Audit Reports
Defence
Report No. 10 of 2013 - Defence Services Air Force on Acquisition of helicopters for VVIPs
Overview
The Communication Squadron of the Indian Air Force (IAF) maintains a fleet of aircraft and helicopters for providing air transportation to VVIPs. IAF proposed (August 1999) to replace Mi-8 helicopters in this squadron with an advanced version of helicopters due to their ageing and operational limitations. Ministry of Defence (MoD) concluded a contract (February 2010)
with M/s AgustaWestland International Ltd., UK for the procurement of 12 numbers of AW-101 helicopters at a total cost of Rs. 3726.96 crore (Euro 556,262,026). Compliance audit of acquisition of VVIP helicopters was conducted with the objective of examining the observance of and conformity with the prescribed procedures enunciated in the DPP, with due regard to adherence to the standards of transparency, probity and public accountability.
The Report contains findings of the examination by Audit on the ‘Acquisition of helicopters for VVIPs’. The entire process of acquisition of VVIP helicopters right from framing of Services Qualitative Requirements (SQRs) to the conclusion of contract deviated from the laid down procedures. The process of framing and revision of SQRs not only limited the number of successful bidders but also resulted in operational disadvantage due to lowering of mandatory service ceiling. Even with the revision of the SQRs, the acquisition process again led to a resultant single vendor situation. The shortlisted helicopters were evaluated following different methodologies which did not give the desired assurance that equal opportunity was provided to the shortlisted vendors. Field Evaluation Trials (FET) were conducted abroad on representative helicopters and not on the actual helicopter (AW-101) of AgustaWestland.
Even at the stage of the FET, the helicopter offered by the company was still in its developmental phase. Further, benchmarked cost was unrealistic and had no correlation with the estimated cost and the offered cost and thus could not provide a realistic basis for obtaining an assurance about the reasonableness of cost of procurement of AW-101 helicopters. It was also observed that the past trend of low utilization levels of the existing fleet over a period of 11 years did not lend credence to the Ministry’s justification for additional procurement of four helicopters. Due to inordinate delay in finalizing the acquisition process, IAF continued to face operational disadvantage with the existing helicopters. In addition, it was observed that offsets were allowed in violation of the DPP.
The entire process of acquisition thus poses serious questions on accountability and lack of transparency in the finalization of contract, which need to be addressed.