On January 11, 2016, a meeting of the Defence Acquisition
Council ("DAC") was held to discuss the proposed changes
to the Defence Procurement Procedure 2013 ("DPP"). As per
the information available in the public domain, the following key
changes to the DPP were approved by the DAC:
Given the challenges involved in developing 100 smart cities,
only the capable cities will be chosen under the Smart Cities
Mission through a two-stage competition. This was indicated in the
Operation Guidelines for Smart Cities Mission released by Prime
Minister Shri Narendra Modi on June 25, 2015. The selection
criteria to be used in both the stages of competition was
elaborated in the Guidelines.
New Category for Defence Acquisition: A
category "Buy IDDM (Indigenously Designed, Developed and
Manufactured)" is likely to be introduced in the DPP. The
introduction of such a category would mean that Indian companies
who have the capability of designing and developing products
indigenously will be preferred in most purchases by the Indian
Armed Forces. This will have two sub-categories — one, it
will be mandatory to have 40 % local content in case the design is
also indigenous. Two, in case the design is not Indian, 60 % local
content will be mandatory.
Offset: The Offset policy which currently
applies to contracts worth ≥Rs. 300 crores is proposed to apply
to contracts worth ≥ Rs. 2,000 crore only. The threshold limit
is being raised to Rs 2,000 crore, as not many Indian companies are
available to absorb so much of technology infusion.
Shorter AONs (Acceptance of Necessity) Period:
In order to reduce delays in procurement process, AON of a
particular platform will be valid only for only six months as
against the current 12 months deadline. Moreover, AON would not be
notified until accompanied by a finalized RFP.
'Indian Company' defined: A company
controlled and operated by Indian nationals would be considered as
an Indian Company and would be eligible to participate in the
categories Buy Indian, Buy & Make Indian and Make cases.
'Single Vendor' Situation: The new DPP
will allow 'single vendor situation' at every stage (bid
submission stage, Technical evaluation stage and Staff evaluation
stage) as long as the vendor complies with the prescribed
Opportunity for 'Medium and Small Scale
Industries': For encouraging R&D in the private
sector, the department of defence production will bear 90% of the
design and development cost of major systems. Small and medium
scale industries will be given from Rs. 3 crore to 10 crore in
funding for design and development and contract within 24 months
and If contract is not awarded then the entire cost shall be
In addition to the proposed changes in the DPP, the DAC is also
contemplating to come up with a new blacklisting policy for
companies involved in wrongdoing and the policy concept of choosing
strategic partners for major weapons platforms. The same are
proposed to be discussed in the next meeting of the DAC.
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The MDO Guidelines further state that the intent of the MCA was for the purpose of achieving a standard contractual arrangement that may be entered into across the country for procurement of such services.
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