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ANNEXES

APPROVED BY

Rosneft Board of Directors

Decision dated 30 November 2018

Minutes dated 03 December 2018 №11

Effective from 28 December 2018

By Order of Rosneft Oil Company

dated 13 December 2018 №799

COMPANY’S REGULATIONS

ON PROCUREMENT OF GOODS, WORKS AND SERVICES

№ P2-08 R-0019

VERSION 3.00

MOSCOW

2018

CONTENTS

INTRODUCTORY PROVISIONS6

PURPOSE6

SCOPE6

VALIDITY AND AMENDMENT PROCEDURE7

1.TERMS AND DEFINITIONS9

2.DESIGNATIONS AND ABBREVIATIONS19

3.GENERAL PROVISIONS21

3.1.PURPOSES OF PROCUREMENT ACTIVITIES21

3.2.PRINCIPLES OF IMPLEMENTATION OF PROCUREMENT ACTIVITIES21

3.3.PROCUREMENT PROCESSES22

4.SUBJECTS OF PROCUREMENT ACTIVITIES23

4.1.CUSTOMER23

4.2.PROCUREMENT ORGANIZER23

4.3.SELLER WHO ANNOUNCES A COMPETITIVE SALE PROCEDURE24

4.4.SUPPLIER, PROCUREMENT PARTICIPANT, WINNER24

4.5.PROCUREMENT AUTHORITY24

4.6.EP OPERATOR24

5.METHODS AND VARIETIESOF PROCUREMENT, AND TERMS OF APPLICATION THEREOF25

5.1.GENERAL PROVISIONS25

5.2.COMPETITIVE PROCUREMENT25

5.3.NON-COMPETITIVE PROCUREMENT: PROCUREMENT FROM A SINGLE SUPPLIER29

5.3.1.GENERAL PROVISIONS29

5.3.2.PLANNED PROCUREMENT FROM A SINGLE SUPPLIER30

5.3.3.PROCUREMENT FROM A SINGLE SUPPLIER BY REASON OF URGENCY33

5.4.VARIETIES OF PROCUREMENT AND TERMS OF APPLICATION THEREOF34

6.INFORMATION SUPPORT OF PROCUREMENT ACTIVITIES41


6.2.PLACE (METHOD) AND TIMELINES FOR POSTING INFORMATION42

6.3.TIMEFRAMES FOR PERFORMANCE OF ACTIVITIES AND PROCEDURES BY THE CUSTOMER, BY THE SUPPLIER, BY THE PROCUREMENT PARTICIPANT54

7.CHECK OF THE SUPPLIERS58

7.1.ACCREDITATION58


7.1.2.EXCEPTIONS IN THE COURSE OF IMPLEMENTATION OF ACCREDITATION PROCEDURE60

7.1.3.REJECTION OF ACCREDITATION DOCUMENTS61

7.1.4.ANNULMENT OF ACCREDITATION RESULTS62

7.1.5.CONSEQUENCES OF FAILURE TO OBTAIN ACCREDITATION OR OF ITS ANNULMENT62

7.1.6.NOTICE TO SUPPLIERS62

7.2.CHECK OF THE SUPPLIERS FOR PETTY PROCUREMENT62

8.QUALIFICATION BY PRODUCT TYPE65


8.2.PROCEDURE FOR QUALIFICATION FOR TYPES OF PRODUCTS OUTSIDE THE PROCUREMENT PROCEDURE66

8.3.PROCEDURE FOR QUALIFICATION BY TYPES OF PRODUCTS IN THE COURSE OF COMPETITIVE PROCUREMENT68

8.4.REJECTION OF DOCUMENTS FOR QUALIFICATION BY TYPES OF PRODUCTS68

8.5.ANNULMENT OF THE RESULTS OF QUALIFICATIONS BY PRODUCT TYPES.68

8.6.CONSEQUENCES OF NON-COMPLETION OR ANNULMENT OF QUALIFICATION BY TYPES OF PRODUCTS69

8.7.NOTICE TO SUPPLIERS69

9.PROCUREMENTPLANNING70


10.PREPARATION FOR IMPLEMENTATION OF COMPETITIVE PROCUREMENT PROCEDURE72


10.2.ANNOUNCEMENT OF THE FORTHCOMING PROCUREMENT PROCEDURE72

10.3.HOLDING A CONFERENCE TO EXPLAIN THE PROCUREMENT PARAMETERS73

10.4.PREPARATION AND APPROVAL OF THE NOTICE ABOUT THE PROCUREMENT, AND OF PROCUREMENT DOCUMENTATION73


10.4.2.STIPULATION OF REQUIREMENTS TO THE PROCUREMENT PARTICIPANT74

10.4.3.ESTABLISHMENT OF REQUIREMENTS TO THE PRODUCTS AND THE DESCRIPTION THEREOF78

10.4.4.ESTABLISHMENT OF THE INITIAL (MAXIMUM) PRICE OF THE AGREEMENT (LOT), OR THE PRICE FORMULA, OR THE UNIT OF PRODUCTION, AND THE MAXIMUM VALUE OF THE AGREEMENT PRICE80

10.4.5.PROCUREMENT CURRENCY81

10.4.6.BASIS OF DELIVERY81

10.4.7.ESTABLISHMENT OF THE REQUIREMENTS TO THE TERMS AND CONDITIONS OF THE AGREEMENT AND THE OBLIGATIONS HEREUNDER81

10.4.8.SETTING THE REQUIREMENTS FOR ENSURING THE APPLICATION SECURITY AND THE CONDITIONS OF RETURN/RETENTION OF THE APPLICATION SECURITY83

10.4.9.IDENTIFICATION OF REQUESTS (CRITERIA)85

10.4.10.ANTI-DUMPING MEASURES IN THE COURSE OF THE PROCUREMENT86

10.4.11.ESTABLISHMENT OF CRITERIA AND PROCEDURE OF BID ASSESSMENT87

10.4.12.ESTABLISHMENT OF THE POSSIBILITY TO SUBMIT ALTERNATIVE BIDS AS PART OF THE APPLICATION90

10.4.13.OTHER CONDITIONS OF PROCUREMENT90

10.4.14.EXECUTION AND APPROVAL OF THE NOTICE, AND OF PROCUREMENT DOCUMENTS90

11.CONDUCTING COMPETITIVE PROCUREMENT PROCEDURE94

11.1.ENERAL PROVISIONS94

11.2.ANNOUNCEMENT OF THE PROCUREMENT PROCEDURE95

11.2.1.POSTING OF THE NOTICE AND THE PROCUREMENT DOCUMENTATION95

11.2.2.CLARIFICATION OF THE TERMS AND CONDITIONS OF THE NOTICE AND/OR PROCUREMENT DOCUMENTATION95

11.2.3.AMENDMENT OF THE NOTICE AND/OR PROCUREMENT DOCUMENTATION. ANNULMENT OF THE PROCEDURE OF PROCUREMENT96

11.3.PREPARATION AND SUBMISSION OF THE BIDS FOR PARTICIPATION IN THE PROCUREMENT PROCEDURE. SECURING THE BID FOR PARTICIPATION IN THE PROCUREMENT PROCEDURE96

11.4.RECEIPT AND GRANTING OF ACCESS TO THE SUBMITTED BIDS/OPENING THE SUBMITTED BIDS FOR PARTICIPATION IN THE PROCUREMENT PROCEDURE100

11.5.DRAWING UP OF MINUTES IN THE COURSE OF THE PROCUREMENT PROCEDURE101

11.6.EXAMINATION OF THE APPLICATIONS OF THE PROCUREMENT PARTICIPANTS AND SUMMARIZING THE RESULTS OF THE PROCUREMENT102


11.6.2.RECEIPT OF CLARIFICATIONS FROM THE PROCUREMENT PARTICIPANTS104

11.6.3.SELECTION OF BIDS106

11.6.4.EVALUATION AND COMPARISON OF BIDS. SELECTING THE WINNER109

11.6.5.SPECIFICS OF THE AUCTION PROCEDURE110

11.6.6.NEGOTIATIONS112

11.6.7.RE-BIDDING PROCEDURE. RECEIVING THE FINAL BID OR AN ADDITIONAL QUOTATION OF THE SINGLE PARTICIPANT OF THE COMPETITIVE PROCUREMENT PROCEDURE114

11.6.8.RENDERING THE COMPETITIVE PROCUREMENT PROCEDURE NULL AND VOID117

11.7.EXPLANATION OF THE PROCUREMENT RESULTS, ASSESSMENT AND OUTCOME OF THE PROCUREMENT PROCEDURE TO THE PARTICIPANTS117

11.8.RETURN OF THE SECURITY FOR PARTICIPATION IN THE PROCUREMENT118

11.9.PECULIARITIES OF CLOSED COMPETITIVE PROCUREMENTS119

11.10.PECULIARITIES OF CLOSED COMPETITIVE PROCUREMENTS WITH LIMITED PARTICIPATION121

11.11.DECISION ON CONCLUSION OF THE AGREEMENT WITH THE SINGLE PARTICIPANT OF THE COMPETITIVE PROCUREMENT122

12.PREPARATION AND IMPLEMENTATION OF THE NON-COMPETITIVE PROCUREMENT PROCEDURE123


12.2.PREPARATION FOR IMPLEMENTATION OF COMPETITIVE PROCUREMENT PROCEDURE123

12.2.1.GENERAL REQUIREMENTS123

12.2.2.ESTABLISHMENT OF REQUIREMENTS TO THE PRODUCTS123

12.2.3.ESTABLISHMENT OF THE INITIAL (MAXIMUM) PRICE OF THE AGREEMENT (LOT), OR THE PRICE FORMULA, OR THE UNIT OF PRODUCTION, AND THE MAXIMUM VALUE OF THE AGREEMENT PRICE124

12.2.4.ESTABLISHMENT OF THE REQUIREMENTS TO THE TERMS AND CONDITIONS OF THE AGREEMENT AND THE OBLIGATIONS HEREUNDER124

12.3.CONDUCT THE NON-COMPETITIVE PROCUREMENT PROCEDURE. PUBLISHING INFORMATION ON THE PROCUREMENT125

12.4.PECULIARITIES OF PROCUREMENT FROM A SINGLE SUPPLIER USING COS127


12.4.2.CARRYING OUT OF THE PRICE REQUEST PROCEDURE IN THE COS127

12.4.3.PROCEDURE FOR SELECTION OF PRICE QUOTATIONS IN THE COS128

13.SPECIAL PROCUREMENT PROCEDURES131

13.1.THE PRIORITY OF THE GOODS OF RUSSIAN ORIGIN, WORKS, SERVICES PERFORMED BY RUSSIAN PARTIES131

13.2.PECULIARITIES OF PARTICIPATION IN PROCUREMENT PROCEDURES OF FOREIGN PROCUREMENT PARTICIPANTS131

13.3.FRAME (PRICE LIST) AGREEMENT;131

13.4.PECULIARITIES OF PROCUREMENT ORGANIZATION DURING THE IMPLEMENTATION OF PROJECTS IN THE TERRITORY OF FOREIGN COUNTRIES, AND IMPLEMENTATION OF JOINT PROJECTS132

13.5.PROCUREMENT OF PRODUCTS SUBJECT TO EXPORT CONTROL133

13.6.PECULIARITIES OF PROCUREMENT WHEN IMPLEMENTING THE INVESTMENT PROJECTS WITH STATE SUPPORT, INCLUDED IN THE REGISTER OF INVESTMENT PROJECTS133

13.7.PECULIARITIES OF PROCUREMENT OF CERTAIN TYPES OF GOODS, WORKS, PROVISION OF SERVICES, AND LEASE (INCLUDING CHARTERING AND FINANCIAL LEASE)133

13.8.PECULIARITIES OF PROCUREMENT FROM SMES134

14.PROCEDURE AND PECULIARITIES OF CONCLUSION AND MODIFICATION OF THE AGREEMENT CONCLUDED BASED ON THE RESULTS OF THE PROCUREMENT. EXECUTION OF THE AGREEMENT136

14.1.AGREEMENT CONCLUSION PROCEDURE136

14.2.PRE-AGREEMENT NEGOTIATIONS137

14.3.EVASION OF THE CUSTOMER FROM THE CONCLUSION OF THE AGREEMENT138

14.4.CONSEQUENCES OF THE PERSON’S EVASION FROM THE CONCLUSION OF THE AGREEMENT138

14.5.EXECUTION OF THE AGREEMENT139

14.6.CHANGE, TERMINATION OF THE AGREEMENT139

15.APPEALING THE ACTIONS (INACTION) OF THE PROCUREMENT AUTHORITIES141

15.1.TERMS OF APPEAL141

15.2.PROCEDURE FOR SUBMISSION AND PROCESSING OF COMPLAINTS141

15.3.ACTIONS CARRIED OUT UPON THE RESULTS OF PROCESSING THE COMPLAINT143

16.PREPARATION OF THE REPORTING144

16.1.STATISTICS REPORTING144

16.2.REPORTING PUBLISHED IN SIS144

17.REFERENCES145

ATTACHMENTS146

CONTENTS

COMPANY'S REGULATIONS “ON PROCUREMENT OF GOODS, WORKS AND SERVICES” OF ROSNEFT AND THE COMPANIES OF THE GROUP”

No. P2-08 R-0019 VERSION 1.00

PAGE 148 OF 1

The copyright of this local regulatory document (LRD) is owned by Public Join-Stock Company Oil Company Rosneft (Rosneft). LND shall not be reproduced, copied or distributed in any form, fully or partially, without permission of Rosneft.

© ® PJSC NK Rosneft, 2018

COMPANY'S REGULATIONS “ON PROCUREMENT OF GOODS, WORKS AND SERVICES”

№ P2-08 R-0019 VERSION 3.00

FOR REFERENCE. Downloaded from Rosneft NOB database: 28.06.2019 17:02

PAGE 5 OF 146

INTRODUCTORY PROVISIONS

PURPOSE

The Company’s Regulations «On Procurement of Goods, Works and Services» (hereinafter referred to as the «Regulations») define the uniform procedure for procurement activities, requirements, main objectives and principles for organization and conduct of procurement activities, as well as contain a description of the main elements governing procurement of goods, works and services at Rosneft Oil Company and the Group Companies.

This Regulation has been adopted in keeping with the requirements of Federal Law No. 223-FZ «On Procurement of Goods, Works, and Services by Selected Types of Legal Entities» dated July 18, 2011 and other legislative acts of the Russian Federation in the field of procurement.

SCOPE

This Standard shall be binding on employees of Rosneft Business Units and Rosneft Subsidiaries for which the Articles of Association, shareholders' agreements and other agreements with partner companies do not specify a special procedure for the shareholders/participants to exercise their rights, including the rights on the Association management, involved in supplying Rosneft and the Companies of the Group with the necessary goods, works and services.

These Regulation is advisory for the employees of other Companies of the Group not being subsidiaries of Rosneft.

The requirements of the Regulation shall become mandatory for execution at the Subsidiaries or Dependent Companies of Rosneft, as well as other Company of Group, in which Rosneft is directly or indirectly participating, and which is subject to the rules of Federal Law № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» dated 18.07.2011 from the date of enactment of these Regulations by order after the adoption of a decision on the approval (addition) of the Regulations:

· on the Board of Directors (Supervisory Board) – for Companies organized in the form of a joint-stock company or, if the Articles of Association of a joint-stock company contemplate discharge of the functions of the Board of Directors (Supervisory Board) by the General Meeting of the Company’s shareholders, on the collective executive authority of the Company, or for the lack thereof, on the General Meeting of the Company shareholders;

· on the General Meeting of the Company’s Members – for Companies organized in the form of a limited liability company, or, if the approval of the Regulation on procurement is referred by the Articles of Association of the limited liability company to the competence of the Board of Directors (Supervisory Board) of the Company or collective executive authority of the Company, on such Board of Directors (Supervisory Board) of the Company or the collective executive authority of the Company.

The requirements of this Regulation shall be binding in Subsidiaries or Dependent Companies of Rosneft and in any other company where Rosneft participates directly or indirectly, and to which the provisions of Federal Law № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» dated July 18, 2011 do not apply from the effective date of this Regulation at the Company in accordance with the Company’s Articles of Association and in accordance with the procedure stipulated at the Company.

For the purposes of execution of Agreements with those participating in the discharge of the Customer’s functions as established herein, the Business Units of Rosneft and Companies of the Group shall include a section on strict compliance with the provisions of the Regulation by such persons into the terms of such Agreements.

The Regulation governs procurement activities with the exception of any cases contemplated by part 4 art. 1 of the Federal law № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» dated July 18, 2011. The Regulation also governs procurement by Rosneft and all the Companies of the Group, regardless of whether the provisions of Federal law № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» dated July 18, 2011 apply to them or not.

The Regulation also does not govern any procedures, which take place before the conclusion of the deals [footnoteRef:2]by the Companies of the Group, to whom the provisions of Federal law № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» dated July 18, 2011 do not apply: [2: Such procedures may be governed by the local regulatory documents and/or administrative documents of Rosneft/Companies of the Group.]

· financial services from banks and stock exchanges;

· banking services (opening of bank accounts, and bank deposits), bank loans and credits;

· procurement of products from Rosneft and the Companies of the Group;

· transfer of powers of the sole executive body of the managing company;

· lease of land and/or real estate from state and local authorities;

· sponsorship/charitable activities;

· acquisition of assets.

If the notice of procurement and documentation on procurement are published before the effective date of this Regulation or amendments hereto, such procedure shall be performed and its results shall be summarized in accordance with the procedure in force at the time of the publication of the notice and procurement documentation.

No administrative, local regulatory or other internal documents may contradict this Regulation.

VALIDITY AND AMENDMENT PROCEDURE

This Regulation is a permanent local regulatory document.

This Regulation is approved, recognized as ceased to be in force, and amendments to it are introduced at Rosneft on the basis of a decision of the Board of Directors of Rosneft and put into force by Rosneft’s order.

Amendments to this Regulation are introduced in the following cases: change of the law of the Russian Federation, change of the organizational structure or the authorities of the management, etc.

Introduction of amendments to this Regulation is initiated by: Planning, Automatization and Efficiency Department of Rosneft, and other Business Units of Rosneft in coordination with Planning, Automatization and Efficiency Department of Rosneft.

INTRODUCTORY PROVISIONS


№ P2-08 R-0019 VERSION 3.00


PAGE 14 OF 146

TERMS AND DEFINITIONS

ACCREDITATION - means the procedure for the check of Suppliers for conformity to the minimal stipulated requirements with respect to their legal status, financial stability, good standing and business reputation, carried out within the framework of the measures aimed at combatting corruption and preventing fraudulent acts.

ASSET - means a legal entity or the participation in an agreement on product sharing, a service contract, a joint venture agreement or a similar entitlement to (dividing) proceeds of business.

Note:

The term Asset shall mean, among other things, entities, which are under the control of the Asset if the Asset is a holding structure.

The concept of an Asset in respect of Assets, in the form of participation in production sharing agreements, service contracts, agreements on joint activities or similar documents giving the right to (divide) profits from doing business, shall only be applied to agreements, as a result of which Rosneft or a Company of the Group as a party in any form (including, but not limited to, initial conclusion, assignment of rights, novation), Rosneft acquires the control over the legal entity.

ALTERNATIVE BID - means a bid in the application of the Procurement Participant, which is in addition to the main bid and contains one or more organizational and technical solutions, specifications of the goods to be delivered or other terms of the agreement amended as compared to those contained in the main bid.

ANNOUNCEMENT - means aninformation release, which is not an official procurement notice, and which is intended for notification of the market of the forthcoming procurement in advance.

AUCTION - means a procurement method, by which the winner of the auction, with whom the contract is concluded, shall be the person, whose application meets the requirements established by the procurement documentation and who has offered the lowest contract price by lowering the initial (maximum) contract price specified in the notice of the auction, down to the value established in the procurement documentation ("auction step").

Note: if during the auction the contract price is reduced to zero, the auction is held for the right to conclude the agreement. In this case the winner of the auction shall be the person, whose application complies with the requirements set by the procurement documentation and who has offered the highest price for the right to conclude the agreement.

AUCTION/REDUCTION PRICE INCREMENT - means the possible (amount of) reduction of the price during the auction, as established in the procurement documentation. If the price of the agreement is reduced to zero during the auction, and the auction shall be held for the right to enter into the contract, it means the increase of the price for the right to enter into the contract.

AUTHORIZED PERSON - means a person who is authorized to manage and perform certain activities.

ACCREDITATION NOTICE - means a notice from the Supplier of the results of their accreditation.

ADMINISTRATIVE DOCUMENT - means a type of internal document of Rosneft or a Group Company, which contains the solution of administrative and organizational matters and the issues related to management, cooperation, supporting and regulating the activities of Rosneft or a Group Company, their business units and their officials.

ASSESSMENT - procedure for consideration of the Procurement Participants’ bids, in the course of which, according to the criteria established in the notice, the procurement documents, and the procedure of assessment and comparison of bids, the bids shall be ranked in order to identify the most preferable bid.

ASSESSMENT OF BIDS BY THE REBASED PRICE - means assessment of the bids, when the assessment and comparison of the accepted Procurement Participants’ bids shall be carried out at the price calculated by unifying the bid’s parameters (including currency of settlement, terms of payment, basis of delivery, etc.), according to the procedure established in the procurement documentation (according to the formula of the price calculation).

ASSESSMENT OF BIDS BY THE TOTAL OWNERSHIP COST (PRODUCT LIFE-CYCLE) - means the method of assessment of bids for participation in the procurement procedure, where the assessment and the comparison of the allowed bids of the Procurement Participants is carried out at the estimated cost of ownership of the products, taking into account the total costs throughout the entire life cycle of the purchased products (from acquisition to liquidation/utilization), according to the procedure established in the procurement documentation (according to the formula of the price calculation).

ASSESSMENT CRITERION - means an attribute that defines the preference for the bid of the Procurement Participant.

APPLICATION FOR PARTICIPATION IN THE PROCUREMENT PROCEDURE (BID) - means a set of documents prepared by the Supplier, which contains the proposition to make an agreement subject to specific conditions, and other information/documents prepared in accordance with the form and submitted in accordance with the procedure stipulated in the procurement documentation.

ADDITIONAL QUOTATION - is the quotation of the Procurement Participant, which improves the bid, originally submitted by the Procurement Participant in terms of the price of the agreement (lot), which is submitted in the manner specified in the decision to collect additional price quotations, in accordance with the procurement documentation.

AGREEMENT - means an agreement between two or more persons on establishing, change or termination of civil rights and duties.

Note: For the purposes of this document, an agreement shall also be understood as all appendices, addendums, and other documents to be signed in addition to the agreement, and which stipulate, change or terminate the rights and obligations of the parties or make some term of the agreement more precise.

BENEFICIARY – means:

1) In relation to Subsection 7.1 of this Regulation:

the real property owner (including stocks, shares, participatory interests in the enterprise’s authorized capital), individual or legal entity that obtains revenue from his/its assets, including any assets placed into trust with another individual or legal entity, or from use of such assets by any third parties.

Note: The requirement to disclose the beneficiaries chain may involve the need to disclose the entire ownership chain, including ultimate beneficiaries, who may be represented by individuals, investment and mutual funds, government and municipal authorities, and public companies.

2) In relation to Subsection 11.3 of this Regulation:

the creditor (Rosneft or a Company of the Group), in favor of whom an independent guarantee is issued, and who, upon the occurrence of circumstances provided for in an independent guarantee, is entitled to receive the cash, according to it.

BID RANKING - means the procedure that is conducted in the course of the procurement and aimed at the placement (comparison) of bids, in descending order of the degree of their attractiveness (the most attractive bid cones first) in accordance with the criteria established in the notification, procurement documents, and with the procedure of assessment and comparison of bids.

BIDDING - means a competitive procurement procedure conducted in one of the following ways: tender (open tender, electronic tender, closed tender), auction (open auction, electronic auction, closed auction), request for quotations (electronic request for quotations, closed request for quotations), request for proposals (electronic request for proposals, closed request for proposals).

CUSTOMER - means Rosneft or the Group Company, for which the procurement is intended.

CLOSED PROCUREMENT PROCEDURE - means the procurement procedure, the information on which shall not be published in open sources of information, in accordance with the current legislation of the Russian Federation and the Regulations of the Company "On Procurement of Goods, Works and Services", and where only specifically invited Suppliers can participate.

COLLECTIVE PROCUREMENT PARTICIPANT - means the Procurement Participant comprised from several legal entities acting as a single party in the course of the procurement procedure, regardless of the form of business ownership, type of company, location or capital origin place, or several persons, including sole traders acting for a single Participant.

COMMERCIAL PART (OF THE BID) - means the part of the bid containing the information on the commercial terms of the agreement offered by Procurement Participant, the composition whereof shall be established in the procurement documentation.

COMMERCIAL TERMS (OF THE AGREEMENT) - means the price, method and terms of payment, pricing method, cost components (including or excluding the expenses for transportation, insurance, payment of customs duties, taxes and other obligatory payments), unit prices and other terms of implementation of the agreement, which are referred to the price of the agreement or derivatives thereof.

COMPETITIVE PROCUREMENT - means the procurement procedure, carried out simultaneously with the following conditions - the information on such procurement shall be communicated by a) posting in the Unified Information System and/or on the Company's website accessible to unlimited number of persons, or b) by sending an addressed invitation to participate in a closed procurement not less than two persons who can carry out the supplies, the works, provide the services that are the subject to procurement; c) when describing the subject to the procurement, the procurement documentation complies with the rules and requirements established by the legislation of the Russian Federation and this Regulation.

COMPETITIVE NEGOTIATIONS - means a competitive procurement method, which does not amount to an auction, where, after negotiations with Procurement Participants, the Procurement Participant, whose application for participation in competitive negotiations meets the requirements of the procurement documentation and whose bid satisfies best the requirements stipulated in the procurement documentation, in accordance with the criteria and procedure of assessment, is recognized as the Winner.

CONSOLIDATED LOT - means a lot that includes the requirement of more than one Customer.

CONFLICT RESOLUTION COMMISSION - means the Commission for consideration of requests (complaints) of Procurement Participants in respect of actions (inactions) of the bodies and/or officials of the Customer/Procurement Organizer in the process of procurement.

COORDINATION BODY OF THE GOVERNMENT OF THE RUSSIAN FEDERATION - means the collective body established in accordance with the procedure established by law by the Government of the Russian Federation for the approval of the Customers’ purchases in cases provided for by the Federal Law of 18.07.2011 № 223‑FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities».

CORPORATE ONLINE STORE - means hardware-software complex, which ensures carrying out of purchases with the exchange of electronic documents or other information in digital form using the Internet.

CONCURRENT PROCESSING - means the processing of parts of Procurement Participants’ bids, where the decision subject to the results of selection of all parts of the bids (qualification, technical, and commercial ones) will be published simultaneously.

CUSTOMER’S OPTION - means the customer’s right to change the quantity of the goods to be delivered, and the volume of works, upward or downward, within the limits stipulated by the agreement, without changing any other of the agreed terms (including the unit price of the products).

CONSOLIDATED PROCUREMENT PROCEDURE (CONSOLIDATED PROCUREMENT) - means a procurement procedure for products carried out by the Procurement Organizer (in particular, by one of the Customers, whose requirement is included into consolidated procurement) in the interests of several Customers simultaneously.

DIVISIBLE LOT - means a lot that may be divided among several Winners.

ELECTRONIC TRADING PLATFORM - means a software-cum-hardware complex designed to perform the procurement procedures electronically.

ELECTRONIC FORM OF PROCUREMENT - means the form of performance of the procurement procedure that calls for electronic means:

a. of the electronic trading platform, or

b. any other information available in the automated system in order to obtain the bids of the Procurement Participants in an electronic form, signed by an electronic signature, which allows to establish that the bid has come from the Procurement Participant (only for the Second Type Customers).

E-DOCUMENT - means a documented information that is presented in electronic form, i. e. in the man-readable form, using computers, and is aimed for transmission via information and telecommunication networks or processing in information systems.

ELECTRONIC DIGITAL SIGNATURE - means information in an electronic form that is attached to or otherwise linked to other information in an electronic form (signed information) or otherwise connected with such, and used to identify the person signing such information.

FINANCIAL LEASE - means the type of the transaction, under which the landlord shall be obliged to acquire the ownership of the property, specified by the tenant, from the seller appointed by them, and provide the tenant with this property, at a charge, for temporary possession and use.

FREIGHT - means the lease of a vehicle under a contract, at a charge (by lease, under a service contract, etc.).

FINAL BID - of the Procurement Participant, specifying/improving the original bid submitted by the Procurement Participant in terms of the application parameters, the composition of which is established in the procurement documents (i.a. in terms of functional characteristics (consumer properties) of the purchased products, and in terms of other conditions of the agreement performance).

INNOVATIVE PRODUCTS - means new or improved products (or technological process) sold in the market and those referred to such products, subject to the resolution of competent executive authorities of the Russian Federation.

LOCAL REGULATORY DOCUMENT - means an internal (applicable within the perimeter of the Company's activities) controlling document in the established form adopted (approved) by the authorized management body or official in accordance with delegated authority in compliance with the procedures established by the Company, where, for the purposes of repeated application, rules and requirements for the Company's activities are established, including those for the employees, production and/or management processes, products, systems, technologies, for compliance with its requirements by employees of the Company and other persons to whom it applies due their obligations of use.

LOT - means a requirement for the goods with common attributes and expressly separated in the procurement documentation.

MULTI-LOT PROCUREMENT PROCEDURE - means the procurement procedure, within the framework whereof the volume of procured products is distributed into several lots.

MULTI-STAGE PROCUREMENT PROCEDURE - means the procurement procedure, which implies the possibility of change the requirements to products and terms of the agreement after having studied the previous stage bids, but before evaluation of the bids (at the last stage of the procurement procedure).

MINUTES - means the document fixing decisions in the course of the purchase, formed in accordance with the procedure, established by the current legislation of the Russian Federation and/or local regulatory documents of the Company.

NON-COMPETITIVE PROCUREMENT PROCEDURE - means the procurement procedure, the method of implementation whereof doesn’t comply with the requirements established for competitive procurement.

NEGOTIATIONS - means the procedure, carried out in the course of the procurement in relation to any aspects of the Procurement Participants' bids, in order to clarify the requirements for the purchased products, the terms of the contract, and other procurement conditions, or improving the bids in the interests of the Customer, except for changing the subject matter of the procurement.

NOTICE OF QUALIFICATION OF THE KIND OF PRODUCT - means the Supplier's notification on results of their qualification of the kind of product.

OPERATOR OF THE ELECTRONIC PLATFORM - means a legal entity that is a commercial organization, established in accordance with the current legislation of the Russian Federation in the form of business organization of a limited liability company or a non-public joint-stock company, in the authorized capital of which includes the shares of foreign citizens, stateless persons, foreign legal entities, or the number of voting shares owned by these citizens and persons, doesn’t exceed twenty-five percent, and those who own an electronic platform, including the equipment, software and hardware, necessary for its functioning, and ensuring the carrying out of competitive procurement in electronic form, in accordance with the requirements of the Federal Law № 223-FZ dated 18.07.2011 № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities».

Note: the electronic platform functions in accordance with the rules applicable for the electronic platform, and with the agreement between the customer and the electronic platform operator, which comply with the provisions of Federal Law № 223-FZ dated 18.07.2011 № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities».

OPEN PROCUREMENT PROCEDURE - means procurement procedure, the information about which is officially posted in the Unified Information System and/or on the website of Rosneft, in the manner established by the current legislation of the Russian Federation and this Regulation, and is available to an unlimited number of persons.

OPEN SOURCE OF INFORMATION - means a source of information, which is available to an unlimited circle of persons.

PROCUREMENT NOTICE (NOTICE) - means a document, which officially informs the concerned parties of the forthcoming procurement procedure and contains its main terms.

Note: The term «Procurement notice» may be made more specific depending on the procurement method: «Notice of request for quotations», «Notice of tender», «Notice of auction» etc.

PETTY PROCUREMENT - means a procurement, the cost whereof does not exceed the thresholds stipulated by Federal Law of 18.07.2011 № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities», and where the Customers need not publish information in the single information system.

PROCUREMENT ORGANIZER (ORGANIZER) - means Rosneft, Group Company or another person, who directly facilitates the procurement procedure.

Note: The term «Procurement Organizer» may be made more specific, depending on the procurement method: «Tender Organizer», «Auction Organizer», «Organizer of request for proposals», «Organizer of request for quotations» etc.

PROCUREMENT PLAN - means the plan of implementation of procurement procedures in the form established by regulatory legal acts of the Russian Federation.

PRICELIST AGREEMENT - means an agreement, which contains the subject of the agreement, the maximum cost and/or the maximum volume of product procurement, unit prices for the products (pricelist), and other material terms, as well as the procedure for cooperation between the parties, if the need should arise for the products stipulated by the agreement.

PRIORITY - means the advantage that may be granted for the purposes of procurement to specific Procurement Participants or groups of Procurement Participants, according to the law of the Russian Federation.

PRODUCTS - means goods, works, and services acquired on a commercial basis.

Note: For the purposes of this Regulation, unless otherwise directly specified by the applicable law of the Russian Federation, the term “goods” shall be understood as physical items measurable in physical terms (for example, kilograms, meters, calories, etc.), the term “works” – as activities aimed at the transformation of physical items (for example, construction works), the term “services” - as activities, which are not directly related to physical items (information, consulting and other services, and other acquired rights and assets, including lease holding).

PROCUREMENT METHOD - means the established standard sequence of actions and a set of civil and legal consequences thereof, which distinguish one type of procurement procedures from others.

PROCUREMENT DOCUMENTATION - means a document (package of documents), which provides any the requisite and appropriate information for the participation in the competitive procurement procedure to the concerned parties.

Note: The term «Procurement documentation» may be made more precise, depending on the procurement method: «Tender documentation», «Auction documentation», «Bid request documentation», «Price request documentation», etc.

PROCUREMENT (PROCUREMENT PROCEDURE) - means a sequence of actions performed in accordance with the Company Regulation «On procurement of goods, works and services» and the procurement documentation (if any), with a view to execute an agreement between the Customer and the Supplier for the purposes of satisfying the need.

PROCUREMENT ACTIVITIES - means activities aimed at satisfaction of the need for products including check of Suppliers, procurement planning, preparation, announcement and performance of the procurement procedure, execution of agreements and control of its implementation, preparation of the stipulated reporting on procurement activities.

PROCUREMENT AUTHORITY - means a collective authority of Rosneft or a Group Company, or a procurement authority that makes decisions in the course of procurement activities within the competence defined by local regulatory and administrative documents, and the agreement entered into by the Customer and the Procurement organizer.

PROCUREMENT PARTICIPANT - means any legal entity (or several legal entities acting on one side), regardless of its form of incorporation, form of ownership, location and origin of capital; or any individual or several individuals acting on behalf of a single Procurement Participant, including a self-employed entrepreneur or several individual entrepreneurs acting on behalf of a single procurement Participant. After the end of the term for submission of bids for participation in the procurement procedure, only the person who submitted the bid before the end of the bid submission period specified in the notice and the procurement documentation, is recognized as the Procurement Participant.

QUALIFICATION PART (OF THE BID) - means the part of the bid containing information about the Participant of the procurement, the composition whereof is established in the procurement documentation.

QUALIFICATION FOR PRODUCT TYPE - means the procedure for checking the Suppliers for conformity to special requirements, which confirms the possibility of a timely supply of good quality products of a specific type by them, including requirements as per possessing special experience, facilities, resource base, requisite authorization documents and other requirements.

REQUEST FOR QUOTATIONS - means a form of the auction, at which the winner of the request of quotations is considered the Procurement Participant, whose application meets the requirements set by the notice of the request for quotations means a competitive procurement method, and whose is the lowest proposed price.

REQUEST FOR PROPOSALS - means a form of the auction, where the Winner is the Procurement Participant whose bid satisfies best the requirements of documentation on request for proposals in accordance with the announced criteria and assessment procedure.

REQUEST FOR QUOTES - means a competitive procurement method, which does not amount to an auction, where the Winner is the Procurement Participant whose bid, in accordance with the criteria defined in the documentation on procurement, satisfies best the requirements of the documentation on procurement and contains the best conditions for supply of goods, performance of works, and provision of services.

REQUEST FOR PRICE PROPOSALS - means a competitive procurement method, which does not amount to an auction, where the criterion for selecting the Winner is the lowest proposed price of the agreement (lot), which is subject to compliance with the stipulated requirements.

RE-BIDDING - means the procedure carried out in the course of procurement process and aimed at voluntary improvement of the bid’s parameters by the Procurement Participants, specified in the decision to conduct rebidding, in accordance with the procurement documentation.

REQUIREMENT - means a condition that is stipulated as material.

ROSNEFT’S WEB-SITE - means the web-site in the Internet intended for publishing information on procurement at the address http://zakupki.rosneft.ru.

SINGLE INFORMATION SYSTEM (OFFICIAL WEB-SITE) - means the totality of the information contained in databases determined by Federal Law of 18.07.2011 № 223‑FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» and technical devices that are used to generate, process and store the same, and provision of such information using the functionality of the official web-site in the Internet (http://www.zakupki.gov.ru).

SOLE-SOURCING - means a non-competitive procurement method that contemplates execution of the agreement with a specific Supplier.

SINGLE-BIDDER PROCUREMENT - means an option for completing the competitive procurement procedure if only one bid is recognized as satisfying the requirements stipulated in the procurement documentation.

TENDER - means the auction form, where, after negotiations with Procurement Participants, the Procurement Participant, whose application for participation in competitive negotiations meets the requirements of the procurement documentation and whose final bid, after the comparison of applications and final bids, satisfies best the requirements stipulated in the procurement documentation, in accordance with the criteria and procedure of assessment, is recognized as the Winner.

SELECTION CRITERION - means an attribute that determines conformity/non-conformity of the Procurement Participant to the stated requirements, or acceptability/unacceptability of the Procurement Participant’s bid.

STARTING (MAXIMUM) PRICE OF THE AGREEMENT - means the maximum price of the agreement stipulated in the notice and in the procurement documentation.

Note: instead of the initial (maximum) contract price, the price formula can be used that establishes the rules for calculating the amounts payable by the customer to the supplier (performer, or contractor) during the execution of the contract, and the maximum value of the contract price, or the unit price of goods, work, services and the maximum contract price value.

SINGLE STAGE PROCUREMENT PROCEDURE - means the procurement procedure, which does not allow for changes in product requirements and contractual terms in the course of the procurement process.

SELECTION - means the stage of processing of Procurement Participants and their bids in terms of conformity to the requirements stipulated in the procurement documentation, and of taking the decision on admission to further participation in the procurement procedure of the Procurement Participants, and bids that meet the requirements in the notification, procurement documentation, and denying access to other participants and rejection of the rest of the bids as unacceptable.

SIGNING OF THE PROTOCOL - means the approval of the protocol by a person authorized to carry out such actions.

SUPPLIER - means a legal entity or an individual, including sole trader (or association of such persons), which is capable of to legally supply the MTR, to carry out the works, and to provide the service, in accordance with the requirements set by the Customer.

SELLER WHO ANNOUNCES COMPETITIVE SALE PROCEDURE (THE SELLER) - means any owner or another lawful possessor of the products who sells products by announcing non-exchange competitive sale procedures.

STANDARD PRODUCTS - means products, works, and services, the requirements whereto are stipulated in the relevant standards, regulations (GOST, TU, technical specifications of the manufacturing plants, of Rosneft and Group Companies), and other similar documents, which does not imply any additional requirements set out by the Customer due to lack of any additional value therein, that have identical characteristics, are interchangeable, and are manufactured by several Suppliers.

SIGNING OF THE PROTOCOL - means the approval of the protocol by a person authorized to carry out such actions.

SUPPLIER - means a legal entity or an individual, including sole trader (or association of such persons), which is capable of to legally supply the MTR, to carry out the works, and to provide the service, in accordance with the requirements set by the Customer.

SELLER WHO ANNOUNCES COMPETITIVE SALE PROCEDURE (THE SELLER) - means any owner or another lawful possessor of the products who sells products by announcing non-exchange competitive sale procedures.

STANDARD PRODUCTS - means products, works, and services, the requirements whereto are stipulated in the relevant standards, regulations (GOST, TU, technical specifications of the manufacturing plants, of Rosneft and Group Companies), and other similar documents, which does not imply any additional requirements set out by the Customer due to lack of any additional value therein, that have identical characteristics, are interchangeable, and are manufactured by several Suppliers.

SMALL AND MEDIUM SIZE BUSINESS ENTITIES - means business entities (legal entities and sole traders) referred in accordance with the terms, stipulated by Federal Law of the Russian Federation dated 24.07.2007 № 209-FZ «On development of small and medium size businesses in the Russian Federation», to small businesses, including micro-businesses and medium size businesses.

STANDARD CRITERIA - means criteria of selection and/or assessment of the Procurement Participants’ bids, approved in accordance with the stipulated procedure for the procurement of products of specific kind (type), for the purpose of subsequent use in all procedures related to procurement of such products, as well as for carrying out the qualification procedure for products.

TERM - means a period of time specified for any event by indication of a moment (date) of the commencement or end thereof: the number of days (months, years), or a date.

TECHNICAL PART (OF THE BID) - means the part of the bid containing the information on the products offered by Procurement Participants and the proposals on non-commercial terms of the contract (if necessary), the composition whereof shall be established in the procurement documentation.

UNACCEPTABLE BID - means an application for participation in the procurement procedure, which fails to meet one or more requirements stipulated in the notice and/or procurement documentation.

WINNER - means the Participant of the completed competitive procurement procedure, whose bid was pronounced the best according to the criteria, and in accordance with the procedure stipulated in the procurement documentation.

Note: The term «Winner» may be made more specific, depending on the procurement method: «Tender Winner», «Auction Winner », «Winner of request for proposals», «Winner of request for quotations» etc.

DESIGNATIONS AND ABBREVIATIONS

TERMS AND DEFINITIONS


AD - means an administrative document.

BID - means the application for participation in the procurement procedure.

BUSINESS UNIT - means a business unit of Rosneft or a Group Company with independent functions, objectives and liability within the framework of its competencies determined by the regulation on the business unit.

COS - means the corporate online store (http://kim.tektorg.ru).

COMPANY - means a group of legal entities with different forms of business ownership, including Rosneft, in respect of which the latter acts as the main or dominant (participating) society.

CONSOLIDATED PROCUREMENT - means the consolidated procurement procedure.

DAY - means a calendar day, unless the Regulations explicitly mention the working day.

EP OPERATOR - means an electronic trading platform operator.

ETP - means the electronic trading platform.

GD № 1352 - means the RF Government Decree dated 11.12.2014 №1352 «On the peculiarities of participation of small and medium enterprises in the procurement of goods, works and services of selected types of legal entities».

GD №. 1442 - means the RF Government Decree dated 12.25.2015 № 1422 «On the procurement of innovative products, high-tech products of selected types of legal entities and the introduction of amendments to certain acts of the Government of the Russian Federation».

GROUP COMPANY - means a business company, a direct and/or indirect ownership interest of Rosneft with respect to stock of shares in the authorized capital whereof makes up 20 percent or more.

UIS - means the unified information system (official website).

lAW №. 223-FZ - means Federal Law dated 18.07.2011 № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities».

LRD - means a local regulatory document of Rosneft/a Company.

NOTICE - means the Notification of procurement.

PROCUREMENT LEGISLATION - means the Law of 18.07.2011 № 223-FZ «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities» and other normative legal acts of the Russian Federation, adopted in accordance with it.

PART OF THE BID - means the qualification, technical or commercial part of the bid.

R&D - means research and development works.

RF - means the Russian Federation.

SRW - means scientific research work.

SMP - means the starting (maximum) price.

SMB ENTITY - means economic entities (legal entities and sole traders) that belong, in accordance with the terms established by Federal Law dated 24.07.2007 № 209-FZ «On the development of small and medium-sized enterprises in the Russian Federation», to the circle of small enterprises, including micro-enterprises, and medium-sized enterprises.

VAT - means value added tax.


GENERAL PROVISIONS

3.1. PURPOSES OF PROCUREMENT ACTIVITIES

The purposes of procurement activities include the following:

a. a timely and complete satisfaction of product requirements with the required price, quality and reliability values, i.a. for commercial use;

b. an efficient use of money earmarked for the procurement of products;

c. an increase of the possibilities of legal entities and individuals for participation in the procurement of products for the customers’ needs, and stimulation of such participation;

d. the development of a fair competition;

e. ensuring the publicity and transparency of the procurement;

f. prevention of corruption and other abuse.

3.2. PRINCIPLES OF IMPLEMENTATION OF PROCUREMENT ACTIVITIES

In procuring goods, works, or services, the Customer shall follow the principles listed below:

3.2.1. Openness, which means Informational openness of the procurement activities, defined by:

a. provision of any necessary and sufficient information in procurement notices and documentation, so that the suppliers could take part in the procurement;

b. unwavering compliance with the requirements of the Russian Federation laws regarding the posting of procurement-related information; posting of procurement-related information not only in the sources contemplated by the law, but also at Rosneft’s web-site, and, if necessary, in other sources;

c. possibility of taking other measures in order to facilitate the openness of the information regarding the customer’s procurement activities of the Customer.

3.2.2. Competition, which means ensuring equality, fairness, non-discrimination, and freedom from improper restriction of competition vis-à-vis Procurement Participants, which means:

a. all the Procurement Participants have equal opportunity to submit their bids, while carrying out the competitive procurement procedures;

b. no unsubstantiated restrictions or preferences exist as to participation in the procurement procedures, unless as contemplated by the current legislation of the Russian Federation, this Regulation, procurement notice, or procurement documentation;

c. application of the competitiveness principle to the bids, while carrying out the competitive procurement procedures;

d. priority of open competitive procurement methods and use of non-competitive procurement methods, only subject to reasons stipulated by this Regulation;

e. expanding the possibilities of participation of legal entities and individuals (including SMEs) in the procurement of products for the needs of the Customer, and encouraging such participation.

3.2.3. Reasonableness, which means the compliance with the current legislation of the Russian Federation and this Regulation, absence of restrictions for admission by establishment of non-measured requirements to the Procurement Participants, which means that, for any mandatory requirement, the failure of which by the Procurement Participant entails the refusal to admit to further participation in the procurement, a unequivocally understandable way of verifying the compliance of the bid with this Requirement must be established.

3.2.4. Efficiency, which means targeted and cost-effective disposal of the cash for purchasing the products (if necessary, considering the cost of the product life cycle of the products procured), and implementation of measures aimed at reduction of the Customer’s costs, including by means of:

a. making decisions subject to the principle that all costs should be economically justified;

b. stipulation of requirements in the procurement documentation to the Participants of the procurement, to the purchased products, in accordance with the tasks, for which the Customer’s needs for the products are satisfied.

3.3. PROCUREMENT PROCESSES

3.3.1. Considering the specific features of application of individual procurement methods, as well as of the type of the Customer, the procurement processes may include the following:

3.3.1.1. Check of the Suppliers (section 7 of this Regulation).

3.3.1.2. Procurement planning (section 9 of this Regulation).

3.3.1.3. Preparation for implementation of the procurement procedure and announcement thereof (section 10 of this Regulation).

3.3.1.4. Implementation of the procurement procedure (section 11 of this Regulation)[footnoteRef:3]. [3: Preparation, Implementation of the non-competitive procurement procedure are presented insection12 of this Regulation]

3.3.1.5. Entering into the contract and controlling its execution (section 14 of this Regulation).

3.3.1.6. Appealing the actions (inaction) of the Customer, of the Procurement Organizer, of members of the Purchasing authority (section 15 of this Regulation)[footnoteRef:4]. [4: If necessary]

3.3.1.7. Preparation of the reporting (section 16 of this Regulation).

GENERAL PROVISIONS

4. SUBJECTS OF PROCUREMENT ACTIVITIES

4.1. CUSTOMER

4.1.1. In order to ensure the conformity to the requirements of the current legislation concerning the procurement procedures to the extent of the requisite or permitted actions, the following types of Customers are focused on in this Regulation:

a. First type Customers (Rosneft and Group Companies, whose procurement activities are governed by the Law № 223-FZ, the regulatory legal acts adopted in pursuance thereof, and this Regulation);

b. Second type Customers (Companies of the Group, whose procurement activities are not governed by the Law № 223-FZ and regulatory legal acts of the Russian Federation, adopted in pursuance thereof.

4.1.2. Key decisions in the course of procurement activities shall be made by the Procurement Authority, or by competent authorities of the Customer, acting in accordance with the legislation of the Russian Federation, this Regulation, LRD/AD.

4.2. PROCUREMENT ORGANIZER

4.2.1. The Procurement organizer shall carry out the procurement procedures in the manner prescribed in this Regulation, and perform other functions assigned to the Customer’s LCD/DD. The procurement organizer may be both the Customer and the other person acting within the framework of the relevant contract with the Customer. The Customer shall be entitled to delegate their functions to the third-party Procurement organizer in cases, which do not contradict the applicable legislation of the Russian Federation and this Regulation.

4.2.2. For the Group Companies, third-party Procurement organizers may be Rosneft or other Companies of the Group.

4.2.3. The scope of functions and powers transferred to the Organizer of the Procurement shall be determined by a contract entered into by the Customer and the Procurement organizer with due consideration of the restrictions established by the current legislation of the Russian Federation (or by the laws of another country, if the procurement is carried out outside the Russian Federation) and this Regulation.

4.2.4. The rules established by this Regulation for the Customer, during the procurement procedures are applied for the Procurement organizer, if the respective functions are transferred to them.

4.2.5. For the purposes of this Regulation, the formulation of norms specifically for the Procurement organizer means that this norm is applicable only in case if the Customer and the Procurement organizer are different persons, and only applies to the Procurement organizer; in all other cases the formulation of the norms for the Customer shall imply the Procurement organizer, too.

4.3. SELLER WHO ANNOUNCES A COMPETITIVE SALE PROCEDURE

The Seller who announces a competitive sale procedure shall establish in the documentation approved by them, the rights and obligations, functions, and terms of participation in the competitive sale procedure, including those mandatory for the Customer who (if it is decided to purchase products from such Seller) shall participate in such procedure on a non-preferential basis.

4.4. SUPPLIER, PROCUREMENT PARTICIPANT, WINNER

4.4.1. The Supplier, depending on the stage of the procedure within the framework of procurement, may be referred to as the Supplier, Procurement Participant, or Winner.

4.4.2. The rights and obligations of the Supplier, Procurement Participant, and Winner are stipulated by the law of the Russian Federation, by this Regulation and the procurement documentation, depending on the method and procurement variety.

4.5. PROCUREMENT AUTHORITY

4.5.1. Procurement authority shall be established on a temporary or permanent basis.

4.5.2. The establishment of Procurement authority by the first type Customer in order to ensure a competitive procurement according to the Supplier's choice, shall be obligatory unless otherwise provided for by the legislation of the Russian Federation.

4.5.3. The Procurement authority’s composition, its main tasks, the procedure of the functioning of the Procurement authority, and types of decisions delivered by it, as well as rights, obligations and liability of the members of the Procurement authority shall be established by the Customer’s LRD/AD in accordance with the legislation of the Russian Federation and this Regulation.

4.5.4. The exclusive competence of the Procurement authority of the Customer/Procurement organizer in the course of competitive procurement procedure, for the first type Customer, shall include the decisions directly stipulated by the legislation of the Russian Federation.

4.6. EP OPERATOR

4.6.1. The list of ETPs for purchasing procedures in accordance with the requirements of the Law No. 223-FZ is established by the Government of the Russian Federation.

4.6.2. The rights, obligations and responsibility of the EP Operator shall be established by the legislation concerning procurement, by the contract between the Customer and the EP Operator, and by the documents regulating the use of ETP.

SUBJECTS OF PROCUREMENT ACTIVITIES

1.

5. METHODS AND VARIETIESOF PROCUREMENT, AND TERMS OF APPLICATION THEREOF

5.1. GENERAL PROVISIONS

5.1.1. The legislation concerning the procurement and this Regulation contemplate the following competitive and non-competitive procurement methods.

5.1.2. Competitive procurement is the preferred procurement method.

5.1.3. The variety of procurement procedure is determined, based on the combination range of forms (Table 3) and the procedure of procurement, established in this Regulation, unless otherwise is provided by the legislation of the Russian Federation.

5.1.4. When determining the methods and varieties of procurement procedures, the Customer shall take into account the specific features of participation of SME entities in the procurement of Customers concerning the procurement, as well as the legislative restriction on access to information on procurement (including, but not limited to, state and other secrets protected by law).

5.2. COMPETITIVE PROCUREMENT

5.2.1. Methods of competitive procurement and terms of application thereof are provided in Table 1.

5.2.2. The methods of procurement «request for proposals», request for quotations, and «competitive negotiations» are not a form of an auction, or a public tender, and they are not regulated by Articles 447-449, and 1057 to 1061 of the Civil Code of the Russian Federation, and do not impose a corresponding volume of civil obligations on the Customer, as provided by the legislation of the Russian Federation.

5.2.3. Purchases only among SME subjects[footnoteRef:5] shall be conducted by the first-type Customers, to which GD № 1352 applies. In this case, such Customers may apply the peculiarities stipulated by the legislation concerning the procurement, if their availability has been explicitly announced in the notice, procurement documentation, or the relevant norms are directly established by the legislation concerning the procurement. [5: Based on the subclause (b) of GD № 1352 ]

METHODS AND VARIETIESOF PROCUREMENT, AND TERMS OF APPLICATION THEREOF

Table 1

Competitive procurement methods and recommended terms of application there of

Item №

Name of procurement method

Auction(yes/no)

Terms of application

FOR 1-TYPE CUSTOMERS


1

2

3

4

5

1

Tender

Yes

1) To clarify certain aspects of the procurement subject description and other terms and conditions of the agreement it may be necessary to negotiate with the Procurement Participant. Following the results of negotiations, the Customer shall be entitled to clarify the procurement requirements and terms and conditions of the agreement, as well as the criteria for conformity of the products and contractual conditions with the specified requirements. In order to determine the most preferable (best) conditions for the execution of the contract (and the selection of the Purchaser), in addition to the bid price of the Procurement Participant, non-price evaluation criteria are used.

2) If the terms of procurement (including those, the Participants in which may be only SMEs) comply with the criteria established by the legislation concerning procurement, according to which the Customer shall apply this competitive method.

In cases expressly provided for in the current legislation of the Russian Federation, in other cases when the Customer assumes the obligation (not only by exercising the right) to conclude a contract with the Winner (the sole participant of the competition whose bid complies with the requirements set out in the procurement documentation)

2

Auction

Yes

1) It is possible to formulate a detailed description of the subject of the procurement or the requirements to it, as well as to determine unequivocally all the terms and conditions of the contract performance, the Procurement participants shall meet the minimum requirements for accreditation and, if necessary, additional qualification requirements. The only assessment criterion is the minimum price of the contract (lot),



3

Request for proposals

Yes

1) It is possible to formulate a detailed description of the subject of the procurement or the requirements to it, as well as to determine unequivocally all the terms and conditions of the contract performance, the Procurement participants shall meet the minimum requirements for accreditation and additional qualification requirements. In order to determine the most preferable (best) conditions for the execution of the contract (and the selection of the Purchaser), in addition to the bid price of the Procurement Participant, which can be quantified and expressed in monetary terms, are used.

2) To clarify certain aspects of the product's description proposed by the Procurement participant, and other terms and conditions of the contract performance, it may be necessary to negotiate with the Procurement participants.



4

Request for quotations

Yes

1) The subjects of procurement are standard products and all the terms and conditions of the contract performance can be unequivocally defined, minimum requirements for accreditation and, if necessary, additional qualification requirements are applied to the Procurement participants, the minimum contract price (lot) is the only evaluation criterion. At that, the SMP of the contract for each Customer, who has initiated the procurement, shall not exceed 30 mln RUB.



5

Request for quotes

No

It is possible to formulate a detailed description of the subject of the procurement or the requirements to it, as well as to determine unequivocally all the terms and conditions of the contract performance, the Procurement participants shall meet the minimum requirements for accreditation and additional qualification requirements. In order to determine the most preferable (best) conditions for the execution of the contract (and the selection of the Purchaser), in addition to the bid price of the Procurement Participant, non-price evaluation criteria are used. At the same time, at least one of the following conditions is fulfilled:

1) Lack of time for holding a tender or request for bids (for the Customer of the first type);

2) Only for the Customer(s) of the second type, the procurement is carried out, and a consolidated purchase - for the Customers of first and second types.

6

Request for price proposals

No

Only for the Customer(s) of the second type, the procurement is carried out, and a consolidated purchase - for the Customers of first and second types. At that, subjects of the procurement are standard products (available goods, works, and services that are not rendered specifically or not provided for a specific description of the Customer) is possible to formulate a detailed description of the subject of the procurement or the requirements to it, as well as to determine unequivocally all the terms and conditions of the contract performance, the Procurement participants shall meet the minimum requirements for accreditation and, when necessary, the additional qualification requirements.

7

Competitive negotiations

No

Only for the Customer(s) of the second type, the procurement is carried out, and a consolidated purchase - for the Customers of first and second types. At the same time, the Customer has no possibility to clearly establish the requirements to it before the start of the collection of the Participant’s bids.

To clarify certain aspects of the procurement subject description and other terms and conditions of the agreement execution, it is necessary to negotiate with the Procurement participants. Following the results of negotiations, the Customer shall be entitled to clarify the procurement requirements and terms and conditions of the agreement, as well as the criteria for conformity of the products and contractual conditions with the specified requirements. In order to determine the most preferable (best) conditions for the execution of the contract (and the selection of the Purchaser), in addition to the bid price of the Procurement Participant, non-price evaluation criteria are used.



№ P2-08 R-0019 VERSION 3.00


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5.3. NON-COMPETITIVE PROCUREMENT: PROCUREMENT FROM A SINGLE SUPPLIER

5.3.1.GENERAL PROVISIONS

Non-competitive procurements are subject to procurement from a single Supplier, which is applied in the case of compliance of the conditions set out in Table 2.

Table 2

Types of procurement from a single Supplier

and the recommended terms of application thereof

Item

№.

types of procurement from a single Supplier

Terms of application



1

2

3

4

1

Planned procurement from a single Supplier

The list of applications of the planned procurement from a single Supplier is specified in Clause 5.3.2 of this Regulation.

2

Procurement from a single Supplier for reasons of urgency

The list of cases of application of procurement from the sole supplier is specified in Clause 5.3.3 of this Regulation.

3

Procurement from a single Supplier in the COS

At least one of the following conditions is met:

1) the subject of the procurement is any product (including the standard ones), and the cost of the agreement does not exceed 500,000 RUB, including VAT.

2) the subjects of the procurement are the standard products obtained in connection with unforeseen changes in the production program, in technical requirements to the products, in case of the absence of the possibility (terms) for a competitive procurement. At that, the cost of the contract shall not exceed 5 mln RUB, including VAT.

4

Procurement by taking part in the competitive procedure of the Seller

At least one of the following conditions is met:

1) The necessity of participation in the competitive process of sales of products, the rules and conditions of which are defined by its organizer and established by the legislation of the Russian Federation;

2) If the Seller has declared such a procedure, and no other method is available for the procurement of the required products. The Customer shall participate in it by filing bids together with other Participants of this procedure of selling the products.

5

Petty procurement

Petty procurement is possible, if the value of the contract, including VAT, in accordance with the Customer’s annual revenues for the financial year, does not exceed the thresholds established by Federal Law No. 223-FZ dated 18.07.2011 «On Procurements of Goods, Works, and Services by Selected Types of Legal Entities», and which doesn’t entitle the Customer to publish information in the unified information system.

Note: the Customer, to enter into a contract with a value not exceeding the established threshold, can decide for a competitive procurement with the use of any method specified in Table 1 of this Regulation.

5.3.2.PLANNED PROCUREMENT FROM A SINGLE SUPPLIER

Planned procurement from a single Supplier is possible in cases, when the subjects of the procurement are:

5.3.2.1. Products, which refer to the sphere of activities of natural monopoly entities, in accordance with Federal Law № 147-FZ dated 17.08.1995 «Concerning Natural Monopolies».

5.3.2.2. Products to be purchased at prices regulated in accordance with the current legislation of the Russian Federation (tariffs).

5.3.2.3. Drilling services purchased from natural monopoly entities within the framework of performance of main contracts related to the activity of natural monopoly entities, and inseparably connected with these auxiliary services. In this case the auxiliary service cannot be provided by another Supplier.

5.3.2.4. Products, the provision of which can be carried out exclusively by the executive authorities or local governments in accordance with their powers or state/municipal institutions, state/municipal unitary enterprises, other legal entities, the relevant powers of which are established by the regulatory legal acts of the Russian Federation, the regulatory legal acts of the subjects of the Russian Federation, and the regulatory legal acts of the municipality.

5.3.2.5. Electric power acquired from guaranteeing power suppliers, as well as from sellers that do not have the status of «guaranteeing power suppliers», in the technologically isolated electric power systems[footnoteRef:6]. [6: For cases when such transaction is not excluded from the guidelines of the Regulation № 223-FZ]

5.3.2.6. Services related to the use of the network infrastructure: water supply, water discharge, sewage, heat and gas supply (except for the services for selling the reduced gas), transmission of electrical and heat energy by network organizations (that do not make part of natural monopolies); connection (accession) to engineering and technical networks in those entities, for which they were established; services on solid utility waste handling.

5.3.2.7. Purchase and sale, lease/sublease, trust management and other contracts providing for the transfer of rights to ownership and/or of use of the immovable property and associated movable property.

5.3.2.8. Services for the maintenance and repair of leased non-residential premises; services for water, heat, gas and energy supply, protection, removal of household waste, in the event that these services are provided to another person or other persons who use non-residential premises located in the building, in which the leased non-residential premises are located.

5.3.2.9. The right to an intellectual property object or a product, exclusive rights where to belong to the rightholder in accordance with the law of the Russian Federation, or another applicable intellectual property law.

5.3.2.10. Use of the intellectual property object created by the Customer in cooperation with the Supplier, provided that the replacement of such Supplier is unreasonable.

5.3.2.11. Services and/or the right of access to specialized information resources and databases, including software and hardware used in them and information protection tools (including those of reference, personnel, information-analytical, financial, rating, etc.), the access to which is carried out at the established uniform tariffs/rates at the rightholders (owners) of information systems/platforms.

5.3.2.12. Management services between the business entity and the managing organization under the agreement on transfer of powers of the sole executive body.

5.3.2.13. Designer supervision over the development of design and project documentation of capital construction projects.

5.3.2.14. Designer supervision over construction, reconstruction, capital repairs of capital construction projects, equipment manufacturing; designer supervision, author's supervision, author’s control in the operation of capital construction, use of equipment.

5.3.2.15. Products that shall be subject to distribution (redistribution) within the Company (with the Customer and Supplier being Rosneft and/or Group Companies).

5.3.2.16. Additional products, purchased to provide the operability (functioning) during the term of warranty obligations of previously purchased products, in case the change of the Supplier will result in the loss of warranty obligations.

5.3.2.17. Supervised installation services, warranty and current service rendered by the manufacturer of such equipment.

5.3.2.18. Products to be purchased for the purposes of experimental and commercial tests.

5.3.2.19. Products to be acquired within the implementation of shelf projects (complex technological, engineered equipment, as well as services/works that require unique and/or innovative technologies).

5.3.2.20. Products manufactured with the use of unique components (no equivalents of which are available).

5.3.2.21. Products to be procured for activities within the territory of a foreign country.

5.3.2.22. Products to be procured from a single Supplier determined by the current legislation of the Russian Federation and executed in accordance with the established procedure, or by a decision of the Government of the Russian Federation, or a federal executive body of the Russian Federation.

5.3.2.23. Products to be procured within the framework of the Company's implementation of integration and consolidating decisions on appointment of the single operator (renderer) of services, i.a. for implementation of centralized development projects for individual business lines, introduction of the unified information technologies, implementation of a unified financial and budgetary policy, accounting and tax accounting, implementation of research and development work, implementation of a unified policy of technical regulation for individual business lines, as well as for development of new technologies.

5.3.2.24. Services related to sending an employee on a business trip (including, but not limited to, ensuring that the employee gains the destination of the business trip, the destination of the indicated events, and returns, lease of an apartment, providing transport and catering services).

5.3.2.25. Information and advertising services, services for placing materials in the media, except for advertising services rendered within the framework of sponsorship activities.

5.3.2.26. R&D in the oil and gas field.

5.3.2.27. Purchase and sale of oil, gas (natural gas and oil gas), and of oil products purchased by means of off-exchange transaction.

5.3.2.28. Services for the receipt, storage, transportation, forwarding, oil and transportation of oil, gas (natural and hand-made) and oil products.

5.3.2.29. Legal services, notary services and other similar services, which are provided, according to the rates (tariffs) regulated by the state.

5.3.2.30. Services related to visits of official delegations and representatives (hotel services or lease of apartments, transportation services, operation of computer and office equipment, providing the sound equipment (including that enabling the simultaneous translation), catering and communication services, and other associated costs).

5.3.2.31. Works/services for the purposes of ensuring security, including the data security.

5.3.2.32. Financial services, including the issuance of a bank guarantee.

5.3.2.33. Services on training or holding seminars (meetings), conferences, and symposiums.

5.3.2.34. Providing services for the event organized for several Customers with the Supplier appointed by the Customer as the organizer of such event.

5.3.2.35. Products manufactured or upgraded and/or mastered in the territory of the Russian Federation under a special investment contract at regulated prices.

5.3.2.36. The implementation of rating actions by legal entities, recognized as credit rating agencies in accordance with the legislation of the Russian Federation, as well as by foreign legal entities carrying out rating activities outside the territory of the Russian Federation.

5.3.2.37. Products purchased in connection with the recognition of a failed competitive procurement and the lack of opportunity (scheduled time) for a new competitive procurement, in case if it is economically appropriate.

5.3.2.38. Products obtained due to unforeseen changes in the production program, technical requirements to the products in the absence of the possibility (terms) to carry out a competitive procurement in case of economic feasibility.

5.3.2.39. Products, the information about which, in connection with the existing actual or potential economic value, consumer value, because of it being undisclosed to others in a particular situation, and (or) discloses technological or scientific and technical information integral for production by the Customer of products competitive on the world market (development of technologies and new kinds of products; machine design, designer solutions; production methods, layouts and drawings of individual units, products, etc.) may not be included in the notice, procurement documentation or the draft of the contract.

5.3.2.40. The additional volume of previously purchased products not exceeding 30% of the initial amount in total terms (cumulatively of all additional agreements), provided that the initial prices for the products are not exceeded.

5.3.2.41. Products purchased due to changing the current Supplier being unreasonable due to standardization causes or the need to ensure the compatibility with existing goods, equipment, technology or services, as well as if the prices provided by the new Supplier do not exceed the potential benefit in the event of entering into the contract with the current Supplier.

5.3.2.42. When purchasing goods and other property at significantly reduced prices (significantly less than normal market prices), when such a possibility exists for a very short period of time (for example, in the case of purchasing goods from a Supplier liquidating its business activities, who sells the property subject to an agreement with lenders, or according to similar or other cases where, for example, the Supplier, for some reason, provides significant short-term discounts).

5.3.2.43. Products to be acquired within the framework of the agreement on replacing a person in the contract, provided by Chapter 24 of the Civil Code of the Russian Federation.

5.3.2.44. The customer, being a supplier, executor (co-executor, sub-executor), contractor (subcontractor) under a state/municipal contract, or in the course of a transaction concluded by the Customer, according to the results of the organization, associations of bidding organizations or other procedures aimed at concluding a civil law transaction, in which the Customer took part in order, for the purpose of a proper fulfillment of the obligations, shall engage other persons for the supply of goods, the execution of works, the rendering of services, and when the established terms and conditions of such a transaction (including, but not limited to, the deadlines for the fulfillment of the obligations) do not allow the Customer to select such persons by conducting the purchase in another way.

5.3.2.45. A civil law contract for rendering of services, the performance of works with the use of the personal labor of an individual who is not a sole trader, shall be entered into.

5.3.2.46. Products or a group of products the purchase of which is determined by the decision of the Chief Executive Officer of Rosneft, of Purchasing authority or of the authorized person of the Customer within the limits of his/her powers.

5.3.3. PROCUREMENT FROM A SINGLE SUPPLIER BY REASON OF URGENCY

Procurement from a single Supplier by reason of urgency shall be carried out in the following cases:

5.3.3.1. If the sufficient product inventory required for liquidation of emergency circumstances (remediation of their consequences/threat of occurrence thereof) is unavailable, application of competitive procurement procedure is unacceptable for the lack of time or need to protect confidentiality and subject to any of the following conditions: presence of danger to human life and health; high probability of causing damage to the environment, partial or complete stoppage of the Customer’s production activities or realization of any other risks that are capable of causing significant losses to the Customer; certain products are required in order to prevent or remedy the consequences of emergency circumstances Emergency circumstances under this Regulation include hostilities, strikes, natural disasters, accidents, catastrophes (including man-induced catastrophes).

5.3.3.2. If it should be necessary to ensure protection of the Company’s interests in the course of court proceedings, criminal proceedings, enforcement of judicial acts, investigations carried put by government/municipal authorities, and in the course of proceedings performed by other authorities and organizations (including international, foreign, extra-judicial ones), if proceedings performed by such authorities and organizations may entail negative consequences for the Company and application of competitive procedures is unacceptable as a consequence of lack of time or confidentiality. In this case, the nomenclature and scope of procured services/works shall not exceed the requirement that is essential in order to protect the Company’s interests during the relevant proceedings, and may include any types of services/works as required for protection of the Company’s interests in the course of the relevant proceedings (including, but not limited to representation and protection of the Company’s interests in the relevant proceedings, appraisal of the object of dispute or related matters, obtaining an opinion on a moot point, retaining the required specialists (experts, translators, etc.)).

5.4. VARIETIES OF PROCUREMENT AND TERMS OF APPLICATION THEREOF

The combination of varieties, methods and of procurement procedure shall be determined, based on terms of application for the procurement procedure stipulated in Table 3:


5.4.1.

COMPANY'S REGULATIONS “ON PROCUREMENT OF GOO

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