The report compared the aspects involved in the proposed acquisition of 126 Medium Multi-Role Combat Aircraft (MMRCA) through tendering process by the previous UPA government with the details of the NDA government's decision to procure 36 Rafale aircraft from French company Dassault through an inter-governmental agreement in 2016.
The CAG said a Defence Ministry team in March 2015 recommended the scrapping of the 126 Rafale deal, saying that Dassault Aviation (manufacturer of Rafale plane) was not the lowest bidder and EADS (European Aeronautic Defence and Space Company) was not fully compliant with the tender requirements.
In RFP (Request For Proposals) of 2007, IAF had projected the requirement of weapons for two squadrons. In 2015 also IAF had projected the requirement of weapons for two squadrons, but with aligned quantities; and addition and deletion of certain weapons, the report said.
After alignment of scope the aligned price worked out to WP1 M€ and the contract price was WP2 M€ a saving of 1.05 per cent. Overall savings in the Weapons package can be attributed to alignment in scope of various items of the weapons package, it added.
Referring to the issue of 126 planes, the government auditor said the IAF did not define the ASQRs (Air Staff Qualitative Requirements) properly and as a result, none of the vendors could fully meet the ASQRs.
ASQRs were changed repeatedly during the procurement process, the CAG said.
In the 2007 offer of 126 MMRCA, the vendor was to provide basic training to 26 pilots and 76 technicians of IAF at a cost of TR1 million €. However, in 2015 offer, IAF increased the scope of training to 27 pilots, 146 technicians and 2 Engineers, the report said.
In addition to this, the 2015 offer included an advanced training for 3 pilots, 1 engineer and 6 technicians at a cost of TR2 million €. This was not available even during 126 MMRCA procurement, the auditor pointed out.
INT (Indian Negotiation Team) had aligned the price of basic training as TR3 million € which added with price of advanced training came to TR4 million €. The contract was signed for TR5 million €.
Audit alignment for training also came to the INT alignment of TR4 million €. Thus there was an excess of TR6 million € which is about 2.68 per cent in case of Training package, it said.
It said the Defence Ministry stated that although scope of training had increased, the INT did not reckon this enhancement.
However, (the) Ministry did not clarify the need for enhanced training including the advanced training for TR7 million € when the number of aircraft had come down to 36 against the earlier 126, the CAG observed.
It said the Ministry, in its response in January 2019, has accepted that the Aligned price worked out by INT and Audit in case of basic aircraft were the same but argued that the negotiated/contracted price of 36 flyaway aircraft was 9 per cent lesser than the price offered for the aircraft in 2007.
This was because the L1 subcommittee of 126 MMRCA had estimated the average cost of each flyaway aircraft till its median delivery as DL1€, the report said.
The Ministry has stated that had the bid been finalized and the contract signed in the MMRCA case in 2011, this would have been the fixed price of the aircraft.
Against this, each aircraft was contracted in 2016 (under 36 Rafale contract) for DL2 M€ which was a saving of 9 per cent, the report said.
The bid price offered by M/s DA (Dassault Aviation) in 2007 for the flyaway aircraft was DL3 M€. Para 42(a) of the RFP required the Vendors to provide firm and fixed prices. Further Para 14(g) of Part I of RFP specified that for product support an indices based formula was to be provided valid for 40 years with an annual cap.
L1 subcommittee in its report stated (Para 2.1) that M/s DA had offered costs with a base price of June 2007 subject to escalation. The L1 subcommittee used the actual values available till June/July 2011 and used provisional values till September/October 2011.
Beyond this, till the mid delivery period the committee used an annualized year on year escalation rate based on the historical data. This was done as the actual escalation factors were not available with the L1 subcommittee for the period 2012 to the mid delivery period, the CAG said.
In 2015, the report said, the INT and Audit had the actual escalation factors and the 2007 offer of DL3 M€ was escalated to DL2 M€. Therefore, there is no difference between the bid of 2007 as escalated by INT with actual escalation factors, and the negotiated cost of the 2015 offer, for the same aircraft.