Monday Morning Webinar on "Systems Approach to Procurement - A Historical Perspective"

In the Monday Morning Webinar held on November 22, 2021, Col. Manish Rana, Research Fellow, Defense Economics & Industry Centre, Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA) spoke on the topic “Systems Approach to Procurement – An Historical Perspective". Col. Vivek Chadha, Research Fellow, MP-IDSA, moderated the session. The Webinar aimed to draw certain lessons from the patterns which were emerging through study of the history of defence procurement in India and also try to understand the complexities by adopting a Systems Approach. The webinar also attempted to identify the fixes that have failed due to interaction of various elements and sub-systems within the defence procurement system in India, to enable guide the decision makers in formulating better and enduring Defence Procurement Policy.

The speaker gave a brief introduction to the Systems Approach to explain what it means and how it works, as also how we can utilize it in our Defence procurement system as such. He brought out that any organization is created with some objective in mind based on a felt need and it consists of various sub-systems and elements which interact with each other to provide the desired outcome. However, over a period of time these relations start affecting each other’s way of working and outcome leading to reduction in efficiency and problems start surfacing. When the problem is identified, the aim is to get the feedback from the environment as to what is happening and why it is happening and based on that feedback the changes in the interaction of the sub elements /sub systems are introduced to make the organization behave in a particular way or come out with a outcome which is desired.

Col. Manish Rana brought out that Systems Approach focuses on a problem which emerges with the interaction among the elements in society, enterprises, and the environment. When we see a problem, we don’t see a problem in isolation we see the genesis of that problem in the interaction with the other sub-systems and sub-elements within that system and accordingly we consider various responses to come out with the solution. As told by Albert Einstein “The significant problems we face today cannot be solved at the same level of thinking at which they were created”.  That is the thought process behind analyzing a problem from a different perspective from a different point of view and from a different level of thinking. The crux remains that complete system is more than the simple sum of the elements which are existing in it (“Whole is greater than sum of the parts”). And for the organizational problem solving the systems thinking approach offers a higher level of thinking.

The speaker talked about Defence procurement as a system.  Major sub-system/elements which come into play into this system are Service Headquarters, MoD, Industry and external factors. Service headquarters in itself is a kind of system which have various sub-systems within itself (Operations, Perspective planners, procurement sections, maintenance sections). MoD also is a smaller system or a sub-system having various departments under it. Further we have Industry as another major element which forms part of procurement system. Industry includes Indian entities, Foreign OEMs, Start-ups, MSMEs, DPSUs. Another major factor which needs consideration is the external environment. The procurement system directly or indirectly interacts with the external environment through MEA policies, PMO directives, Ministries relating to Industries and MSMEs etc. All these elements can be brought together under one system to be able to define the system of defence procurement and there interactions amongst each other and its effect on the outcome if studied objectively will give us leverage points to ensure system continues to produce the desired outcome.

Concept of causal loops as a tool for systems analysis was explained and “Fixes that Fail ‘Archetypes was discussed by the speaker. This behavioral pattern suggests that to fulfil a particular need or gap whatever action you take that may give you certain results in the short run, however, it may also happen that over a long term this particular action causes some unintended consequence which over a period come back to haunt us and keep increasing the problem further. Aim of adopting a Sytems approach is to identify such possibilities by study of behavioral patterns in history to avoid introducing a fix which may fail again.

Col. Manish Rana discussed the Historical Perspective of Procurement in India and highlighted that modern Defence industry which was setup in India before 1947 was essentially to meet the colonial interests. They had created a particular system towards which small mills, gun powder factories, gun carriages production facilities etc were set up for whatever limited requirement they had. The British rulers were not inclined towards making bigger weapon systems or undertaking major defence projects in India as the cost of producing those systems in India was appreciated to be higher as compared to procuring them from England. The initial infrastructure that was set up at that time was very limited in scope for various reasons which were suiting the colonial power at that time and was able to at best meet the Indian Armed Forces requirement of so called Quartermaster stores only.

Speaker mentioned about the Industrial policy of 1956 and its impact on defence procurement and production. It was a major turning point in the Indian Defence Production system. The 1956 Industrial Policy was in accordance with the national objective of socialist pattern of society at that time, towards which the public sector was given a push. Government had recognised and realised that the planned and rapid development is the need of the day. However, the industrial base in India at that time was not able to give the results that were required and not able to put in the required capital in major sectors like defence. Hence, the basic sectors and some strategically important sectors were put directly under the control of the government. The State assumed direct responsibility for the future development of industries over a wide area. Like exclusive responsibility of Railways and Air transport, arms and ammunition and atomic energy.

Research and development in various fields was also realized to be an important aspect and towards this the DRDO was established in 1958. Prof. PMS Blackett played a major role to guide the government and helped government to take the policies forward. Unfortunately, as per PMS Blackett the threat perception of India which was very limited and he suggested that India needs to procure weapons system to cater for their internal turmoil and limited external threat only. In one of his documents, it is also mentioned that he had advised the government to take a holistic threat perspective and come out with likely future scenarios and based on that decide what defence equipment factories and projects should be established by the Government of India. Which somehow did not happen, and we kept on struggling with the limited resources. Whereas the future of science was realised in other sectors and developments happened accordingly. Col. Manish Rana emphasized that the crux of the matter remains that we rightly pushed for the public sector units but we did not realise at that time was the need for gestation period in procurement and the production of defence equipment as also necessity of comprehensive threat assessment based requirements in defence.

Col. Manish Rana linked India’s dependence on Russia to the geopolitical realities of 60’s and 70’s when China-Pakistan and USA were coming closer. At that time, we went for a treaty with Russia in 1971 i.e., Indo-Soviet Treaty of Peace, Friendship and Cooperation and focus shifted to import of defence equipment through Govt to Govt negotiations and single vendor contracts. Though we did not lose sight of indigenous capacity enhancement, towards which licensed production contracts were introduced. But the desired aim was not met as there was limited transfer of technology. Over a period of time we went into comfort zone and got used to single vendor procurements. However, in 1990s as industrial capacities started improving and economy got liberalised, defense production started opening up to private sector and we also started diversifying our import of defence products from other countries as well. Since multi-vendor acquisitions are complex and time consuming the institutional deficiencies started coming to fore. India realised that it needs to formalise the procedures and reduce discretion amongst decision makers involved in defence procurements. The Public Accounts Committee of Parliament in its 187th Report in 1989 recommended that Government should draw up comprehensive guidelines relating to defence purchases and contracts. Later the Kargil War and consequent recommendations from Group of Ministers ensured we started working on policy aspects with a renewed purpose of strengthening our system. Director General of Defence Acquisition was created in MoD and detailed procedural guidelines called Defence Procurement Procedure (DPP) were promulgated in 2002 (revised in 2005, 2006, 2008, 2009, 2011, 2013, 2016 and 2020). Offsets were also introduced in 2005.

Col. Manish Rana presented a causal loop with capability gaps as the main focus and steps taken to cover them since independence. How the various factors like indigenous solutions, public sector units, Global purchases etc affected our overall process were discussed in detail. He concluded that crux of the systems approach is to have a simple solution and gaining maximum advantage by identifying historical patterns and leverage points in causal loops. He highlighted that historically it has been seen that encouraging Research and Development and striking a balance between import and indigenous development may be the key to success of Defence Procurement as a System. Constant threat evaluation is required so that we don’t end up splurging on the things that we don’t require. Also he left the audience with the thought of what should be our focus, should we ‘Indigenise the past or learn lessons from past and try to indigenise the Future’.

Thanking the speaker for a comprehensive analysis and the valuable insights, the Chair Col. Vivek Chadha called on Amb. Sujan R. Chinoy, DG, MP-IDSA, to share his remarks on the theme. Amb. Sujan R. Chinoy congratulated the presenter for the insightful presentation and mentioned instances where India has done well in indigenizing defence systems. However, he raised the question of the barriers that have impeded India’s beginning in the realm of indigenised defence systems. Amb. Chinoy also mentioned that “Whenever India has decided to make something in India, it has done very good” and gave examples of the recently unveiled INS Vishakhapatnam as India’s success story.

Maj. Gen. (Dr) Bipin Bakshi (Retd) DDG, MP-IDSA highlighted that our services have been reluctant to go for indigenous weapons till recently. Maj. Gen. Bakshi said that one of the reasons is that technological gaps are still there. He mentioned that Covid-19 has given fillip to indigenisation by exposing dependencies on global supply chains. He also emphasized that we need to strike a balance between foreign and indigenous sources.

The Panelist Samuel Rajiv, Associate Fellow, MP-IDSA commented that there is a need for a re-emphasis on Atmanirbhar Bharat. He said that the whole point of indigenisation is to reduce the capacity gap so we need to measure how much of capacity gap can be filled. However, the speaker Col. Manish Rana disagreed that there is a reluctance in the Indian armed forces to adopt Indian weapons. The floor was then opened for the Q&A session which emphasised on the need to improve processes, and barriers to these improvements.

Report prepared by Richa Tokas, Research Intern, Defence Economics & Industry Centre, MP-IDSA, New Delhi.