On January 11, 2016, a meeting of the Defence Acquisition Council ("DAC") was held to discuss the proposed changes to the Defence Procurement Procedure 2013 ("DPP"). As per the information available in the public domain, the following key changes to the DPP were approved by the DAC:

Given the challenges involved in developing 100 smart cities, only the capable cities will be chosen under the Smart Cities Mission through a two-stage competition. This was indicated in the Operation Guidelines for Smart Cities Mission released by Prime Minister Shri Narendra Modi on June 25, 2015. The selection criteria to be used in both the stages of competition was elaborated in the Guidelines.

New Category for Defence Acquisition: A category "Buy IDDM (Indigenously Designed, Developed and Manufactured)" is likely to be introduced in the DPP. The introduction of such a category would mean that Indian companies who have the capability of designing and developing products indigenously will be preferred in most purchases by the Indian Armed Forces. This will have two sub-categories — one, it will be mandatory to have 40 % local content in case the design is also indigenous. Two, in case the design is not Indian, 60 % local content will be mandatory.

Offset: The Offset policy which currently applies to contracts worth ≥Rs. 300 crores is proposed to apply to contracts worth ≥ Rs. 2,000 crore only. The threshold limit is being raised to Rs 2,000 crore, as not many Indian companies are available to absorb so much of technology infusion.

Shorter AONs (Acceptance of Necessity) Period: In order to reduce delays in procurement process, AON of a particular platform will be valid only for only six months as against the current 12 months deadline. Moreover, AON would not be notified until accompanied by a finalized RFP.

'Indian Company' defined: A company controlled and operated by Indian nationals would be considered as an Indian Company and would be eligible to participate in the categories Buy Indian, Buy & Make Indian and Make cases.

'Single Vendor' Situation: The new DPP will allow 'single vendor situation' at every stage (bid submission stage, Technical evaluation stage and Staff evaluation stage) as long as the vendor complies with the prescribed procedures.

Opportunity for 'Medium and Small Scale Industries': For encouraging R&D in the private sector, the department of defence production will bear 90% of the design and development cost of major systems. Small and medium scale industries will be given from Rs. 3 crore to 10 crore in funding for design and development and contract within 24 months and If contract is not awarded then the entire cost shall be refunded.

In addition to the proposed changes in the DPP, the DAC is also contemplating to come up with a new blacklisting policy for companies involved in wrongdoing and the policy concept of choosing strategic partners for major weapons platforms. The same are proposed to be discussed in the next meeting of the DAC.

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