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Rafale deal was 2.86% cheaper than UPA: CAG suggests revamping of acquisition policy

2/13/2019

New Delhi, The CAG report on the Rafale combat aircraft deal tabled in Parliament on Wednesday has endorsed the government claims of better negotiations vis-a-vis the UPA reime and said the government could ink the deal at 2.86 per cent cheaper than what was decided earlier. The CAG also recommended that the Defence Ministry needs to revisit the process of acquisition to 'get rid of redundant activities and simplify the process'. 'The price offered by Dassault Aviation in April 2008 against the request for proposal (RFP) of 2007 was a market discovered price and based on competitive bidding. 'The price offer of 2007 had two distinct packages -- prices for 18 Flyaway aircraft package and pricing for transfer of technology (ToT) package of 108 aircraft which were licence produced in India. The offer of 2015 on other hand was only 36 Flyaway fighter.....and acquisition and price bids of 2007 and 2015 were very different as the latter included the price of transfer of technology for licence production of 108 aircraft in India which was 77.8 per cent of the total price bid of 2007,' the report says. The report which deals with procurement of 36 Rafale aircraft shows that in terms of Services and Products Operational support, the final deal inked in 2015 was at 4.77 per cent cheaper than the earlier rate. Similarly, for India specific announcement, the deal was 17.08 per cent lesser than what was proposed earlier by the UPA.The report said -- 'There is no difference between the bid of 2007 as escalated ......with actual escalation factor, and the negotiated cost of the 2015 offer for the aircraft'. Moments after CAG report on the contentious procurement from France was tabled in Rajya Sabha, senior BJP leader and Union Minister Arun Jaitley welcomed the same tweeting 'Satyameva Jayate” – the truth shall prevail". "The CAG Report on Rafale reaffirms the dictum," he said. The CAG also maintained that on policy matters, the 'Overall the capital acquisition system, as it exists, is unlikely to effectively support the IAF in its operational preparedness and modernization.' In a statement, the official audit body said that IAF should improve its process of formulation of Air Staff Qualitative Requirements (ASQRs) to ensure that they correctly reflect the users functional parameters. 'Audit is of the view that the present ‘Lowest Price Technically Acceptable (LPTA)’ method of bid evaluation wherein the contract is awarded to the lowest priced offer which is technically acceptable, needs reconsideration. For procuring highly technical products use of the Best Value method or a quantitative assessment method may ensure better value for money,' it said. The CAG further said the Defence ministry needs to revisit the entire process of acquisition, to weed out redundant activities and simplify the process. 'The acquisition wing, headed by the DG (Acquisition) was envisaged as an integrated defence organization. In reality, this has perhaps not happened, with bulk of the acquisition related activities still carried out in Services Headquarters,' it said.

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