HIGHLIGHTS OF CAG REPORT (A PART VERBATIM)
- Comparative analysis of 2007 and 2015 price Bids
The Aligned Price worked out by INT was “U1” million € while the Aligned Price as assessed by Audit was “CV” million € which was about 1.23 per cent lower than the INT aligned costs. This was the price at which 2015 contract should have been signed if the prices of 2007 and 2015 were considered at par. But as against this the contract was signed in 2016 for “U” million € which was 2.86 per cent lower than Audit’s aligned price. The difference between the Aligned Price estimated by INT and Audit could be attributed to inconsistent price variation factors adopted by INT, alignment of the quantities/scope of the two offers and the difficulties of alignment itself as stated earlier.
The contract consisted of six different packages – Flyaway Aircraft Package, Maintenance package, Indian Specific Enhancements, Weapon Package, Associated Services and Simulator Package. There were a total of 14 items under these six packages. Item wise analysis of prices showed that, the contracted price of seven items were higher than the aligned price, three were same and four were lower Also the price of elements could not be compared because the structure/format of the M/s DA bid of 2007 and the offer of 2015 were different. This is discussed below:
- Though the price offer was submitted in Jan 2016, the prices quoted by M/s DA as in May 2015.
- Indian Specific Enhancements
In the previous procurement of 2007 the M/s DA had quoted “XX” M€ as the Non Recurring Cost (NRC) for Design and Development of ISE. However, the vendor did not quote the price for the equipment and integration of the ISEs. The CNC had adopted “XX” M€ as the total price for ISE inclusive of these elements.
In the price bid of 2016 M/s DA had quoted “IS” M€ for ISE. In addition it had quoted “IS1” M€ for ISE equipment and “IS2” M€ for integration. This was finally negotiated (2016) to “AX3” M€ as the total price for ISE which included “AX4” M€ for NRC and “IS2” M€ for integration. The price of equipment was also inclusive.
Audit aligned the scope of the offer of 2007 and contract of 2016. The 2007 offer included Missiles ‘A1’ which was excluded by IAF in 2015 because it was being developed indigenously by Defence Research & Development Organisation (DRDO). In place of Missiles ‘A1’, IAF included Missile ‘A2’ for integration on the aircraft. The difference between integration of Missile ‘A1’ and Missile ‘A2’ which was “IS3” M€ had to be deducted from the ISE price of “XX” M€. This works out to “AX1” M€. Therefore the aligned price by Audit was estimated to be “AX2” M€. As against this the contract was signed for “AX3” M€, a saving of 17.08 per cent.
NATIONAL DEFENCE HAS ACCESS TO FULL CAG REPORT BUT DECIDED NOT TO PUBLISH THE FULL REPORT DUE TO SECURITY REASONS IN NATIONAL INTERESTS.
Shailesh Kumar is an independent journalist with over 15 years of experience in crime, political and defence reporting for leading media brands including Star News, India TV and NewsX. He is the founder editor of defence and security news portal, National Defence.