4 June 2016

Security Risks Through Delays in Acquisitions: A Solution

Jun 3, 2016

The Business Standard, in its Editorial of May 18, 2016, acknowledged that the Modi Government had ‘taken a variety of initiatives’ on modernisation of the armed forces but ‘security risks from delay’ must be addressed. In my personal capacity I truly believe that path breaking progress has indeed been achieved by MoD. However, whilst the procedural and policy issues have been addressed there is no escape to the delays in the overall acquisition chain. The reason for this is obvious.

Most acquisition programs take time - for design, development, customisation, test, production and final delivery. Therefore, delays are inherent and unavoidable, which in turn result in overexploitation of existing assets/war reserves, consequential higher maintenance costs and earlier decommissioning thereby causing further reduction of force levels. This also creates a public perception that the MoD is not doing enough and fast. To bridge the capability deficit during the period of accord of AoN and final induction into service it is proposed that the DPP 2016 include a ‘Lease’ categorisation for certain platforms/equipment as a stop gap arrangement to check force level declines, improve operational capability and reduce security risks. I was the first to mention this concept on Lok Sabha TV during the Indian Defence Analysis program and since then I remain ever more convinced that for fast tracking defence capability building lease is an ideal solution.

Leasing offers the following advantages for cost constrained and limited duration stop gap requirements:- 
Maintains vital force levels. 
Lowers cost and time of capability build up. 
Makes available the current technology immediately. 
Enables concentration on core competence of the service. 
Removes technological complexity and lowers manpower costs. 
Vendor responsibility to ensure the requisite force levels. 
Service delivery is guaranteed as pay per use model followed. 
Several types of lease options possible: wet or dry lease, financial or operational lease. 
Buy back post lease is always an option. 
Access to the current technologies without repeated capital investment. 
Leasing improves core operating skills and leads to innovation. 
Competitive bidding for commercial and Government to Government negotiations for excess defence articles are both feasible for lease. 

Lease can reduce acquisition and developmental costs, help sustain a need to keep pace with changing technologies, and work at meeting what has become an insatiable appetite for real-time information and prompt action that the armed forces and citizens desire. Lease of assets for force modernisation and maintenance is a practice followed worldwide. Some instances are placed at Appendix A. 

In addition, a Lease categorisation will open up several start ups, generate employment, possibly promote exports of services and earn revenues to the government. However, a leased equipment/platform may be commercial grade and detailed customisation may be time and cost prohibitive and should be minimised. Therefore, the Lease of commercially available/excess defence stores to meet stop gap requirements may be considered for certain limited options apart from strategic assets which can be leased from friendly governments to bolster national capability for defence rapidly:- 
Commercial cargo and transport aircraft for transportation of military goods and personnel for non combat duties by the Air Force for the period that the AVRO replacement aircraft are not delivered, which may be about 7-9 years from now. This is a serious gap. Options could be to excess defense articles on lease from the USG, such as the Spartan or commercially available AN-32 duly retrofitted in India for operations this period. 
Commercially available retrofitted aircraft for medium range surveillance until the MRMR and the MMMA aircraft are inducted which may be about 5-7 years for the Navy MRMR and about 9-10 years for the ICG MMMA. Today, worldwide this is the new normative as this weblink shows: http://dau.dodlive.mil/files/2015/12/Hoang.pdf many companies are offering ISR surveillance on diverse platforms such as the King Air 350 the Pilatus 12 etc for close coast ISR missions. 
Merchant vessels for the Navy until Fleet Support Ships are delivered which may take about 10 years. Mostly tankers retrofitted with under way replenishment gear and built to merchant ship/Lloyds certification standards can provide a very good logistic trail for the Navy in its distant operations. 
Commercial aircraft and helicopters for VVIP transportation. The logic of having an exclusive fleet of VVIP transportation which is sporadically used defeats me. Mush better business Jets can be available on charter for such requirements for routine missions into non combat areas where there is no need for chaff and flare dispensers or other warning systems. 
Crafts of Opportunity fitted for: 

o Minesweeping and mine laying operations for the Navy until the MCMV program is delivered in about 7-9 years.

o Inshore and Offshore Patrol Vessels for the Coast Guard.

o Tugs, Yard craft and Ferries for the Navy.

Vehicles and Troop/Tank transporters for the Army. 
Civil certified Unmanned Aerial Vehicles at the Sub-tactical level for the Coast Guard and Army. This is the next great opportunity. 

The concept of Lease is already mentioned at Para 7 (b) (ii) (ac) of Chapter V - Fast Track Procedure which states “Option of procuring from friendly countries ex-stock or through lease.” India also had earlier leased nuclear submarines from Russia. So it is not a completely new approach for force modernisation and therefore can be formalised as an acquisition category in the DPP. 

Therefore, introducing a "Lease" category for defence acquisition is an option that has its merits and should be examined on merits as a low cost, fast track, quick fix, transparent solution for meeting the immediate gaps in force level of the Services and the Coast Guard and thus overcoming security risks from delay.

A draft para for inclusion in the DPP 2016 is placed at Appendix B for consideration please.

Examples of Force Level Maintenance through Lease (Appendix A) 
The Royal Navy leased four offshore patrol ships armed with 30 mm and other light weapons for five year periods. Maintenance support is also provided by a contractor for the lease period. 
The Royal Air Force may lease two US Navy P-8s, to bridge the gap between now and when the first P-8s enter service in 2018-19. 
The Italian Air Force leased 34 F-16s from the USAF for a period of five years, followed by an additional five years under the program “Peace Caesar”. The aircraft was effectively used to fill a gap during the transition from the F-104 and the Eurofighter. 
The Philippines is to lease five TC 90 aircraft from Japan for maritime patrol. 
The Malaysian Government may lease JAS 39 Gripen C/D multirole fighter. Saab has already successfully leased the Gripen to the Czech Republic and Hungary. 
The Malaysian Maritime Enforcement Agency (MMEA) intends to acquire fixed-wing maritime surveillance aircraft on long-term wet-lease. 
The Royal Canadian Navy's (RCN) has leased two vessels to provide fuel, ammunition and other supplies to its vessels at sea until 2021 when its two joint support ships would be inducted. 
The French MoD have decided that the Airbus A400Ms and FREMM frigates would be the first assets transferred under a proposed sale and lease back mechanism, but ultimately a range of other types of equipment, including the C-295 light transport aircraft fleet and military helicopters, could be subject to sale-and-lease-back. 
Uruguay is looking at the option of leasing offshore patrol vessels (OPVs). 
Norwegian Navy and Coastal administration are using long term wet leased aircraft for Maritime Patrol and oil pollution detection at sea. 
Denmark Armed forces have awarded contract for long term lease for surveillance Aircraft. 
Estonia has come out with long term lease tender for transport aircraft. 
Royal Australian Navy leased two patrol boats to fill an urgent gap in its border protection capabilities. 

Draft Para for inclusion in DPP 2016 (Appendix B)

The following paragraph may be considered for inclusion as new Para 5(a) of Chapter 1.

5(a). Lease: Lease category refers to an initial procurement of equipment in Fully Formed (FF) state from an Indian vendor or Friendly Foreign Government, in quantities as considered necessary for a limited duration to meet urgent operational requirements that requires the rapid induction of equipment or platforms, or where AoN has been accorded but induction into service may take several years. Under such circumstances a “Lease” categorisation may be processed for leasing of equipment/platform/system as a stop gap measure or to maintain expertise, continued operations or to sustain essential force levels. Such acquisitions would follow the Fast Track Process at Chapter – V for approval of DAC.

The following amendments (in track change mode) are recommended to Para 25 of Chapter V:

In certain acquisition cases it may be expedient to procure equipment offered by friendly countries/vendors by sale/lease/otherwise ex their own stocks. In some cases, Government-to-Government Agreements at appropriate level would be established to facilitate the issue of such stores and in others through direct procurement from potential vendors on competitive basis. The offered stores should have a minimum residual life of at least half that of the initial lease period so as to keep the buy option open post end of lease period. In such cases a technical delegation may be deputed to check the condition of the stores being offered as required. Only if the technical delegation confirms it is operationally acceptable and technically feasible would the case be processed further.

Other paragraphs under Chapter V of the DPP where fast Track acquisitions are required may also be accordingly changed.

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