3.5

Procurement Efficiency Management

TVEL Fuel Company supports, respects and protects basic human rights and builds its external business relationship on the principles of honesty, integrity and openness.

GRI G4-EN32, EN33, LA14, LA15, SO9, SO10 Uniform Industrial Procurement Standard of ROSATOM (UIPS) prohibits introduction of any requirements (other than those stipulated by the law) to the admission criteria for suppliers and contractors participating in the procurement procedure. Suppliers and contractors are evaluated using the criteria of labor practices, impact on society and environment only subject to availability of all permits and licenses set by the law. Such criteria also include availability of management system certificates as evaluative ones i.e. forming the final evaluation for a member of procurement procedure. The Company does not perform any evaluation study of actual and potential impacts in the supply chain; all concluded contracts are checked for compliance with the Russian legislation.

More than 90% of competitive procurement procedures are carried out through on-line sales platforms. This promotes openness and transparency of the Company and saves labor and financial resources. Procurement procedures are implemented using the following electronic platforms: United Electronic Market Place JSC, Fabrikant LLC and Economics Development Center JSC.

Total amount saved by the subsidiaries of the Company in 2015 through the procurement procedures made RUB 2,852 mln.

In 2015 total volume of warehouse material assets reduction at the enterprises of TVEL Fuel Company amounted to RUB 2,094 mln.

The largest procurement groups are the following: the products and services purchased from the companies of nuclear industry, power supply. These are the largest categories in procurement from sole supplier.

Basic groups of competitive procedures:

  • materials and equipment,
  • construction and installation works,
  • manufacture of components,
  • repair and maintenance of equipment,

Pursuant to provisions of the Uniform Industrial Procurement Standard of ROSATOM the Company may not provide any preferences to the suppliers on a territorial basis. The exception is only envisaged for outsourcing companies founded during the restructuring of TVEL Fuel Company. UIPS guarantees to such companies certain volumes of orders over a period of five years from the date of incorporation in the following way: the first year — 90%, the second year — 75%, the third year — 60%, the fourth year — 40%, the fifth year 25% of total annual demand of the client.

GRI G4-EC9 Local suppliers participate in competitive procedures on a common basis; specific approaches to local suppliers are not applied. The Company maintains no special records for such suppliers.

Main documents regulating procurement and establishing the criteria for the selection of suppliers and contractors of TVEL Fuel Company:

  • Federal Law 223-FZ of 18 July, 2011 “On Procurement of Goods, Works and Services by Certain Types of Legal Persons”;
  • Unified Industrial Standard of Procurement, ROSATOM;
  • Corporate Standard of TVEL JSC “Procurement Process”.

Structure of TVEL FC Procurement:

Indicator 2013  2014  2015 2016 (plan)
Share of procurement through public competitive procedures under the UIPS, % 95 95 97 94
Total amount of procurement of TVEL FC 161,200 168,962 130,632 123,060
Total amount saved by subsidiaries of TVEL FC from procurement through public competitive procedures, RUB mln 2,534 2,601 2,852 minimum 2,000

Structure of Suppliers and Contractors of TVEL FCGRI G4- 12, G4-13

Russia Non-residents Total
Total Suppliers and Contractors 3,398 34 3,432
Competitive procurement procedures 1,785 13 1,798
Non-competitive procurement procedures 1,613 21 1,634
In 2015 the Arbitration Committee of TVEL JSC received 109 complaints concerning procurements procedures of the Fuel Division (please refer to Diagram 6). This is about half the number of complaints received during the previous year. 22 complaints were recognized as reasonable and partially reasonable.

In planning and implementation of procurement activity for 2015 TVEL Fuel Company afforded priority rights to small and midsized businesses in accordance with the Federal Law d/d July 18, 2011 No.223-FZ “On Procurement of Goods and Services by Particular Legal Entities” and in accordance with the Resolution of the Government of the Russian Federation d/d December 11, 2014 No.1352 "Concerning special aspects of participation of small and midsized business in procurement of products, works, services by particular legal entities". Share of procurement from small and midsized business made from 32% to 83% for particular enterprises, when the regulatory level is 18%.

In furtherance of the plan aimed to admit small and midsized businesses to procurements of infrastructural monopolies and government-linked companies, TVEL JSC has approved the order specifying the list of goods, works, services that can be purchased from small and midsized businesses.

In the reporting year the works within the framework of the Project “Optimization of the Fuel Company Logistics Management System” were continued; this project is planned for implementation till 2016. Purpose of the project:

  • introduction of category management1;
  • reduction of stock reserves (works for optimization of uncalled stock and reduction of their level);
  • optimization of warehouse infrastructure and material flows (optimization of material flows both in the internal logistics scheme of the enterprises, between the subsidiaries of the Company, and between enterprises of various divisions of the ROSATOM).
1. Category management as it pertains to procurement means the operations plan to promote efficient management of procurement, supplies, stock and interaction with suppliers of each specific category of purchased products. By introducing the category management, TVEL FC intends to minimize involvement of go-between companies and to enter into long-term contracts directly with manufacturers.

Procurement structure according to cost criterion, %

Complaints received by the Arbitration Committee of TVEL JSC in 2015