Statement by Deloitte and Russian Railways on technical and price audit of East Russia objects
In connection with the appearance in the media of distorted information about an audit on the project documentation of a number of objects in the East Russia modernisation programme, Deloitte and Russian Railways deem it necessary to make the following statement.
Deloitte notes that a technological and price audit (TPA) was performed during the development stage of construction documents, so discussion about any cost overruns is unnecessary. On the contrary, the TPA's results reflect the potential savings that can be achieved on implementing the changes to the technical solutions and budget calculations as proposed by the auditor.
It is also important to note that savings of 45% will be achieved in the event that the construction of the second track will be cancelled in favour of passing loops and require an adjustment of the project's target indicators with regard to the target through capacity of individual stretches.
As the audit shows, to achieve the specified through capacity and the requisite number of pairs of trains per day, it is necessary to build a second track on some stretches, for example between Ikabya - Senatorsky and Ulkan - Umbella, but the required through capacity in terms of a million ton per annum is ensured by a double-track insert. Depending on the specific stretch, the specific potential savings can reach 30% of the construction budget.
Decisions to change the programme's technical certification are taken by the Russian Government. Deloitte therefore considers it appropriate to raise the issue, at least, at the level of the Board of Directors of Russian Railways, which is headed by Russian Deputy Prime Minister Arkady Dvorkovich.
With regard to the overall savings that can be achieved over the entire project, Deloitte believes that, based on several objects, it is still too early to draw conclusions. A total of 72 object are subject to TPAs, and a figure of 40-45% still represents the upper limit to optimising individual stretches based on the revision of both the price and technical parameters
At the same time, the actual cost of the objects will inevitably differ from the estimates, for example due to additional work and unforeseen expenses etc. In this regard, the auditor recommends that Russian Railways do not stop the TPA during the development phase of the project and estimate documentation, but also ensures continuous monitoring of the work in progress, which can guarantee both a record of all the TPA recommendations and independent control over the project's implementation.
For its part, Russian Railways notes that in accordance with decisions of the Government Commission on Transport, 72 railway infrastructure objects in Eastern Russia must undergo a technological and price audit of their project documentation. Of these, the final decision on implementing 12 objects will be made at meetings of the Interagency Working Group on the Development of Rail Transport.
In 2015, 30 rail facilities in Eastern Russia were audited. The Government Commission on Transport approved adjustments to the detailed action plan for the modernisation of the Baikal-Amur Main Line and the Trans-Siberian Railway at its session on 28 December 2015.
In accordance with this adjustment, the total project cost was reduced by 8.3 billion roubles from 562.4 to 554.1 billion roubles. Thus, savings by the Sovereign Wealth Fund currently stand at 2.3 billion roubles, while federal budget savings amount to 6 billion roubles.
Russian Railways will continue to work with auditors and experts to optimise the cost of modernising the railways in Eastern Russia.