Avtodor’s panel discussion about the tender for the third and fourth segments of the Moscow Region Ring Road (CKAD)

During a recent panel discussion that Avtodor organized regarding the forthcoming tender for the third and fourth segments of the Moscow Region Ring Road (CKAD), Yaroslav Kulik, of ART DE LEX, asked several poignant questions.

The Moscow Region Ring Road (CKAD) is one of the most epic and ambitious projects in highway construction in Russia in recent years. In May 2014, bidding for the construction of the first portion took place, and bidding for the third and fourth segments will occur in the near future.

Federal Law No. 115-FZ, “On concession agreements,” dated 21 July 2005, and the Government Decrees No. 874-r and 875-r, of 22 May 2014, created the legal bases for the tender. Avtodor, the Russian State Highway Company, is the purchaser and the organizer of the tenders, and it will fund the project from its 2010-2020 long-term plan. The winners of the tender will conclude a construction and maintenance contract that will last for thirty years.

Financing the third and fourth segments of the CKAD highway will require 150 billion rubles, which will come from the National Prosperity Fund, according to a decree of Vladimir Putin. The total cost of the construction and operation of the first segments will amount to RUB 127 billion. Based on information revealed during a panel discussion that Avtodor organized regarding the new tender, in order to pass the preliminary selection process, companies must provide bank guarantees for RUB 210 million and a binder for RUB 430 million. Therefore, the total cost for the tender will be RUB 640 million, which is 1 percent of the total cost of construction. The percentage is twice the amount of the first tenders and sparked a lively debate among the panel participants.

During the discussion, Yaroslav Kulik, from ART DE LEX, asked Avtodor several questions:

1. Mr. Kulik asked if foreign investors will be invited to submit bids since Russia recently has imposed sanctions on European Union member states. Avtodor responded that it is excluding foreign investors because of the need to support Russian firms and the Russian economy.
2. Mr. Kulik questioned the need for companies to prove their financial stability with RUB 5 billion in assets because that amount will reduce the number of qualified participants. Avtodor answered that it may consider exceptions, and new wording may appear in the final bidding documents.
3. Mr. Kulik noted that, compared to earlier tenders, the organizers limited the winning bidder much more with respect to employing technology-price audits to optimize the price.
4. In conclusion, Mr. Kulik has asked about how the winning bidder will recover expenses. Other participants echoed his concern, including one representative of a major construction firm, Dmitry Dolgov, from Arks, whose firm bid on earlier segments of the CKAD. He asked if non-monetary compensation, used in other countries, would be a possibility. The representatives of Avtodor agreed to examine this question.

On 22 August 2014, Avtodor will release the final notification of the competition, and a month later, bidders will be able to examine the technical details about the construction and maintenance of the project.