Barriers Impede Revival of Indian Vehicle Project

[Zarvan]

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  Raveendran/AFP via Getty
  
  An Indian BMP armored vehicle is driven across a waterway during exercises at Mahajan Firing Range. India is looking to replace its fleet of BMPs.
  
  NEW DELHI — India's attempt to revive its homemade Future Infantry Combat Vehicle (FICV) project, worth more than $10 billion, is unlikely to succeed because the defense industry views the selection criteria as subjective and rules covering intellectual property rights will raise objections from overseas partners, analysts said.
  
  Though the FICV is restricted to domestic companies, analysts said collaboration with overseas companies will be needed in several areas.
  
  The Defence Ministry last month floated fresh expressions of interest for the second time in five years, inviting private and state-owned domestic companies, two of which will be chosen as development agencies (DA) to develop and build the FICV in the "Make in India" category, in which the government funds 80 percent of the cost of the prototype.
  
  After trials of the prototype, one of the DAs would be shortlisted and asked to produce the FICV to replace more than 2,600 Russian-made BMP infantry combat vehicles, for an estimated cost of over $10 billion.
  
  The expressions of interest were issued to private domestic majors Mahindra, Bharat Forge, Larsen & Toubro, Punj Lloyd, Tata Power, Tata Motors, Pipavav Defence, Rolta India, Titagarh Wagons and state-owned Ordnance Factory Board.
  
  Since India has never executed a project in the Make in India category, analysts and industry officials fear the DA selection will be based on subjective criteria.
  
  "Too much emphasis in the assessment of DAs has been laid on commercial and technical criteria which should have already been taken into account during the feasibility study conducted for short-listing companies as potential DAs. Repeating the same criteria for final selection is a faulty method and only places emphasis on the size of the company and the defense contracts executed earlier, even if such contracts have little in common with the FICV," said Khutub Hai , retired Indian Army brigadier general and managing director of Firmbase Consulting.
  
  Since commercial and technical criteria count for more than 60 percent of the assessment, Hai said, "only two or three large companies will qualify all the time."
  
  Awarding marks for plant, equipment, tools, etc., is misleading because these can be acquired as needed or the work subcontracted within a well-developed supply chain, Hai said.
  
  Bhupinder Yadav, retired Indian Army major general, said the criteria for evaluation appears subjective.
  
  "The assessment of the DAs would be based on the evaluation criteria and their weight for commercial assessment will be 26.08 percent, technical capability assessment criteria 34.24 percent, critical technology assessment criteria 31.37 percent and technical specification assessment criteria 8.31 percent.
  
  "The criteria and its evaluation methodology appears to be subjective and risks different interpretations," Yadav said.
  
  However, Vivek Rae, MoD former director general acquisition, is optimistic that the selection can be fairly accomplished if the criteria is spelled out clearly in the request for proposal.
  
  "The last FICV project was aborted due to problems in bid evaluation. Sufficient experience has been gained to avoid similar mistakes this time. The bid evaluation criteria should be spelled out clearly in the RFP. There will be no problem if this is done. Both technical and financial criteria can be used for short-listing two bidders. There are no fixed criteria and MoD is free to fix criteria as long as they are transparent," Rae said.
  
  A senior executive of a private defense company said the selection criteria could weigh in favor of bigger defense companies.
  
  "Salient features on which development agencies will be selected will be commercial, technical capability assessment, critical technology assessment and technical requirements assessment. ... A few vendors have alleged that this will unduly favor larger defense firms," the executive said.
  
  Amit Cowshish, MoD former financial adviser, said the selection will be done according to procedure laid down in the Defence Procurement Procedure (DPP).
  
  "According to the [expressions of interest] the development agencies will be selected as per the procedure given in DPP 2008 and the criteria mentioned in the [expressions of interest]. DPP 2008 talks about selection of the DAs on the basis of 'proven excellence with capability to contribute due to their technical, managerial and financial strengths' as also the following parameters," Cowshish said. The expressions of interest "go a step further by stipulating the evaluation criteria in more specific terms based on assessment on commercial, technical capability, critical technology, technical specification parameters."
  
  Rahul Bhonsle, retired Indian Army brigadier general and defense analyst, is confident the selection process will be fixed and he wants greater "competence" on the part of the MoD to select the DA.
  
  "Given the experience of the Ministry of Defence in the [expressions of interest] for the FICV in 2010, which had to be scrapped in 2012 as there was no fixed criteria for selection of the vendors ... this time criteria have been issued for commercial, technical capability, critical technologies and so on. This should overcome apprehensions of vendors in the past," he said.
  
  "However the assessment is likely to be complex and the Ministry of Defence or the service concerned has not displayed any degree of competence in this field in the recent past. The failure of the MMRCA deal with France is a salient example," Bhonsle said.
  
  Intellectual Property Rights
  
  Analysts said another point of concern among defense companies is MoD's decision to vest intellectual property rights (IPR) with themselves. Overseas defense companies that will tie up with domestic firms are unlikely to want to part with their technologies if the intellectual property rights are also passed to the MoD.
  
  "The prototype stage does not guarantee production of the project, so keeping the IPR of the prototypes is not acceptable to some domestic companies," said a senior executive of a defense company.
  
  An executive of a foreign defense company here said, "It depends on the commercial negotiations and how much Indian DA value the required technology. It has to be worth the while of the [original equipment manufacturer] otherwise it would not make sense to sell IPR."
  
  An executive of a second defense company said domestic companies will need to tie up with overseas companies in almost all categories, including for anti-tank guided missiles, armor, protection systems, ammunition, engine and transmission, etc.
  
  Whether Feasible
  
  There is no confirmed date when the FICV project would be complete and given the questions regarding the selection criteria, analysts are not sure if the project will survive.
  
  "The fact that mere reissuance of the [expressions of interest] has taken such a long time, the subsequent stages are not likely to adhere to the anticipated schedule. The fact that neither DRDO nor the production agency have any experience in designing the infantry combat vehicle, to put this program at a time when the existing inventory would need replacement 10 years down the line, is bit ambitious," Yadav said.
  
  Rae is cautiously positive. "This is a good make project and should be pursued. May take about five to six years to [come to fruition], but the benefits will be worth the effort. The persons in the integrated project management team should be chosen carefully and key personnel should not be transferred till the DAs are selected."
  
  Cowshish is optimistic but won't commit to any time frame. "All design and development projects seem unrealistically optimistic at the initial stage. The FICV project is no different. Whether or not it is technically feasible and cost-effective would depend on the response to the [expressions of interest]. There is no reason why it should not take off," he said.
  Barriers Impede Revival of Indian Vehicle Project