Syllabus: 

GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. 

Context: 

Recently, the Ministry of Defence has approved the updated Defence Procurement Manual (DPM) 2025 to meet the armed forces’ evolving needs and streamline revenue procurement.

About the Manual

• It is a document aimed at expediting revenue procurements for the armed forces, simplifying processes for domestic industry and supporting innovation in defence manufacturing.
• It is revised after 16 years (last updated in 2009) and lays down principles and provisions for all revenue procurements in the Defence Ministry, which are expected to touch around Rs 1 lakh crore in the current financial year. 
• It has been aligned with the Ministry of Finance’s procurement guidelines and updated to meet the demands of modern warfare.
• The manual reflects the latest developments in public procurement, ensuring the use of technology with utmost fairness, transparency, and accountability.

Key Features of DPM 2025

• Ease of Doing Business: The revised rules enable contracts to be awarded through competitive tenders, easing working capital issues, and incentivising timely deliveries.
• Relaxation of Penalties: Liquidated damages will be not levied during the development phase, and the maximum penalty is capped at 5%, extendable to 10% only in cases of inordinate delay.
• Guaranteed orders: The policy assures guaranteed orders for up to five years, extendable by another five in exceptional cases. 
• Empowerment of Competent Financial Authorities (CFAs): CFAs have been empowered to take decisions in consultation with their financial advisors in respect of granting extension in delivery period irrespective of the delay period without approaching higher authorities.
• Collegiate Decision-Making: Strengthening collaborative decision-making, CFAs are empowered to extend bid opening dates within prescribed limits to ensure a fair, transparent, and faster decision-making process without higher-level approvals. 
• Indigenisation and Innovation: Boosts Research and Development by enabling collaboration with private industry, DPSUs, and premier institutes such as IITs and IISc.
• Repair and Maintenance:  To reduce downtime, a 15% upfront provision is allowed for repair, refit, and maintenance of aircraft, warships, and other platforms.
• Limited Tendering: The manual allows limited tendering for contracts up to ₹50 lakh, with contracts beyond that allowed only in exceptional cases to expedite specialised procurement.
• Government-to-Government Agreement: Established clear procedures for high-value government-to-government (G2G) deals to expedite the acquisition of critical equipment.

Potential Advantages

• Faster Procurement Cycle: Ensures quicker availability of critical supplies and spares for Armed Forces, enhancing readiness.
• Boost to Domestic Defence Industry: Encourages innovation, supports start-ups, and academia and reduces import dependence.
• Better risk sharing: Relaxed penalties during development phase lower supplier burden, enabling the risk-taking necessary for innovation.
• Transparency and competition: Removing unnecessary hurdles such as DPSU NOCs and enabling open bidding promotes competitive pricing and fairness.
• Support to MSMEs & Start-ups: Simplified processes and reduced financial and procedural burdens and lowers entry barrier for small players.