Procurement Practices

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One of the principles of procurement is to provide all potential suppliers with equal opportunities to participate in the procurement process.

At the same time, the current system of procurement of goods provides for an open tender or purchases by the method of requesting price proposals only among the commodity producers of the purchased goods in the Register of Producers of the Holding Company, and also only among the organizations of the disabled who produce the purchased goods, which are in the Register of organizations of the disabled. In addition, the Rules provide for special conditions for the procurement of goods that are used by Subsurface Users of the Holding that have concluded subsoil use contracts before January 1, 2015, before the expiration of such contracts or until January 1, 2021, whichever comes first. These special conditions stipulate that Subsoil users are obliged in accordance with the requirements of clause 3 of article 78 of the Law of the Republic of Kazakhstan “On Subsoil and Subsoil Use” to purchase goods from Kazakhstan producers of goods provided they meet the requirements of the project document and the legislation of the Republic of Kazakhstan in the field of technical regulation.

The procurement process includes the following main steps:

  • development and approval of the annual (long-term) procurement plan;
  • selection of the supplier;
  • conclusion and execution of the procurement contract.

The choice of the suppliers of JSC NC “KazMunayGas” and its SDEs is mainly carried out by way of holding an open tender with the use of tenders for downgrade, in the manner of requesting price proposals, as well as from one source, in accordance with the Rules of Procurement of Goods, Work and Services of Samruk-Kazyna JSC (hereinafter – the Rules).

All purchases by the way of conducting an open tender with the use of tenders for a reduction, by the way of requesting price offers are conducted through the Electronic Procurement Information System in accordance with the Instruction for electronic procurement.

An important aspect in choosing a supplier of goods, works, services is the conduct of procurement procedures in strict accordance with the Fund’s procurement rules without the admission of violations affecting the outcome. This indicator is included in the Key Performance Indicators Card of KMG executives and its SDEs.

The Board of Directors of JSC NC “KazMunayGas” approved the Regulation on procurement of goods, works and services for JSC NC “KazMunayGas” and its subsidiaries. This Regulation was developed on the basis of Samruk-Kazyna Holding’s Purchasing Management Standards and determines the procedure for the formation of Category Lists, Procurement category groups, the implementation of Purchasing category strategies, procurement planning, supplier selection procedures, and procedures related to maintaining the optimal stock size in KMG and KMG Organizations. This Regulation currently operates in a part that does not contradict the Fund’s Purchase Rules.

The Fund has developed and approved a Special Procedure for Procurement among Qualified Potential Suppliers, which provides for pre-qualified selection of potential suppliers and the formation of a database of potential suppliers that have passed prequalification.

In general, the volume of purchases of goods, works and services from resident companies of the Republic of Kazakhstan (irrespective of the nationality of their employees and the availability of certificates on the origin of the goods of the form “ST-KZ”) amounted to:

KZT bn

Year

Total

Goods

Works and services

2015

1,481

570.7

910.3

2016

1,602.5

637.5

965

2017

2,257.9

775.1

1,482.8

Thus, in 2017 the purchase of goods, works and services from resident companies of the Republic of Kazakhstan amounted to KZT 2,257.9 billion, which is 88.4 % of the total amount of purchases.

At the same time, the calculation of the share of local content in the procurement of goods, works and services is carried out on the basis of the Unified Calculation Methodology by local content organizations in the procurement of goods, works and services approved by Order No. 87 of the Minister for Investment and Development of the RoK of January 30, 2015.

The word “local” means domestic enterprises that produce goods and have a certificate of origin of the form “ST-KZ”, which indicates the percentage of the share of local content. When calculating local content in a contract for the performance of work (the provision of services, except for the contract for performance of work (rendering services) purchased in the framework of subsoil use contracts, the share of the payroll of Kazakhstani personnel in the total wage fund of employees is taken into account.

The total amount of goods, works and services and the share of local content (KZT bn)

Year

Total

LC Share,%

Goods

Works / services

 

 

amount

LC Share,%

amount

LC Share,%

2015

1,669

77

620

81

1,049

74

2016

1,871

76

721

83

1,149

71

2017

2,553

75

863

79

1,690

73