Complaint with CVC Alleges Dilution of Standard Norms in Process to Hire Consultant for OFB Corporatisation

This is the second complaint to the statutory body seeking investigation; union leader calls it a “serious matter”.

The Central Vigilance Commission on Friday, August 28, received another complaint bearing allegations against the defence ministry officials of resorting to “fraudulent practice” in the process of hiring a consultant for the corporatisation of the Ordnance Factory Board (OFB). This is the second complaint seeking investigation into the matter, filed with the statutory body that looks into governmental corruption.

The complaint dated August 28, contents of which has been shared with NewsClick, has been filed by a “social activist”, who wishes to remain anonymous. According to it, the standard norms for contracting the corporatisation of the board has been “diluted with a clear eye to benefit some parties, raising doubts about the integrity of officials acting on behalf of the client.”

On July 6, the Ministry of Defence (MoD) had invited Expression of Interest (EOI) cum Request for Proposal (RFP) for the selection of a consultant for providing “strategic and implementation management consultancy services” to assist the ministry in the corporatisation of the OFB.

Latest media reports suggest that three private companies – KPMG, Deloitte and EY – have been shortlisted, and a final call will be taken before the end of August.

The complaint with CVC, however, alleges that the notice of invitation, published by the Department of Defence Production (DDP) of MoD does not comply with the standard contract norms enlisted under the Defence Procurement Manual, 2009, that draws the principles and procedures of military procurements and any other type of purchase.

“Many of the standard Contract provisions like Risk and Expense clause, Indemnity & Insurance, Warranty & Warranty Bond, Termination of Contract, Arbitration, penalty for use of undue influence, agents/agency commission, etc. are missing in flagrant violation of a normal Contract,” the complaint said.

The complaint further noted that staggered delivery schedule is allowed without Liquidity Damage clause, which implies, according to it, “that payment (to the consultant) can be done without imposing any penalty despite delayed delivery.”

The Terms of Reference (ToR) or the scope of work in the tender invitation document lacks clarity, according to the complaint. “It implies that MOD is not clear about the objectives and is likely to change it in collusion with the vendor to serve the private interests,” it said.

Furthermore, the complaint raised “doubts” about the whole process and the intent of the defence ministry officials, for not linking payments – made to the consultant – to the deliverables of the project, that is, to achieve efficiency, improvement in the quality, better utilisation of capacities and assets of the ordnance factories. This will render the consultant “less accountable and put nation at risk,” according to the complaint.

The “poor” contract design is so, the complaint said, “with a clear objective to see that OFB declines and dies so that the property of the OFB can be sold to private parties at a throwaway price.”

C. Srikumar, general secretary, All India Defence Employees’ Federation (AIDEF) called it a “serious matter” which must be put to an investigation. “One more complaint has been filed, which again confirms the concerns that had been raised time and again by defence federations,” he told NewsClick.

An earlier complaint about alleged irregularities with the CVC, filed by a former defence employee, had prompted AIDEF, along with the other two recognised ordnance workers’ federation – Bharatiya Pratiraksha Mazdoor Sangh (BPMS), an arm of the RSS-affiliated Bharatiya Mazdoor Sangh and Indian National Defence Workers’ Federation (INDWF) – to write to President Ram Nath Kovind seeking his intervention.

The three defence employees’ bodies have also given a joint call for an indefinite strike, beginning October 12, to press for the withdrawal of the Centre’s move to change the status of the OFB. Finance Minister Nirmala Sitharaman had announced the corporatisation of OFB and its subsequent listing on stock market earlier on May 16, as part of Centre’s Atma Nirbhar Bharat programme.

The board, under which 41 ordnance factories are engaged in defence equipment production across the country, currently operates as a government department under the MoD.

The corporatisation of the board is against the “defence preparedness” of the country, said Srikumar. He added, “The move will kill the OFB and will certainly defeat the very objective of ‘self-reliance’. We have already accepted the government’s production target of Rs. 30,000 crore for the next five years and have reiterated that the status of the board must not change.”

On August 26, the three defence federations also approached the Parliamentary Standing Committee on Defence, with a detailed memorandum seeking its intervention in the matter and advising the ministry to withdraw the corporatisation decision.

Back in last year, as many as 82,000 defence employees went on a one-month strike when a similar proposal to convert the OFB into a corporation was floated then. The strike lasted for six days, and called off following assurances by the then Secretary of Defence Production that “no final decision has been taken yet”.