The Indian government is actively developing a new procurement model aimed at enhancing national security while promoting domestic manufacturing. This initiative is primarily driven by the need to streamline public procurement processes and ensure that local suppliers are prioritized.

Key Features of the New Procurement Model

1. Government e-Marketplace (GeM)

The GeM platform is designed to facilitate efficient procurement of goods and services by government entities. It provides a transparent, paperless, and cashless system that minimizes human intervention in vendor registration, order placement, and payment processing.

GeM supports the "Make in India" initiative by allowing government buyers to easily procure products from local suppliers, thereby fostering domestic manufacturing.

2. Public Procurement (Preference To Make In India) Order 2017

This order mandates that only "Class-I local suppliers," defined as those with over 50% local content, can bid for government contracts where sufficient local capacity exists. A purchase preference margin of 20% is provided for these suppliers.

The order aims to enhance local competition and boost employment through increased domestic production.

3. Enhanced Security Measures

The procurement model emphasizes the importance of national security by ensuring that critical goods and services are sourced from reliable domestic suppliers. This reduces dependency on foreign suppliers and mitigates potential risks associated with external procurement. The government is focusing on mechanisms that will protect sensitive information related to arms and equipment procurement. This is a direct response to lessons learned from the delays in the supply of the turbofan engines for the TEJAS program from the US have attracted the penalty clause. Also, lessons from the Rafale fighter aircraft Procurement process have triggered the government to work for a new procurement process shunning controversy and safeguarding national security information.

Highly placed sources confirmed that the penalty clause against the United States engine manufacturer General Electrics has been invoked for the delay in the supply of the engines contracted by India.

Frustration of the Chief of Air Staff (CAS) is understandable since it is a purely logistics matter which the GE is facing due to problems with its suppliers and it has nothing to do with the HAL, stated a New Indian Express report.

Chief of Air Staff AP Singh said in October “It is a known fact that TEJAS has been delayed. There is no doubt. There is also a promise that the production rate will be increased to 24 aircraft per year. If that promise is kept, I think the delays can be caught up with. The first aim is not to let our aircraft strength go down,” he said.

4. Streamlined Processes

The new model aims to simplify procurement procedures while ensuring that national security considerations are prioritized. This includes reducing bureaucratic hurdles and making it easier for domestic suppliers to participate in defence contracts.

4. Improved Efficiency And Cost Savings

The GeM platform has demonstrated significant cost reductions—averaging 15-20% lower prices compared to traditional procurement methods. This efficiency is achieved through demand aggregation and standardized specifications.

The new model is expected to yield annual savings estimated at around ₹40,000 crore through streamlined processes and competitive pricing.

5. Implementation Framework

All ministries and departments are required to incorporate the principles of the PPP-MII order into their Request for Proposals (RFPs) to ensure compliance with the new procurement guidelines.

6. National Security Unit For Procurement

As part of broader reforms under the Procurement Act, a new National Security Unit will be established within the Cabinet Office. This unit will scrutinize suppliers and assess their potential risks to national security before they are allowed to bid for public contracts. 

7. Focus On Domestic Industry

The government is also emphasizing the importance of maintaining a robust domestic industrial base for defence procurement, ensuring that critical supply chains are not overly dependent on foreign entities.

The government's new procurement model aims not only to safeguard national security but also to invigorate the domestic manufacturing sector through strategic policies that prioritize local suppliers and enhance transparency in public procurement processes.