Ministry to amend defense offset provisions

The Indian Defense Ministry is planning to amend the Defense Procurement Procedure (DPP) barely three months after its latest version was released, in an attempt to streamline the process for evaluation of offsets for defense contracts.

The policy revision will provide for invitations to offer offsets proposals to be issued to only those vendors who are validated as technically qualified by the respective service and shortlisted to be invited for the opening of their respective commercial bids.

Under the existing rules, technical and commercial offsets proposals have to be submitted by all vendors competing in a tender. While the Technical Offsets proposals are examined and validated by the Technical Offsets Evaluation Committee, the Commercial Offsets are submitted as sealed proposals, to be opened only when the respective Commercial Offer for the vendor is opened.

The ministry has increasingly felt the submission of offsets proposals by all vendors in a particular tender to be unnecessary, since only the proposals of the shortlisted vendors will be relevant to the tender process. This has been most vividly observed in the evaluation process of the offsets proposals submitted by the six vendors in 126 Medium Multi Role Combat Aircraft (MMRCA) tender, where each proposal consists of hundreds of offsets agreements to be examined.

The ministry had planned to ask for revised offsets proposals from the MMRCA-6 vendors by the end of January, after several months of delays, but subsequently informed them to hold their submissions until further notice.

Interestingly, the ministry also wants to apply the proposed amendment to the MMRCA tender process, which is governed by the DPP of 2006 and plans to ask the Law Ministry for approval to implement the revision with retrospective effect. This will pare down the work of the Technical Offsets Evaluation Committee, significantly, and is also likely to make the process simpler for vendors.