Moscow’s targeted capital investment program in action

In response to the current crisis, the Moscow City Government has made decisions that have helped save the city’s entire social program without reducing construction and commissioning of facilities for social needs. The Targeted Investment Program for 2009 is being fully fulfilled in accordance with the decisions.

For 2009, the limit of capital investments in the city’s Capital Construction Ordering Department was set at 157 billion rubles, of which 61 billion were allocated to housing construction. Construction valued at 94 billion rubles was completed during the first 8 months of 2009, comprising 63% of capital investments. Completed construction valued at 86 billion rubles was financed. A total of 1,952 facilities in 14 targeted programs are being financed under the city’s Targeted Investment Program in 2009. All facilities slated for commissioning in 2009 fall within the capital investment financing limits.

During the first 8 months, the city’s Capital Construction Ordering Department prepared and carried out a total of 402 order placement procedures on facilities of the city’s capital construction investment program in 2009 totaling 59 billion rubles. The city saved 5.4 billion rubles relative to the initial (maximum) value of contracts during the first 8 months of 2009. The cost of construction fell by 8.25% on average. The money saved will be spent on the construction of other objects. The tenders on the facilities of the 2009 Targeted Investment Program are almost finished. City order placement procedures are to be carried out in the 4^th quarter of 2009 on facilities of the City Capital Construction Investment Program for 2010.

During the first eight months, 39 residential buildings totaling 325,000 square meters, 4 health care facilities, 10 schools, 18 kindergartens and 17 sports and recreation centers were commissioned. In addition, by the end of 2009 the city will commission 32 residential buildings totaling 399,700 square meters, 5 health care facilities, 9 schools, 11 kindergartens and 9 sports and recreation centers.

A total of 331 state contracts were concluded in 2009, bringing the total number of valid state contracts to 1681. Particular attention was drawn to the enforcement of state contract obligations. Under Federal Law of July 21, 2005 № 94-FZ “On placing orders for goods, works and services for state and municipal needs”, 4 types of guarantee are defined: Money deposits, bank guarantees, liability insurance and guarantee agreements. The department stopped using liability insurance as a way of guaranteeing the fulfillment of obligations under state contracts because it has proved impossible to force insurance companies to pay claims through the court system.

None of the insurance companies paid claims for losses that the city suffered because of contractors’ failure to meet deadlines, saying that the events were not covered. Insurance company guarantees are now excluded from all tenders, and all contractors must present a bank guarantee, money or a guarantee agreement. More solid contractors, who can be trusted to fulfill state orders, have entered the market. Claims were brought against 25 companies in 2008, and penalty payments were received in 22 cases. Penalties amounted to between 1 and 5 million rubles depending on how soon after the deadline the facility was commissioned.

The crisis has significantly affected the number of bidders, while competition for city orders has intensified. Instead of 3—4 contenders, as in previous years, the city saw 21 contenders per facility in 2009, a record high. There has been an increase in cases involving unscrupulous contractors who resort to forging the tender documentation. There have been cases of forged licenses, commissioning permits and even bank guarantees. All the materials on such cases are handed over to law enforcement agencies, and four criminal cases have been opened.

The city’s decision to stop buying housing as part of investment programs, combined with the practice of making capital investments as part of the Target Investment Program, make it possible to support the city’s construction complex, create jobs, boost wages and successfully implement the city’s social program.