The State Atomic Energy Corporation ROSATOM

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Procurement management

 РОСАТОМ » Capital management efficiency » Management of the production capital » Procurement management

Roman Zimonas
Director of Procurement Department

– The procurement system of ROSATOM has been highly praised several times by both the Government of Russia and the expert community. What are the procurement system elements responsible for this success, do you think? What role does implementation of the transparency principle to this activity play?

– In our work, we are guided by six basic principles: compliance with the legislation and basic principles of business organisation, the strict requirements for product quality and optimality of cost, transparency of activity and the use of anti-corruption mechanisms. All these principles are interrelated elements of the procurement system, which in combination allow the achieving of optimal consumption of resources and maximum economic effect. For example, the information openness of the procurement activities allowed suppliers to become controllers of nuclear industry procurements and to take an active part in improving the system.

We pay special attention to the issues of the product quality control that is dictated by the sectoral features. In case of especially important procurements, we require our suppliers to have permits, materiel and human resources as well as asking for information about experience with similar works or supplies.

– According to the roadmap of giving a greater access to small and medium businesses to procurements of the infrastructural monopolies and state-owned companies, 18 % of procurements of state-owned companies in 2015 should come from small and medium businesses. How would this affect procurement, given the fact that many goods necessary for the Corporation, such as complex equipment, require large investments, while these often are not available to small and medium businesses?

– The needs of nuclear industry eneterprises include both complex, capital-intensive equipment and the products to support their economic activities. The Corporation has already started implementing the measures of the roadmap, taking into account the sector’s features. We have made a number of decisions which will enable us to painlessly develop relationships with small companies. For example, a list of products to be purchased only from small and medium businesses has been compiled based on data provided by ROSATOM’s companies, which already now prefer to buy certain goods and services from small companies. Today it has about 900 headings, but it is not final and will be updated depending on the needs of our companies. To satisfy the governmental resolution, which establishes the rules of participation of the small and medium businesses in the state-owned companies’ procurement process, it will become mandatory to purchase from representatives of the small and medium businesses.

– In what direction will ROSATOM’s procurement system develop in 2014 and in the mid-term?

– We have started implementing a project on the management of the consolidated needs of the nuclear industry enterprises. I consider it the main task of 2014. We have started enlarging orders for complex, frequently purchased equipment and materials for the nuclear industry, as well as starting the transition to signing long-term contracts. This will help fix prices for the long term, unify specifications of purchased products, carry out more stringent quality control directly in the manufacturing process, ensure “just-in-time” deliveries and reduce inefficient stocks at our enterprises. The order enlargement will help reduce substantially their number and this, in turn, will reduce the cost of the procurement organisation and risks of appeals against procurement procedures.

Procurement openness and transparency enhancement mechanisms

The nuclear industry procurement system is developed in accordance with three main principles: compliance with the law, increasing the quality of the procured products, as well as openness and information transparency of the procurement process.

The main document that regulates the procurement activities of ROSATOM is the Uniform Nuclear Industry Procurement Standard (UNIPS) (Provision on Procurement).
Management and control bodies:

  • Central Procurement Commission of ROSATOM,
  • Department of Internal Control and Audit of ROSATOM,
  • Central Arbitration Committee of ROSATOM and arbitration committees of divisions,
  • Controlling Committee.

ROSATOM’s procurement website:

Main results of 2013

Fulfilment of the Procurement Programme

In 2013, according to the Annual Procurement Programme, ROSATOM and its organisations planned from their own funds to hold 37,366 competitive bidding processes; 36,156 competitive bidding processes were held for an overall amount of RUB 379 billion with an economy of RUB 20.3 billion (6.7% of the amount of the competitive biddings).

In 2013, ROSATOM, with federal budget funds allocated to it and in accordance with the Annual Procurement Programme, planned to hold 906 competitive procurements totalling RUB 130.5 billion; procurement savings were RUB 1.7 billion (3.4 % of the competitive procurement amount).

In 2013, a 10 % reduction of expenses in the purchase of products (works, services) as calculated per unit of product was achieved in pursuance of the Resolution of the Government of Russia No. ISh-P13-58089 of 15.08.2011. The actual value of the cost reduction indicator was 11.29 %.

Table. Amount of competitive procurements of ROSATOM and total savings*, RUB bln

Type of procurement201120122013
Total amount of public placement of competitive procurement requests, including: 454.5 389.0 509.5
using ROSATOM’s own funds 418.3 313.0 379.0
using federal budget funds 36.2 76.0 130.5
Total saving of funds, including: 31.5 (6.9 %) 20.0 (5.1 %) 22.0 (6.2 %)
saving of own funds ( % of the total amount of competitive procurement) 27.92 (6.7 %) 18.0 (5.8 %) 20.3 (6.7 %)
efficiency of placement of an order using federal budget funds ( % of the total amount of competitive procurement) 3.58 (10.1 %) 2.0 (2.6 %) 1.7 (3.4 %)

The percentage of public procurements across the Corporation and its organisations was 93.3 % (KPI for 2013).
The procurement programme as related to governmental targets was 100 % fulfilled (KPI for 2013).

Transition to the Federal Contracting System

In the framework of the transition to the Federal Law No. 44-FZ of 05.04.2013 “On the Contracting System of Procurement of Products, Works and Services for the Public and Municipal Needs” the following was carried out:

  • a joint pilot project of ROSATOM and RNU HSE was implemented on testing tools of the contracting system using the case of the actual procurement procedures of nuclear industry enterprises. Following its outcomes, proposals for the relevant by-laws of No. 44-FZ were drafted and 12 proposals for draft resolutions were submitted;
  • schedules of procurements using federal budget funds, prepared in accordance with the new rules of three-year planning. were posted on the freely accessible page of the website;
  • the function of formulation and concurrence of procurement plans and procurement schedules, as well as the function of preparation and holding procurement procedures as per Federal Law No. 44-FZ “On the Contracting System…,” were computerised and deployed.

Roman Zimonas, the Director of Procurement at ROSATOM, won the Annual Compliance-2013 Award in the category “The Best Anti-Corruption Compliance Manager” “for building up an efficient system of internal control to prevent breaches of the anticorruption legislation with the consideration of the best practices.” The award organiser is ICS.

Providing greater access to small and medium businesses in procurement procedures

The provisions of the Roadmap “Providing greater access of small and medium businesses to procurement procedures of infrastructure monopolies and state-owned companies” approved by Resolution of the Government of Russia No. 876-r of 29 May 2013 were fulfilled, specifically:

  • information about counterparties who are subject of small and medium businesses and supply nuclear industry enterprises, was consolidated. In 2013, the share of small and medium businesses (SMBs) of the total procurement volume for nuclear industry enterprises was ~ 11 %;
  • to ease SMB representatives’ access to procurement, changes were introduced to the Uniform Nuclear Industry Procurement Standard (Provision on Procurement) as regards giving preference to an SMB subject, which provide for sections on performance security, security payment maturity period, contract term and factoring opportunities;
  • the function of collecting procurement information from SMB subjects by the Uniform Nuclear Industry Procurement Management System has been implemented, along with the function of accreditation of participants on ETPs who are SMB subjects.

ROSATOM’s procurement management activity has gained the acceptance of the expert community:

  • ROSATOM topped the 2012 procurement management quality rating of public corporations and publicly-owned companies given by the rating agency Expert-RA ordered by the National Association of Procurement Institutions,
  • ROSATOM took a leading position in the rating “Procurement Transparency” developed by the Centre for Anti-Corruption Research and Initiatives of the Transparency International- Russia,
  • ROSATOM took the second place in the “National Procurement Transparency Rating-2013”.

Purchases from local vendors

A simplified contract-awarding procedure exists for intra-sectoral suppliers and producers who manufacture products of strategic importance for nuclear industry development. It has been in effect since 2011. A list of such products and their producers and suppliers is posted on the publicly accessible website of ROSATOM. A share of purchases from local vendors in regions of substantial activity of nuclear industry organisations exceeds 50 % of the total volume of purchased products. The volume of purchases from domestic producers and suppliers exceeds 80 % across the sector as a whole.

Local (domestic) vendors are legal entities and physical persons who are most closely located to the customer (to minimise costs of product delivery and relocation of machinery and resources) and who provide the customercompany with material resources required for the manufacture of specific products and rendering of specific services

Based on the results of fulfilment of the annual procurement programme, contracts were signed with 17,874 counterparts, of which 99.2 % were registered in the territory of Russia and located predominantly in the European part of the country.

Plans for 2014 and on the mid-term horizon

  • meeting requirements of the Plan of Measures on limiting the end cost of the products and services of the infrastructural companies while retaining their financial soundness and investment attractiveness (Government of Russia, resolution of 11 November 2013);
  • implementation of provisions of the Plan of Measures (Roadmap) “Providing greater access of small and medium businesses to procurement procedures of infrastructure monopolies and state-owned companies” approved by the Resolution of the Government of Russia of 29 September 2013, including:
    • achievement of a share of purchases from SMBs of 10 % (of signed contracts);
    • setting up a consulting body;
    • setting up a “front-end” system for the implementation of innovative products;
    • allocation of not less than 20 % of the annual total amount of purchases for innovative product procurements;
    • development of a methodology for determining a product’s lifecycle and lifecycle cost assessment criteria;
  • implementation of category-based materiel management in 48 organisations of ROSATOM, whose volume of materiel and equipment purchases (M&E) is not less than 80 % of the total annual M&E procurement programme of enterprises joined the UNIPS, including:
    • identification of M&E categories, development of strategies to benefit from cost reduction (reduction of the price growth rate);
    • implementation of long-term strategies to work with suppliers of each category;
    • reduction of the number of procurement procedures through consolidation of lots, procurement orders and signing of long-term contracts;
    • standardisation of consumed products (standardisation of stock item catalogues, standardisation of off-series products).

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