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13.11 Subclause "e” Clause 1 of the List of Orders of the President of the Russian Federation on performance of primary measures aimed at improvement of the investment climate in the Russian Federation dated April 2, 2011 No. Pr-846 which insure that companies controlled by the state (joint-stock companies in which the Russian Federation holds a share exceeding 50% of the charter capital (JSC) adopt resolutions on increasing expenses for purchase of goods (work, services) calculated by a product unit by at least 10 percent per year during three years in real terms (Letters of Rosimushchestvo dated September 14, 2011 No. GN-15/27795, of September 16, 2011 No. GN-15/28326 and of September 14, 2011 No. GN15/27797, as well as of September 14, 2011 No. GN-15/27797, of September 16, 2011 No. GN-15/28327, of July 14, 2011 No. DP-15/20610) (Order No. 13)

According to this Order, JSC “Transneft” adopted the following resolutions on reduction of expenses for purchase of goods (work, services) calculated for one product item by at least 10 percent per year within three years in real terms as per prices of 2010.

According to the Measures for Performance of this Order approved by the Management Board of the Company (Minutes No. 17 dated May 16, 2011), in 2012 the Company continued work in the following areas of primary interest:

  • negotiations with subcontractors and contractors on price reduction;
  • optimization of projects for construction and reconstruction of objects in order to preserve their quality and technological safety;
  • optimization of technological processes;
  • reduction of imports;
  • increase of equipment loading, exclusion of downtime;
  • optimization of the transportation scheme;
  • optimization of the payment and guarantee scheme;
  • decrease of specific power consumption;
  • decrease of current activity expenses;
  • reduction of the cost of the works performed by service companies, etc.

In 2012, as a result of the tenders held the Company also saved some money on the purchase of materials and equipment for objects of the “Transneft” system within the framework of the Programs for 2013.

Assessment of the effectiveness of Measures is carried out in line with the methods “Of Calculation of Indicators of Reduction of Expenses for Purchase of Goods (Work, Services) Calculated for One Item of Products in Real Terms in Prices of 2010” (“Methods”) as approved by the Board of Directors of JSC “Transneft” (Minutes No. 16 dated October 27, 2011).

The “Percentage of the Reduction of Expenses for Purchase of Goods (Works, Services) calculated according to the Methods is included in the target indicators of efficiency of the economic activity of JSC “Transneft”.

The effective system of remuneration following the results of the year’s performance payable to the managers and employees of JSC “Transneft” and organizations of the Transneft system provides for linking of the remuneration payable with achievement of the above efficiency indicators and relative reduction of the remuneration in case of failure to achieve them.