Disentangling the Vendor Development Processes of RDSO-Part IV

Editorial Comment: #Vendor-Approval policies of Indian Railways have been in state of confusion since 2010-11 when then Minister for Railways, #MamtaBanerjee said on the floor of the house: “I am not happy with the functioning of RDSO”. Her lament led to major reshuffle of policies and personnel. This was followed by an angry #PiyushGoyal and then #AshwiniVaishnaw who perhaps were more driven by their experience as vendors in their past corporate avatar.

Over the course of 15 years, there were numerous changes such as the reassignment of items between agencies and modifications to #vendor categories. Nonetheless, a standardized structure for vendors across the country was not established. Although feasible, it faced resistance due to entrenched #departmental interests and geographically specific vendors in their preferred Production Units (#PUs). These circumstances contributed to delays in the retirement of #ICF coach production.

Instead of addressing core issues, #RDSO was perceived primarily as a vendor management agency. This perception negatively affected the service engineering role of RDSO. After 2014, PUs were assigned record orders as well as the responsibility for vendor development and management. Due to rapidly changing vendor handling policies, the quality of output from PUs began to decline, which is evident from the increasing asset failure rates across Indian Railways, particularly in rolling stock.

We invited comments of an eminent retired officer who is known for keen insights into the process of vendor development and management. Readers should forgive that the article would read more like an official note in fourth concluding part, but our #editorial-advisors advised us to preserve the structure given importance of the subject.

Systemic Deviations by the RDSO from Established Policy Framework and their Consequential Ramifications – Suggestions for improvements (Continued from Part-III)

Please Read in Continuation:

“Disentangling the Vendor Development Processes of RDSO, Part-I”

“Disentangling the Vendor Development Processes of RDSO, Part-II”

“Disentangling the Vendor Development Processes of RDSO, Part-III”

5.0 Non-Communication of Financial Implications Arising from Specification Revisions by RDSO to Procurement Agencies

5.1. As per prevailing instructions laid down in the ISO policy framework governing RDSO’s operations, any revision or amendment to the technical specification of a product mandates a prior assessment of its financial implications. In compliance with this requirement, #RDSO routinely seeks written declarations from approved vendors regarding the estimated cost impact associated with such #specification changes.

5.2. However, a systemic lapse persists in that the financial disclosures so obtained from vendors remain confined to RDSO’s internal records and are not communicated to the respective #procurement agencies of Zonal Railways (#ZRs) and Production Units (#PUs). Consequently, these procuring entities remain uninformed about the projected cost implications arising out of revised specifications.

5.3. This lack of #transparency creates an operational blind spot that #vendors have repeatedly exploited. The recent case involving #GFN-liners highlights a concerning discrepancy in #vendor submissions. During the revision of GFN LINERS to #HVN-liner specifications, the supplier informed RDSO that the proposed changes would entail negligible cost implications. Subsequently, however, the same set of approved #suppliers submitted quotations to procurement agencies that reflected substantially higher prices, attributing the increase to those very specification changes. This contradiction between the vendor’s initial representation to RDSO and its later pricing for field units undermines the integrity of the procurement process. Finally, the Board (MInfra) has to intervene and direct the RDSO to disclose the financial impact calculations that were prepared at the time of the specification revision. Such disclosure is necessary to ensure #accountability and #transparency. It underscores the #Policy imperative that cost assessments made during internal reviews align with the quotations provided to field units. Hence, the absence of alignment between RDSO and the field procurement units effectively nullifies the intended purpose of cost impact assessments, allowing vendors to derive unjust and unintended financial advantage.

5.4. Accordingly, it is imperative that RDSO, at the time of effecting any change in #product-specification, concurrently communicates the documented financial implications—as obtained from vendors—to all Zonal Railways and Production Units. Such transparency is essential to ensure consistency in procurement decision-making, prevent commercial exploitation, and uphold the principles of fair, accountable, and cost-effective public procurement.

6. Non-Adherence to Policy Directive on Periodical Quality Audit

As per the prevailing policy framework enshrined in the #ISO documentation of RDSO, it is mandatory to conduct periodical quality audits of approved vendors at prescribed intervals. The policy further stipulates that non-compliance with these #audit requirements shall result in the automatic de-listing of such vendors from the approved list upon lapse of the specified audit cycle. However, in contravention of its own laid-down policy, RDSO has failed to conduct these quality audits for extended periods in respect of several approved sources. This systemic non-adherence not only violates established norms but has also led to a discernible deterioration in product quality, as prolonged audit lapses foster complacency among vendors. The continued recognition of such firms without requisite quality validation undermines the integrity of the approval process and poses serious risks to operational reliability. Accordingly, immediate corrective measures are warranted to enforce policy compliance and restore the #credibility of the vendor monitoring mechanism.

7. Lack of Uniformity in Vendor Approval Policies and the Need for Centralized structure

7.1. At present, multiple #vendor-approving agencies operate under the aegis of #IndianRailways, each dealing with distinct categories of items. However, these agencies function under disparate policy frameworks, resulting in a lack of uniformity and coherence across the vendor approval ecosystem. This divergence in policy application, particularly on fundamental procedural and eligibility issues, constitutes a serious systemic lapse warranting urgent redressal.

7.2. To ensure consistency and procedural equity, it is imperative that a uniform vendor approval policy be formulated and enforced across all approving agencies. While minor contextual deviations may be permitted to accommodate localized operational conditions, core aspects of the policy must remain standardized. The absence of such uniformity not only hampers transparency and predictability but also impedes efficient vendor development and monitoring.

7.3. This harmonization is feasible only through the establishment of a centralized command structure at the #RailwayBoard level, which shall be entrusted with both policy formulation and operational oversight. This centralized body must also be vested with the mandate to regularly monitor delays, identify systemic bottlenecks, and track progress in vendor base expansion across all approving entities.

7.4. Furthermore, the #CMR Cell constituted at RDSO by the Railway Board over four years ago has remained non-functional, having failed to deliver even a single cost analysis report during this period. This critical function of cost monitoring and comparative analysis would be more effectively discharged if transferred to and supervised by the proposed centralized structure at the Board level.

7.5. In light of the above, it is recommended that the post of Special DG/Vendor Development—currently stationed at RDSO and functionally dormant—be transferred to the Railway Board to lead and operationalize this centralized vendor development and policy monitoring unit. Such reorganization is necessary to bring accountability, policy uniformity, and efficiency to the vendor approval framework across Indian Railways.

8.0 Summary of Recommendations

1. A definitive cutoff date should be prescribed; post which all conditionally approved developmental vendors must take necessary actions to acquire the status of developmental approved or be removed from the vendor directory.
2. Railway Board should consider issue directions to all Zonal Railways and Production Units (ZRs/PUs) to treat conditionally approved developmental vendors as unapproved sources until they achieve “developmental” status, necessitating appropriate modifications in #Tender documents.
3. The effective date of a vendor’s application should be redefined as the date on which a complete and compliant application is submitted, eligible for advancement to the next procedural stage (i.e., #CCA).
4. The time taken by a vendor to manufacture and offer a prototype should be recorded separately and excluded from the timeline attributed to RDSO.
5. #UVAM portal should be restructured to explicitly capture and segregate vendor-induced delays; total processing time shall be computed only after excluding such delays. #CRIS should implement the necessary modifications.
6. RDSO should place developmental orders only for the limited category of items specified under Paragraphs 4.3 and 4.4 of the main document.
7. RDSO should mandatorily communicate the assessed financial implications of any specification change or new item introduction to all ZRs/PUs concurrently.
8. The policy-mandated periodical quality audits must be strictly enforced. A time-bound audit campaign should be initiated to clear all backlogs exceeding the permissible time frame.
9. The post of Special DG/Vendor Development, presently and practically almost dormant at RDSO, should be transferred to the Railway Board to head a centralized vendor development unit to oversee and monitor the vendor approval policies of all vendor approving agencies policies on IR.