CII Welcomes Positive Amendments to Defence Procurement Procedure (DPP)

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CII welcomes Defence Acquisition’s Council’s (DAC) approval of new industry friendly provisions of Defence Procurement Procedure (DPP). CII recommendations, including level playing field, fast tracking of procurement and preference in procurement from indigenous sources have been accepted and included in the revised DPP. These provisions include clearly stated goals like giving a boost to Make in India initiative, enhance the involvement of the private sector, build indigenous design and development capabilities, promote absorption of world-class technologies, provide premium consideration to high quality products, promote the growth of the MSME sector, reduce time lines across various stages of procurement, among other procedural refinements effected to enhance efficiency and effectiveness of the defence procurement process.

Chandrajit Banerjee, Director General, Confederation of Indian Industry said that CII would like to compliment Hon’ble Raksha Mantri for bringing game changing amendments to DPP 2013. The long standing demands and aspirations of Indian Defence Industry have been duly addressed. Hon’ble RM’s vision of accelerating indigenous manufacturing in Defence can be seen through the introduction of Buy Indian (IDDM) category, to promote indigenous design, development and manufacturing. This will specially benefit the MSMEs who have enormous capabilities.

In a significant move, Buy Indian Indigenous Design Development and Manufacturing (IDDM) has been introduced as a new procurement category in addition to the existing ones. Under this category it would be mandatory to have 40% indigenous content (IC) for indigenously designed equipment, or 60% IC for other equipment. Moving a step ahead than DPP 2013, Buy Indian (IDDM) procurement category will be given the first preference. DPP 2013 had Buy Indian as the most preferred acquisition category.

Whilst Indigenous Content requirement for Buy (Indian) cases has been raised to 40 percent from the existing 30 percent, Buy and Make (Indian) and Buy and Make categories will require 50 per cent Indigenous Content. New DPP will also address the users’ requirement of having a wide vendor base. Selected companies dealing with specific projects can further work on the improvement of the product based on the mutually agreed parameters. Companies meeting the requirements of Enhanced Performance Parameters will get additional credit scores while evaluation of their product cost.

New provisions for private sector’s involvement as Production Agencies (PAs) and TOT (Transfer of Technology) partners have also been introduced.

The rules for the retraction of Request for Proposals will be made more stringent. Even single vendor cases are going to see light of the day, however, with due justification.

New DPP will also have three sub-categories, Make I (Government funded), Make – II (Industry funded) and Make – III (MSME funded), under Make procedure. MoD will fund 90 per cent of Make projects instead of 80 per cent. In case of delay of issuance of RFP after the successful development of prototype, MoD will also cover remaining 10 per cent cost of the prototype development. New DPP will also address the concerns of MSMEs as projects under Make I sub-category, with estimated development costs of less than INR 10 crores will be reserved for MSMEs. Procurements linked with MSME funded Make projects not exceeding INR 3 crores would be exclusively reserved from MSMEs. MSMEs will also get 100 per cent refund of the prototype development cost if RFP is not issued within 24 months of successful development of prototype. Government funded Make projects will be eligible for a mobilisation advance of 20 per cent of the estimated development cost.

Make projects will be steered and monitored by a dedicated Project Management Unit, chaired by a Major General or equivalent officer from each service HQs – Army, Navy, Air Force. Companies having a majority stake by an Indian and controlled by resident Indians will be eligible for projects under Make category.   Companies need to be registered for a period of five years; three years in case of MSMEs. Companies need to have a minimum credit rating of B++, issued by recognised credit rating agencies.

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