Defense acquisition system lacks costing expertise: CAG

The Comptroller and Auditor General (CAG) has found flaws in Defence Ministry's benchmark price estimates for the equipment it proposes to buy as in four deals, including the contract for 36 Rafale jets, the estimated cost turned out to unrealistically lower than the actual bid. "Repeated off-the-mark benchmarking reveals lack of costing expertise in the defence acquisition system," said CAG in its latest report on 11 recent acquisitions by the Indian Air Force (IAF).

The CAG noted that variation in benchmark price estimated by the Ministry of Defence (MoD) and the actual price offered for 126 Rafale jets being negotiated by the UPA government was 47 per cent. In the contract for 36 Rafales finalised by the Modi government, the difference between the benchmark and real price was 56.67 per cent. The report has concealed the actual amount.

In the case of purchase of 15 Chinook heavy-lift helicopters, MoD had estimated a benchmark price of Rs 4,119.72 crore but the bid price turned out to be Rs 6,473.91 crore. For procurement of five full mission simulators which was a repeat order, the MoD had estimated the cost to be $44.48 million. But the actual bid price was $79.61 million.

The CAG noted that mostly price of last purchases was relied on to make an estimate. "These last purchases were very old and the products were also not identical," said the report. The auditor noted that much of the costing, price estimation and price comparison exercise are generally done by the air headquarters with or without the help of the cost advisors in the Ministry of Defence, said the report.

(With inputs from agencies.)