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Chaos in Sheremetyevo Tender

    Tuesday, November. 18, 2003
    The Moscow Times
    City Hall-connected conglomerate Sistema, a top declared contender for the coveted management contract of Sheremetyevo Airport, was eliminated from the bidding with the announcement of the official tender Monday. The rules of the long-awaited tender, published in Rossiiskaya Gazeta, require bidders to have had assets of at least 60 billion rubles ($2 billion) on Jan. 1, 2003, as assessed by one of the "Big Four" auditing firms.
    In international business parlance, the Big Four designates accounting firms Deloitte & Touche, KPMG, PricewaterhouseCoopers and Ernst & Young.
    The tender, however, leaves out Deloitte, which audits Sistema, and lists Baker McKenzie, a law firm, in its place.
    Deloitte also audits East Line, which manages Domodedovo Airport, and Aeroflot, the heaviest user of Sheremetyevo facilities.
    On Monday most companies involved in the bid had either not heard about the mistake or only read about it in Vedomosti.
    "My first impression is that this is a sorry misunderstanding," said Alexander Dumnov, partner at Deloitte & Touche CIS. "It is so dumb, I don't think anyone could do it intentionally. It goes against both common sense and the principles of competition."
    Dumnov said Deloitte is the leading bookkeeper in the air business, providing 33 percent of all air industry audit services conducted by the Big Four.
    "We still have an open interest in the project, and we are trying to decide our next step now," said Olga Pestereva, head of Sistema's press office.
    Yet the written criteria are definitive and will be enforced, said Alexander Parshukov, a spokesman for the Property Ministry, which drafted the rules. He said the "Big Four" is an off-hand, not a legal, term, and therefore only the companies audited by firms listed in the rules will be considered. He could not say why a law firm was included in the quartet.
    Igor Rotenberg, an official at the Property Ministry and head of the working group on the draft rules, could not be reached for comment Monday. Neither could Yury Isayev, first deputy economic development and trade minister and head of the board of directors of Sheremetyevo.
    "It is unquestionably a mistake, but it only shows that they approached this tender carelessly," said Yelena Sakhnova, transportation analyst at United Financial Group, an investment bank.
    She said other conditions restricting competition for the tender, such as the 60 billion ruble asset minimum, were "not self-evident. It seems like the criteria were picked with Alfa Eco in mind," she said.
    Alfa Eco, a subsidiary of Alfa Group and Sistema's main competitor, is audited by PricewaterhouseCoopers and therefore still eligible to bid.
    Igor Baranovsky, the general director of Alfa Eco Sheremetyevo, a subsidiary of Alfa Eco, said: "This is the first heard I've heard of this. No one has even submitted documents, so no one has been ruled out yet.
    The announcement of the tender is long overdue.
    "It's about time -- with Deloitte or not," said Natasha Zagvozdina, an airlines analyst at Renaissance Capital, referring to the long-delayed appointment of a private manager.
    Sheremetyevo is plagued by poor service, long lines and backed up runways. Airlines have been fleeing for Domodedovo or Vnukovo, two other Moscow airports.
    Aeroflot, which is particularly hamstrung by the overcrowded airport and has invested over $10 million into building a third terminal, is also eager for a solution.
    "Who manages these two terminals is not so important, as long as they are competent people. In the new terminal, however, we would like to play an important and direct role," said Lev Koshlyakov, Aeroflot's deputy general director.
    The so-called Sheremetyevo-3 project has been repeatedly delayed due to disagreements between the airline, Sheremetyevo and the government over equity shares in the company that would build and run the new terminal.
    Contenders have 30 days to submit bids for the tender, Parshukov said.


    Alex Fak
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