The armed forces badly need modernisation, IT services. But procurement systems are written in a code of delays
Pratap Vikram Singh | March 11, 2014
The deployment of information technology in the three armed forces—army, navy and air force—might get a shot in the arm. By July this year, the ministry of defence (MoD) will revise its defence procurement manual, as it does every five years. A framework for procurement under the ministry’s revenue budget, it is expected to include a chapter on IT.
DPM and defence procurement prodedure (DPP, meant for procurement under the capital budget) have been missing IT-related provisions. This will shorten the processes and duration in the selection of vendors, which at present takes a whopping three to five years.
Defence procurement is divided in two categories: revenue, involving routine operations and salaries, and capital, involving asset creation. The former is guided by the DPM, revised in five years; the latter, guided by DPP, is revised annually.
For the guidelines to have a meaningful impact, the IT procurement clauses must be followed in both the revenue budget and the capital budget. Otherwise, existing procedures are likely to get complicated further. This is exactly what is not going to happen.
A senior official with the ministry says the IT procurement-related clauses in the DPM 2014 will be mandatory for the revenue projects only. For capital projects, the changes will have to be introduced separately, which the the ministry is not even considering at present.
The movement of files among the deparments of the armed forces headquarters is infamous for inertia, slowing down further when the defence ministry comes into the picture. Several schemes, worth thousands of crores of rupees, to modernise the armed forces with the help of IT and communication tools are stuck. The decision to reform the IT procurement of only revenue projects is bound to limit efficacy of the reforms, say sources in the government and the industry.
The defence ministry has a different take. It sees the partial reform as a first step to ironing out the wrinkles that have dogged IT procurement in the three services for over two decades. The DPM’s IT chapter will have separate timelines and will fast-track the procurement process.
“We are planning to notify the new DPM in another four to five months,” says Shankar Aggarwal, additional secretary to the defence ministry. (Aggarwal in his previous assignment served as additional secretary with the department of electronics and IT.)
Given MoD’s lack of IT expertise, the ministry is considering setting up a programme management unit (PMU) to help expedite project implementation and the selection of vendors, Aggarwal says.
The management unit will include experts drawn from the industry, besides representatives from the ministry and the three armed forces. The unit will be framed along the lines of the National e-Governance Division, set up by the department of electronics and IT to oversee the national e-governance plan. This will require the finance ministry’s approval, which is expected by the middle of this year, says Aggarwal.
“These manuals were prepared to buy arms and ammunitions. They are not too conducive to procurements relating to IT, which involve services,” says Aggarwal. He hopes that the new IT-related clauses will help in bring more clarity and expedite procurement.
A virtual dillema
The procurement of IT and communications is riddled with numerous snags. The classification of an IT project itself has been a nuisance; it is not easy to tell whether a project falls under revenue expenses or capital expenditures. The armed forces do not have a provision for a mission mode, which could fast-track the implementation of a project, says an army official.
This takes a heavy toll on industry which supplies the IT solutions and services; their payments are routinely delayed and decisions lack clarity. Industry associations have repeatedly urged the ministry to set up an empowered body with representatives from the three services and the MoD. (This excludes the PMU, which is only a troubleshooting entity for existing and upcoming projects.) The time for conceptualisation and selection of vendor, says a Tata Consultancy Services official, should happen in not more than 12 months, as software and hardware follow a shorter life cycle as compared to the four to five years the ministry takes to merely select a vendor.
The TCS official says that the armed services do not have a single project to benchmark speedy and successful rollout. The delay in issuing of ‘request for proposal’ and then the final selection of vendor makes the project a liability for the company because the system does not account for variations in the currency exchange market, which are critical to IT vendors.
An official at the Confederation of Indian Industries (CII) says, in several meetings they have urged the ministry to review procedures and reduce in-house delays before the signing of the contract and in its execution. It has also demanded the ministry to prepare and share an integrated road map for ICT services for high value projects.
As the defence services lack an integrated approach towards ICT projects, says Rama Vedashree of Nasscom, the three services should have their own overall IT roadmap for the sake of clarity and speedy operations. She suggests a shift in the selection procedure, which is at present L1T1 (lowest financial bidder past the technical round), to quality and cost-based selection (QCBS), which has been adopted for mega projects like Aadhaar.
The 2013 DPP on the MoD website gives a snapshot of the tangle that slows down IT procurement and projects. There are 17 steps related to approvals that must be followed in the selection process. This has to be done within 23 to 34 months.
A file’s tryst with destiny
The file’s journey is ardous. First, it is sent to the service headquarters. From there, it is consigned to a policy committee, which then dumps it upon a committee with a name that promises delays: the service acquisition plan categorisation committee (SCAPCC). After it has cleared these obstacles, it must then submit itself to the defence acquisition council and, in special cases, to the defence minister’s scrutiny.
As soon as a project is outlined, the file begins this journey all over to be finalised. First-hand accounts cite projects that were in the works for four to five years before it was finalised. The project commenced thereafter.
The army’s computerisation of inventory control project (CICP), overseen by the ordnance services wing, is a classic example. It’s been over ten years and the project is yet to emerge from under the red tape. The ordnance services supply everything other than fuel and ration to the army. “The inventory includes items varying from pins (used in guns) to tanks. Around five lakh such unique items are stored in the inventory. The number of these items could be in millions,” says a senior official with the ordnance services.
The project was conceptualised in 1994 to automate the ordnance corps, which manages the large inventory in three tiers: central, regional and divisional depots. There are eight central, 13 regional and 45 divisional depots.
In the project’s first phase, an application was developed in 2001 (in a client server fashion wherein software is deployed in standalone computers which are not connected centrally). Four years later, the project was approved for upscaling the pilot to other depots. By then, however, the software got obsolete and the concept of enterprise resource planning (ERP) was introduced.
In 2008 the cabinet approved the proposal of ordnance services for the change in approach. A year later the ordnance services floated the RFP, which was again sent to the ministry. In 2010, Siemens was shortlisted. Soon after, the company was acquired by another multinational, which backed out from the project.
Owing to security concerns, the ordnance services again upgraded the RFP. Meanwhile, the ministry asked the services to seek permission of the defence minister, including for the presentation of a proof of concept by vendors.
A new refutation of timeliness
In 2011, the minister approved the revised RFP. In November 2012, the services received a bid from three companies. Only one submitted its bid on time, though. (The other two submitted their bids a few minutes after the closing time.) So that, too, was cancelled.
In April 2013 the services retendered the project. “Out of four companies, two—L&T and Wipro—have been shortlisted for opening of commercial bids,” says the army official. The final selection will happen only by April 2014, and it will be another 18 months before the project is rolled out.
But then CICP is not the only delayed project. The Emerald, an ERP project, of the EME (electrical and mechanical engineers), was conceptualised in 2006. The responsibility of the EME wing is to ensure the reliability of all equipments—arms, ammunition or helicopters. The ERP project is aimed at giving visibility to the decision makers on technical and human resources, tools and spare parts and ensuring that all processes related to maintenance, repair and overhaul are followed in letter and spirit. As of now the processes at EME are paper-based.
A detailed project report was finalised for selection of consultant in 2009. It took four years for the army headquarters and MoD to approve the project under the revenue head. In June 2012 its funding changed to a turn-key basis, which provides for a multi-vendor approach. An RFP, however, is still a work in progress.
In a similar project, the selection of a vendor for an electronic maintenance management system (eMMS, worth '900 crore) was stalled by the air force for five years. It was finally awarded to Wipro in November 2013.
The modernisation of air field infrastructure (MAFI), which aims to modernise the navigational aid system at all airfields of the air force, is another example of how procedures and delays have restrained project rollout. The project includes integration of runway lighting system with air traffic management system and enhancement of the night flying capabilities.
The project RFP came in 2008 and the bids were submitted the same year. The contract, however, was awarded to Tata Power SED only in 2011. The project was to be completed in three years. As the project involved deployment of commercial-of-the-shelf servers (COTS products have a two year life), by 2013 ten different computer hardware components got obsolete. Buying of new materials requires an amendment as it increases the cost.
The DPP prescribes that the material has to be of the latest year of production, says an official of Tata Power. In cases of systemic delays, it also has a protection clause: the new material can be procured with the approval of the apex committee (and doesn’t require an amendment). But on practical grounds, says the Tata official, it is not easy to come on a common understanding with the ministry officials.
The files start moving from the deputy secretary level. “These babus usually don’t have an inkling of the project, the technology used and the specifications,” he says. So far, says the Tata official, one airfield in Punjab has been completed. A set of five airfields are in the works. The full rollout will take another two years, due to the delays.
So has been the case with financial management system project of the navy, which was awarded in mid-2013. The army’s wide area network project, overseen by the signals wing, is also awaiting the selection of a vendor.
THE 5-MINUTE CAPSULE
Nasscom wish list
(This story appeared in the March 1-15, 2014 print edition)
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