By Ajai Shukla
Business Standard, 1st Apr 12
The contest to build the army’s Tactical Communications System (TCS) is witnessing a determined and coordinated play by the energised Indian private sector. Fearful that Bharat Electronics Ltd (BEL), which belongs to the defence ministry (MoD) and has long been favoured in contracting, might be handed the TCS contract on a plate, three private companies who were given separate invitations to bid --- Larsen & Toubro; Tata Power (Strategic Electronics Division); and HCL --- have joined forces to bid together.
The TCS contract, estimated to be worth at least Rs 10,000 crore, is India’s first “Make” contract. That means, in accordance with the Defence Procurement Policy (DPP), the government will select and fund two vendors, who will each build a prototype of the high-tech TCS system. The government will then select the winner, who will be awarded the contract to build seven TCS for the army.
The government sent Expressions of Interest (EoI) to eight carefully vetted companies, asking them to bid for the TCS contract. Besides BEL; L&T; Tata Power (SED); and HCL, EoIs were also sent to Rolta; Wipro; and the PSUs Electronics Corporation of India Ltd (ECIL); and ITI. But now there are just five contestants, with L&T, Tata Power (SED), and HCL having bid as an SPC (special purpose company).
According to Jayant Patil, Executive Vice President at L&T, the distribution of stakes in the SPC are: L&T, 56.67%; Tata Power (SED), 33.33%; and HCL 10%.
The TCS will be a fully mobile communications grid, which can be moved anywhere during war, even deep into enemy territory, each one providing an army corps (a formation of some 60,000 soldiers) with a backbone network on which to communicate and transfer large volumes of data.
The TCS operates much like a cellular phone network, but with three major differences: the TCS’s exchanges and switches will be installed in high-mobility vehicles, allowing them to be transported and set up anywhere. Secondly, large volumes of data will be transmitted over the TCS, such as streaming video from sensors like unmanned aerial vehicles. Finally, information sent out over the TCS cannot be easily intercepted or jammed since it will not be transmitted on a single frequency. Instead, transmissions will hop frequencies, dozens of times every second, in a pre-programmed sequence.
Business Standard has learned from MoD sources that the ministry has almost completed the selection of the two vendors who will build the TCS prototypes. At the next meeting of the Defence Production Board, the decision is likely to be finalised.
Once the MoD announces the two winners, they will each have about 6 months to prepare a Detailed Project Report (DPR). This will define every system, sub-system, and capability of the TCS network. Based on that, the MoD will decide on the amount that developing the prototype is likely to cost. The figure is likely to be around Rs 300 crore for creating a working prototype of a TCS for an army division (15,000 troops). The MoD will fund 80% of the development cost; with 20% paid by the vendors.
Rahul Chaudhary, CEO of Tata Power (SED) says that the prototypes could take about18 months to build, which will be followed by user evaluation trials that could run for another 6-8 months. Based on that, the final form of the TCS will be decided, and documented in the form of a General Staff Qualitative Requirement (GSQR). That will be the frozen design for the final system.
While the government could select a single winning vendor to build all seven TCS systems that the army requires for seven corps, market expectations are that the order could be distributed, in a 65:35 ration, between the two vendors. This would expedite production, as well as mitigate production risks. Each corps’ TCS is expected to cost about Rs 1,500 crore.
Patil explains the working arrangement between L&T; Tata Power (SED); and HCL. Notwithstanding the pattern of ownership, work share will be distributed in a 40:40:20 ratio. Both the larger partners, L&T and Tata Power (SED), have already spent years developing the data handling technologies, switches and routers that will be needed for the TCS, which are prominently displayed at their stalls at the ongoing Defexpo India 2012 defence exhibition in New Delhi. However, work will be allocated based on efficiency of production, lower costs and expeditious delivery.
“Our SPC is a business school case study,” says Patil of L&T. “We are creating efficiency within our consortium by not just competing externally, but competing within the consortium as well.”