the core function only? Or would it also include attendant environmental or hygiene requirements that directly or indirectly affect core functions?

At which stage should the claims for EPP be sought? At the stage when response to Request for Information (RFI) is sought or during the Request for Proposal(RFP)?

The need for confidentiality on EPP between the Bidder and the MoD. Does specifying EPP in the RFP infringe upon sensitivities of confidentiality and competitiveness?

Since every EPP cannot qualify for max credit, how should the price indexing be done? Or the sliding scale for various criteria and categories?

The common complaint about insistence on lowest price precluding best technology from being inducted in to the Armed Forces can be largely dealt with if an appropriate solution to indexing technology and capability is determined.

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