RZD Can Reduce 2 B USD of Costs - Deloitte

OAO RZD can reduce costs at 95 - 130 B RUB (1.4 - 2 B USD), the Vedomosti reports. Deloitte analyzed OAO RZD’s operations and believes that the company can save on sourcing, investment projects and optimizing management.

Deloitte believes that OAO RZD does not save on sourcing - the orders are placed in large lots. E.g. the 100 biggest lots make 2/3 of OAO RZD’s corporate budget. However, the average discount on contracts is just 1.8%, which is the worst among state-owned companies. Deloitte supposes that the low efficiency of the tenders might be a consequence of “potential interests in deals in both documentation drafting and tendering processes”. For example, a 54-B RUB (832 M USD) tender for construction of 40 sites at Baikal-Amur and Transsiberian mainlines was held within three weeks only. “It is impossible for an independent contractor to evaluate the work to be performed under the project without a prior access to design documentation, while such documentation is still unavailable on most projects”, Deloitte concludes.

The consultant also suggests OAO RZD optimizes 35,000 of its personnel, primarily management. The management’s share in OAO RZD’s total staff is 35%.

Additional 35 B RUB (540 M USD) can be saved through revising large-scale projects - the Moscow - Kazan high-speed railway, modernization of the Baikal-Amur and Transsiberian mainlines and development of the infrastructure at Azov and Black Seas. Deloitte suggests OAO RZD cancels acquisition of Lastochka (Desiro RUS) EMUs - the company expects to buy 60 trains at 49 B RUB (755 M USD).