Purchasing

The purpose of the Policy of JSC IDGC of the North-West is to establish a common approach for the implementation of Regulations on the Procurement of Goods, Work and Services for Company needs, organization and coordination of the Company’s logistics and procurement activities in accordance with Russian legislation, internal administrative and regulatory documents, ensuring:

uninterrupted supply of the Company with quality products, work and services;
economic efficiency in procurement;
reasonable control over the procurement from the Company’s shareholders;
prevention of errors and abuses in the area of procurement;
procurement of products on a competitive basis, where applicable, increased control over decisions in situations where it is not possible to purchase products in competitive markets;
reasonable approach to the regulation and organization of procurement, special purchases;
considering special features of purchased goods and materials when choosing strategies and procedures for preparing and carrying out procurement;
professionalism in procurement;
formation and execution of procurement plans;
introduction of a unified methodology for regulations on procurement procedures;
management of procurement in accordance with the division of powers between the Central Procurement Body and Regional Procurement Bodies of the Company’s branches, structural subdivisions of the Company’s executive body and its affiliates;
implementation of unified procurement accounting formats and reporting forms for the execution of the procurement plan;
marketing research in respect of goods, work and services.

The Company’s procurement is carried out in accordance with the revised Regulations on Procurement of Goods, Work and Services for the Needs of JSC IDGC of the North-West (hereinafter, the Regulations) that were approved by the resolution of the Company’s Board of Directors on July 22, 2013 (Minutes No. 130/1The Regulations are posted on the website of JSC IDGC of the North-West http://www.mrsksevzap.ru/ in Purchasing Activity Management section.). The Regulations were developed to meet the requirements of Federal Law No. 223-FZ on Procurement of Goods, Work and Services by Certain Types of Legal Entities dated July 18, 2011 and other procurement-related regulatory acts in force.

The effective Regulations provides for a high degree of transparency of purchasing activities of JSC IDGC of the North-West. All purchasing documents, including all protocols made in the course of purchasing activities and all amendments made to the documents are published on the Company’s official website and on the website of the Government of the Russian Federation http://www.zakupki.gov.ru. Procurement announced on the electronic trading site must be not less than 95% of the total procurement plan in value terms, excluding semi-constant purchases (clause 5.13 of Regulations) and purchases in order to prevent emergency situation or eliminate its effects (clause 5.12 of Regulations).

The Regulations on the Permanent Central Tender Committee of JSC IDGC of the North-West (hereinafter, CTC) ensuring the development and implementation of a unified policy of goods, work and services procurement for Company needs, were approved by the Company’s Board of Directors on November 12, 2008 (Minutes No. 37/5). The members of CTC are also approved by the Board of Directors. CTC makes decisions on the purchase of products and provides coordination and control over procurement for Company needs.

Procurement regulation:

is based on the system approach, which stipulates that the Company should have the regulatory environment, established of the organizational structure of purchase management and control, trained purchasing personnel, organized purchase infrastructure;
ensures compliance with the corporate integrity of purchase rules.
is carried out by application of mandatory procedures to be complied with by the customer’s employees for each purchase worth more than a certain value (excluding VAT) (such procedures may also be applied for smaller purchases, if considered reasonable).
provide control over the scope of authorities and responsibilities of purchasing employees.

To carry out planning and operational management of the purchasing activity, Management Department for Tender Procedures is formed in the Company, which carries out the following functions:

development of purchasing activity methodology documents;
ensuring permanent operation of CTC;
performing procurement procedures for the needs of the Company;
monitoring of the Company’s purchasing activity performance;
conduction of expertise of the Company’s documents for compliance thereof with effective purchasing activity standards;
conduction of checks of the Company’s branches’ purchasing activity;
participation in purchase, tender and expert committees of the Company and committees of external Organizers of purchases for the Company’s need;
participation in the work of committees for review of complaints filed by purchasing activity participants against the activity of purchase and tender committees of the Company.

The Company’s branches have separate structural units dealing with procurement of goods, work, and services.

Procurement procedures and conditions of their selection

In order to carry out procurement activities, the Company applies the following procurement procedures specified by the Regulations.

Procurement Procedures

Current Regulations on Procurement of Goods, Work and Services provide for the following types of procurement and special procedures.

Types of Procurement

The main criteria affecting the choice of a purchasing method other than open tender are:

level of complexity of purchased products;
peculiarities of market of purchased products;
procurement cost;
necessity to ensure confidentiality in the Company’s interests;
procurement period.

The list of mass media for the official publications of documents on procurement procedures for the needs of JSC IDGC of the North-West is determined by the Board of Directors’ resolution of February 26, 2010 (Minutes No. 54/9) and resolution of December 28, 2011 (Minutes No. 89/10) and posted on the Company’s websitePurchase section on the Company’s website http://www.mrsksevzap.ru/ contains information on the following areas: Procurement Management, Announcement of Purchases, Information about Current Procedures, Procurement Results, Procurement Archive, Products Received with Defects, Information on the Number and Value of Contracts, Action Plan (Road Map) Improving Access to Procurement for SMEs..

Performance of Procurement Plan

In accordance with the Regulations on the Procedure for Purchases of Goods, Work, Services for the Needs of JSC IDGC of the North-West, procedure for the formation and approval of the Procurement Plan must be approved by an administrative document of the Company.

The Procurement Plan is developed in accordance with the Company’s draft Business Plan (Budget), based on the Programs representing the Company’s production activity.

The Procurement Plan is aimed at determining the volumes and value of purchases forecast date of their announcement and summation.

The Procurement Plan shall be coordinated as per the procedure of preparing the Board of Directors’ resolution and approved by the Company’s Board of Directors.

The 2014 Procurement Plan of JSC IDGC of the North-West was approved by the Board of Directors’ resolution of December 28, 2013 (Minutes No. 144/15).

In 2014, 1,685 purchases were actually completed totaling RUB 9,893.6 million, including VAT.

Based on the results of procurement procedures in 2014, the economic effect equaled RUB 980.7 million, including VAT, or 9% of the target declared value of competitive procurements.

In 2014 the share of public procurement procedures (open tenders, requests for proposals, competitive negotiations, closed requests for prices of open competitive negotiations, exclusive sources of failed open procedures) accounted for 96.4% of total purchases in value terms.

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Procurement activities based on the 2014 Procurement Plan sections

Sections of annual integrated purchasing program	Quantity of performed procedures			Effectiveness
Sections of annual integrated purchasing program	Quantity	initial value	total value	RUB million, exclusive of VAT	in % of initial value
New construction and expansion	289	1,755.78	1,675.52	80.26	4.6
Reconstruction and technical re-equipment	488	2,777.62	2,621.81	155.81	5.6
Power repair facilities, maintenance	527	2,248.68	2,063.66	185.02	8.2
IT technology	131	351.06	326.43	24.63	7.0
R&D	0	0	0	0
Consulting Services	10	122.89	113.2	9.69	7.9
Other purchases	240	2,096.69	1,747.92	348.77	16.6
Total	1,685	9,352.72	8,548.54	804.18	8.6
including open purchase procedures	1,498	9,033.39	8,234.10	799.29	8.8

In 2014, the quantity of conventionally continued purchases was 225 purchases totaling RUB 1,344.52 million (including VAT).

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Comparison of target and actual indicators by amount, RUB mln

Classification of types of activities:

NC — New Construction; TRR — Technical Re-equipment and Reconstruction; ERP — Energy Repair Production; IT — Information Technology; R&D — Research and Development; CS — Consulting Services; SA — Services of Assessors; Other — other services.

Information on the Company’s procurement activities is available on the website of JSC IDGC of the North-West, its branches (links to the sites of the branches of JSC IDGC of the North-West could be found on the Company’s home page), on the hope page of information-analytical and trading-operation system Power Industry Products, Services and Technologies Market http://www.b2b-energo.ru, http://www.b2b-mrsk.ru and on the official site http://www.zakupki.gov.ru.