Defence Procurement Procedure (DPP) 2020

Defence Procurement Procedure 2020

  • Recently Defence Minister released Defence Procurement Procedure 2020, which will supersede the Defence Procurement procedure 2016.
  • The defence Procurement Procedure, 2020 will come into force from April 01,2020
  • The new DPP will remain in force till March 25,2025.
  • A committee, formed in August 2019 and chaired by Director- General Acquisition finalized the draft of DPP.

Overview

  • Another category leasing has been added while continuing the existing Make and Buy categories of acquisition. It will have provision of periodical rental payments instead of huge capital outlays.
  • There are two categories of leasing-
    • Lease (Indian) in which an Indian entity is the owner and Lessor of the asset.
    • Lease (Global) in which a global entity is the Lessor.
  • The Lease category will be beneficial in acquisition of equipments required in transport fleets, trainers, simulators, but will be less beneficial for equipments used in actual warfare.
  • To support Make in India drive the stipulated indigenous content has been increased by 10% in various categories of acquisition⟋procurement.
  • To verify indigenous content, a simple and realistic methodology has been finalized.
  • Another category Buy (Global-Manufacture in India) has been added. This category equipment will have at least 50% indigenous content on the basis of total contract value.
  • There is provision of long term product support in DPP 2020, which would last upto 3 - 5 years after the warranty period expires.
  • Under DPP 2020, use of indigenous raw materials, alloys and softwares has been incentivized.
  • A “Price variation clause” has also been introduced in DPP 2020 for the contracts which have total contract cost more than ₹ 1,000 crore and delivery schedule exceeding 60 months.
  • The variation clause will deal with the risk of price escalation from the last date of submission bids till the final approval by Contract Negotiation Committee (CNC) .
  • To enhance and optimize life cycle support of equipment, modern concepts have been included. These are
    • Performance Based Logistics (PBL)
    • Life Cycle Support Contract (LCSC)
    • Comprehensive Maintenance Contract (CMC)
  • The new DPP will facilitate the development of robust defence industrial base, increased use of Indian raw material and enhanced participation of Indian industry.

Examrace Team at Aug 23, 2021