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. Last Updated: 07/27/2016

PC Tender Favors Foreign Firms

By 5:00 P.M. next Tuesday, all applications have to be in from companies wishing to take part in the first-ever fully open Russian state tender for computer systems. Though something of a landmark for the market, it has provoked little more than anger and incredulity among Russian computer companies -- none of which qualifies to take part.

The Russian Federation has received a $70 million loan from the International Bank for Reconstruction and Development for an employment and social services project administered by the Social Security Ministry. In September it issued an "Invitation for Pre-Qualification" for a tender on the supply of computer equipment to be held in December.

The ministry requires 6,600 IBM-compatible PCs, network software, and MS-DOS operating systems, peripherals and consumables. The order includes installation and support in 800 offices in 27 Russian regions.

The ministry states four minimum requirements for companies to qualify, including: (a) Within the past five years an average annual turnover of at least $500,000,000. (b) Within the past five years the successful fulfillment of at least two contracts for the delivery of a least 1,000 Microsoft-DOS-compatible desktop computers within the Russian Federation, or comparable experience in similar countries.

What has raised anger and suspicion among Russian companies is not just that the first requirement excludes all Russian companies, but that the second, using phrases like "comparable experience in similar countries," could include large foreign companies regardless of experience in Russia.

The IBRD, an arm of the World Bank, has already approved these requirements and refuses involve itself in the controversy. Molineus Hasse, manager of the Moscow representation of the IBRD, said that once money has been dispersed for a loan, ordering for projects is the responsibility of the borrower.

Vyacheslav Savinov, head of the Social Security Ministry's Department of Automation and Information Technologies, agrees that the qualification requirement effectively and intentionally excludes any Russian company from taking part in the tender.

The Association of Russian Producers of Computer Systems and Software, which represents several of the largest Russian computer assembly and integration firms, has sent a complaint to President Boris Yeltsin. In a statement issued last week, it said qualification was structured so that "in fact only one or two well-known foreign firms can take part in the first stage of the tender. It can hardly be called a tender; it is nothing but a badly set-up transfer of a good order to a concrete foreign firm."

Large Russian distributors are equally aggrieved. "The document asks for 'comparable experience in similar countries' because [the ministry] looked for similar projects that foreign companies have undertaken in Russia, and they found none; no foreign company here has the infrastructure to take on this project," said Anatoly Karachinsky, general director of IBS, a distributor of Dell Computers. In reality, whoever signs the contract, it will be a Russian company that is in charge of installation, service and support. That the machines that end up on people's desks will almost certainly carry U.S. or European brand names is irrelevant. What counts is that they arrive intact, that they be installed properly, that they work, and that if they break down they be repaired.

Konstantin Naumenko, of ELKO Technology, a Moscow-based systems- integration firm that is a contractor in a USAID-funded project to help the State Property Committee set up a nationwide securities market, said the situation is too stupid to be suspicious.

"The restrictions laid out for this tender are nonsense," he said. "We have taken part in a similar, smaller project, and shown that we are perfectly reliable. Of course they don't want to waste time processing applications of small, unknown firms. But the person who made this decision maybe was not sufficiently professional or knowledgeable. There are a lot of unfortunate laws and regulations being issued -- and this is one of them."

The project covers such a mammoth area that it may turn out to be a poisoned chalice for the winner. That firm will be contracted to provide one-hour response times for maintenance and repair in 800 locations scattered across the Russian Federation. This would be unprecedented here.

Nevertheless it is remarkable that while around the rest of the world national governments bend over backwards to favor domestic firms, the Social Security Ministry seems determined to do exactly the opposite.

Robert Farish is the editor of "Computer Business Russia" Tel: (7 095) 198-6207.

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