Foreign Ministry to spend RUB 1.1bilion on airline tickets

The Russian Foreign Ministry intends to spend RUB 1.1 billion on airline tickets for its employees, and it has announced a tender to choose an agent that will be responsible for purchasing the said tickets. However, the conditions of the tender are rather specific, as the agency must be located within 300 m of the Ministry itself; have at least seven employees dedicated to the Ministry; and have service desks and ticket counters in all Moscow airports. The Federal Anti-monopoly Service (the “FAS”) is reviewing the tender documentation for any limitation on competition, but does not intend to get involved during the tender process.

The Ministry has posted two orders on the state procurement site: one to purchase RUB 840 million worth of airline tickets for those employees that work in its central office; and the second one to buy RUB 304 million worth of tickets for the country’s diplomats abroad.

The first lot envisages the purchase of around ten thousand tickets, of which 49% will be economy and business class, while only 2% will be first class. Sixty tonnes of excess baggage will also be transported. The second lot envisages the purchase of 7,500 tickets, of which 65% will be economy class, 25% will be business class, and 10% will be first class. In addition, 240 tonnes of excess baggage will be transported.

The airline tickets are not expected to cost the Ministry more than RUB 1.104 billion, which is less than 2% of the state programme’s budget.

Participants in the tender will have to meet rather strict requirements, such as having one’s own ticket counters in each of Moscow’s airports; having at least seven employees to serve the Ministry; and operating twenty-four hours a day, seven days a week. However, the most specific requirement is the necessity of the agency’s being located within 300 m of the Ministry’s centrally located main building in Smolensk Square. Besides this, practically all of the world’s functioning airports, even those that do not have regular passenger service, have been included in the list of airports to which the agency must be able to send passengers.

The Ministry has informed Izvestia that these requirements meet diplomatic standards and are completely realistic ones that correspond to the Main Administration for the Service of the Diplomatic Corps under the Ministry of Foreign Affairs of the Russian Federation (“GlavUpDK”). GlavUpDK (founded by the Russian Government, the Foreign Ministry and the Federal Property Agency) is a commercial organisation that is subordinate to the Ministry, and it currently acts as an intermediary to buy tickets for the Ministry.

An FAS official has explained to Izvestia that even though the tender may initially appear to be set up to favour the current contractor, which would seem to be a violation of competition legislation, the FAS has not received a legitimate complaint from any of the tender participants; therefore, it has no reason to review the matter, meaning that the situation cannot be unequivocally assessed without such a review.

“The requirements alone do not violate the law; however, if it is revealed that only one company could possibly meet these requirements, this would be a violation of the law”, explains Kirill Dozmarov, a lawyer at ART DE LEX. “Prior to the deadline for submitting bids, any interested organisation may file a complaint. Once the deadline has arrived, however, then only those participating in the tender may file a complaint. Theoretically, the FAS may investigate the matter based on information from another administrative body, such as the Foreign Ministry or the office of the prosecutor general, or even information in the media. However, the FAS very rarely reacts to information in the media”.

The intermediary agency stands to make a decent profit. According to market players, on average, the agency could earn about 3% of the cost of the airline tickets, depending on its agreement with the airline company. In this case, this would mean around RUB 33 million.

An official from aviashop.ru has explained to Izvestia that this type of contract is very attractive to a large agency, as small ones are not able to handle the work: On the one hand, the work is guaranteed, with a guaranteed profit as well as prestige. On the other hand, however, the work is stressful and non-stop when organising connections. Transporting diplomatic mail and post is the most complicated aspect, given that this “excess baggage” is estimated to be 60 tonnes per year. Besides this, the tender is fraught with many difficulties, possible checks and oversight. All of these factors add to the belief on the part of the majority of the market players that GlavUpDK will win the tender, as it long ago resolved all of these nuances, meaning that many players will not even submit bids.

Vadim Zelensky, general director of Zelensky Corporate Travel Solutions, believes that this is a very attractive tender: “The requirement of being within 300 m of the Ministry is reasonable, given that many organisations today have affiliate offices with the required personnel right where the client is located. However, the requirement of having ticket desks in a large number of airports does seem odd”.