Navy leads the way on Strategic Partnerships

A French Navy Airbus Helicopters’ AS565 Panther helicopter, expected to be offered for the Indian Navy’s utility helicopter RFI | Photo: Airbus Helicopters

When Chapter 07 of the Defence Procurement Procedure of 2016 (DPP 2016) was finally published on May 31, 2017 after much delay, it evoked a fair bit of head-scratching from industry, who were still unsure about how the process would pan out. “Let’s see how the fighter thing goes,” commented most industry executives, referring to the Indian Air Force (IAF) acquisition process and one of the four Make in India programs under Chapter 07, which was widely expected to be the first of the four programs to hear the starting pistol.

Instead, the Indian Navy, which has ownership of two of the four Chapter 07 projects, surprised many by issuing Requests For Information (RFIs) for both, submarines and the helicopter acquisition programs, in quick succession, shortly after the publication of Chapter 07.

One of the major concerns of industry was how the requirements of Strategic Partnerships under Chapter 07 would be incorporated into the traditional tender process under DPP 2016. Analysis of Chapter 07 reveals many instances where processes have been left vague, apparently deliberately, to allow for subsequent customization and refinement. At any rate, the impression left by the publication of Chapter 07 was that competition under it would still be an ‘L1 game’ – that ultimately the technically qualified cheapest bid would win, irrespective of offers for transfer of technology and associated requirements.

But the navy appears to have dispelled this impression and settled many of these concerns with its two RFIs. Although the RFI for submarines is not a public document, the RFIs for Naval Utility Helicopters and Naval Multi Role Helicopters are freely available.

Now, the tender process under Chapter 07 is significantly different from the standard process under DPP 2016 and requires separate processes for the shortlisting of foreign OEMs, Indian applicant companies and, finally, the joint bid to an RFP.

The RFIs issued by the navy are the first step in the process of shortlisting foreign OEMs who will later be allowed to partner with Indian companies and bid for the subsequent RFPs for submarines and the two helicopter types.

Under Chapter 07, the process leading up to this shortlist requires foreign OEMs to submit information about their intended proposals for transfer of technology, (specifically range, depth and scope), percentage and value of indigenous content, creation of manufacturing infrastructure and eco-system, train manpower and roadmap for research and development.

The value and extent of these heads have been traditionally difficult to quantify. In it’s RFIs, the navy has diligently addressed all of these and , for instance, deliberately conveyed the the required range, depth and scope for transfer of technology under specific heads, which will leave little room for foreign OEMs to later weasel out of their obligations and set a quantifiable, comparable, compliance-based high bar for foreign OEMs, which will be their first entry barrier to finding a place in the first shortlist, after the submission of the associated Expression of Interest.

This is, perhaps, a result of lessons learned by the navy from observing the IAF experience with their ill-fated tender for 126 Medium Multi Role Combat Aircraft (MMRCA).

Further, with the navy setting the standard for stated requirements for transfer of technology, the IAF and the army will find it difficult to ignore this precedent when they issue RFIs for fighter aircraft and armoured vehicles, respectively, under Chapter 07.

As things stand, the navy has fulfilled its responsibility to begin the the Make in India acquisition process for two of the the four programs under Chapter 07 and issued three RFIs.

Replies to an earlier navy RFI for Multi Role Carrier Borne Fighter (MRCBF) aircraft, which predates the publication of Chapter 07, have already been submitted. The RFI for this is widely expected to be brought under Chapter 07, as well, with all the associated requirements for Make in India, the model for which has been created in the two RFIs issued by the navy.

It is now up to the IAF and the army to follow suit and match the standards set by the navy.