CAG: Lowest bid doesn't always ensure best value

NEW DELHI: With India often not getting the requisite bang for its buck as the world's largest arms importer, the CAG has recommended that the defence ministry follow the 'best value method' instead of the existing 'lowest price technically available' (LPTA) method in deals for high-tech weapon systems and platforms.

"It needs to be considered whether the present LPTA method of bid evaluation, wherein the contract is awarded to the lowest priced offer that is technically acceptable, is suitable for all procurements. It does not give value for money when used to procure items where quality is of high importance," the CAG said.

Instead, the defence ministry should go in for the 'best value method' or a 'qualitycum-cost when it is procuring high-tech products. "This method gives higher weightage to quality/technical bids and uses a quantitative evaluation matrix. It would enhance objectivity and consistency," the federal auditor said.

Noting that the defence ministry needs to "revisit" the entire process of acquisition to simplify it and "weed out redundant activities", the CAG also said the CNC (contract negotiation committee) in several deals had "repeatedly failed in realistically estimating the benchmark price", which in turn made it difficult to establish the reasonability of price.

"This also caused delay in price evaluation and contract negotiations. The model used for calculating the life-cycle cost of acquisitions has several deficiencies and needs to be fine-tuned and improved further," it said. The armed forces are also guilty of drawing up unrealistic technical parameters, which often lead to scrapping of projects after long-drawn processes, instead of focusing on . The IAF, for instance, changed its ASQRs (air staff qualitative requirements), so frequently that it led to long delays in several procurement projects.

"The objectivity, equity and consistency of the technical evaluation process was also affected. This created difficulties during technical and price evaluation and affected the integrity of competitive tendering, and also became one of the main reasons for delays in the acquisition process," said the CAG.