4.1 State defense order
The Concern, for the third year running, shows 100% performance of contracts under the state defense order. In the previous year, a total of more than 500 units of military and special purpose equipment was delivered to the public contracting authority, including newest EW electronic warfare complexes “Krasukha” and multipurpose jamming station “Rtut-BM”, EW complex “Khibiny”, airborne optronic defense complexes “Vitebsk” and helicopter-mounted EW complex “Richag-AV”, as well as mobile small-size radar stations “Garmon”.
The greatest difficulties the Concern faces with the state defense order are connected with the deficit in high-performance workplaces and shortage of production and engineering staff. In this regard, the Concern is taking proactive efforts to upgrade the production base of its companies involved in the state defense order (for more details, see Upgrade and reconstruction), and to engage young professionals and organize professional training (for more details, see Professional training and retraining system).
F37. State defense order breakdown by types of products in 2015, billion RUB
F38.State defense order in 2015, billion RUB
F39. Performance of the state defense order, billion RUB
P40.State defense order in 2015, billion RUB
The Concern includes two companies which are entitled to supply military products to the international market - Aerospace Equipment Corporation JSC and NPO KVANT JSC.
4.2 Military technical cooperation
The exports of the Concern’s military and non-military products for 12 months of 2015 amount to RUB 30.1 billion (see Fig. 42).
High-tech military products are promoted onto the international market
During the reporting period, the modern and high technology Avionics products, as well as IFF and EW systems and devices, were promoted onto the Middle East, Gulf countries, North Africa, South-East Asia and CIS member states
For product presentation purposes, the Concern organized meetings and held negotiations with representatives of foreign agencies and firms of a number of foreign countries (Turkmenistan, Republic of Belarus, Republic of India, Republic of Singapore, French Republic, Bolivarian Republic of Venezuela, People’s Republic of China).
Presently, as part of the military technical cooperation, KRET JSC signed contracts with Progress Arsenyev Aviation Company PJSC (a part of Russian Helicopters JSC) for supply of equipment for Ka-52 helicopters and with RAC MiG JSC for supply of equipment for MiG-29 fighters.
Under the approved long-term programs for effective after-sale maintenance of military products and prompt supply of spare parts to foreign customers, the Concern took all necessary steps to support the service life, maintain and repair the military products it had previously supplied during the post-warranty period.
- exports growth up to 35% in the total revenue by 2020;
- growth in exports to the Asia-Pacific Region,Middle East and North Africa.
In 2015, the Concern took part in:
- the 12th International Aviation and Space Salon (air show) MAKS-2015 and became the two-time winner of the Golden Wings MAKS- 2015 Contest;
- the 10th International Aerospace Show Aero India 2015, where it held a series of negotiations with representatives of Indian companies regarding upgrade of the Air Force fleet;
- the 8th International Helicopter Industry Exhibition HeliRussia-2015, where it presented the recent national developments in the area of helicopter-mounted equipment;
- the Army-2015 International Military-Technical Forum and obtained an honorary diploma of the Russian Ministry of Defense in the nomination “Electronic Warfare and Intelligence Systems”.
F41.Structure of proceeds from exports of military and non-military products in 2015, million RUB
PF2.Structure of proceeds from exports of military products in 2015, million RUB
4.3 Non-military products
In accordance with its development strategy, the Concern pays much attention to development of non-military production. The Concern’s companies develop and produce a wide range of non-military products in the following key lines of business:
- avionics (navigation systems, automatic control systems, health and usage monitoring systems, onboard control systems for unmanned aerial vehicles (UAVs) etc.);
- medical equipment (tonometers for IOP measurement, magnetic therapy ocular devices, physiotherapeutic equipment, non-invasive lung ventilators, anesthesia machines, blood pressure and cardiovascular activity monitoring systems, electronic blood pressure monitors, and 24-hour monitors of blood pressure and cardiac signals, ultrasonic nebulizers);
- car electronics, including charging stations “FORA” for electric cars (fast and slow charging stations, blocks for the electric car produced by AvtoVAZ JSC);
- oil and gas equipment;
- automated information and measuring control systems;
- control and diagnostic devices;
- software for unmanned control of metro trains;
- protection and aviation safety equipment for civil aviation based on airborne defense system “President-S”;
- radio monitoring equipment for ensuring electromagnetic compatibility (Russian Ministry of Telecom and Mass Communications).
In 2015, the Concern approved its investment program which provides for development of the non-military production in the areas where the Concern’s companies hold strong competitive positions and that have substantial growth prospects, including avionics for civil aircraft (UAVs, in particular), new medical equipment, charging stations for electric cars.
The proceeds from sales of non-military products in 2015 amounted to RUB 16 billion, where RUB 805 million falls on exports supplies.
KRET JSC and Russian Space Systems JSC signed a cooperation agreement for development and implementation of import substitution programs to localize information technologies and systems and to provide high-tech and information security services to the infrastructures which are critical for the Russian companies. The cooperation is intended to conduct joint research to create a technical advance in the area of information security and system integration, and to improve effectiveness of data processing, including geospatial data.
4.4 Import substitution
The Concern takes steps towards localization of assembly parts and electronic components which are produced in the Ukraine, NATO and EU member states. The Concern has to complete two equally important tasks: to ensure that the components of foreign make are promptly localized as part of the import substitution policies and to timely perform R&Ds to create principally new products which would be much ahead of the foreign substitutes.
In 2014, all necessary decisions and plans for import substitution were developed and agreed. The Concern took a part of actions contemplated by the road maps for 2015 approved by the Russian Ministry of Defense and the Russian Ministry of Industry and Trade, while the remaining part will be completed in 2016.
Under the state contracts signed with the Russian Ministry of Industry and Trade, 16 development projects were in the pipeline in 2015 to substitute Ukrainian products, totaling to RUB 4,623.0 million (see Fig. 44), of which an amount of RUB 2,898.7 million was disbursed in 2015
Results of 2015
- 4 development projects have been completed, whereas 12 types of alternative electric connectors (approximately 30% of the whole range of electric connectors of Ukrainian make that are to be substituted) have been developed and put into serial production;
- 1 development project has been completed, whereas alternative small-size announciators MS-2 of Ukrainian make have been developed and put into serial production;
- contracts have been concluded for 7 development projects to substitute products imported from NATO and EU countries.
F43. Development projects underway in 2015 to substitute Ukrainian products, million RUB
Plans for 2016
- complete 11 development projects to substitute Ukrainian products for RUB 1,724.3 million;
- continue 7 development projects to substitute component parts imported from NATO and EU countries that are used in the aviation equipment, totaling to RUB 2,912.1 million.
The effectiveness of the Concern’s quality management system is proved by the lowering number of notices of defects per unit of warranty-covered products.
4.5 Quality management
According to the Quality Policy of Concern Radio-Electronic Technologies Joint Stock Company, it is planned:
- to continually improve the characteristics of radio-electronic equipment meeting the up-to-date requirements and expectations of Customers and end-users, and to reduce the time to develop, produce, repair, supply and to timely maintain this equipment;
- to improve cooperation and coordination of efforts of the Concern, the Customers and Concern’s companies, and for that purpose:
- conceptualize and develop integrated target programs for design, development, upgrade, production and supply to Customers and end-users of the up-to-date and advanced radio-electronic equipment;
- the Concern will act as an R&D general contractor in creating radio-electronic equipment and supplies of serial products
- organize and ensure operation of the Chief Designer Council and assist in implementation of the decisions the Council will make to enforce the research and technical policies for development of radio-electronic equipment, including on the matters of standardization, harmonization and classification;
- coordinate quality assurance and control in respect of the products under state defense order;
- professional development of all Concern’s employees on an ongoing basis;
- strictly comply with legislative and regulatory requirements.
The Concern’s top management ensures maintaining and ongoing enhancing the efficiency of the quality management system as required by state standards, GOST ISO 9001 and GOST RV 0015-002, and looks into what else needs to be done for that purpose.
There is a positive trend towards lowering the number of notices of defects per unit of warranty-covered products (see Fig. 45) with the growing volumes of state defense order at the same time.
F44.Share of notices of defects per unit of warranty-covered products
Unified Procurement Regulations of Rostec State Corporation dated 18 March 2015 set out the manner and methods of centralised procurement procedures. Centralisation of procurement processes and common purchases are real tools for effective spending.
Key principles of the Concern’s procurement operations:
- openness and transparency of procurement processes,
- raising the competitiveness among procurement bidders,
- attaining the maximum economic effect from procurement events.
4.6 Procurement management
The Concern carries on its procurement operations as required by Federal Law 223-FZ of 18 July 2011 “On Procurement of Goods, Work, Services by Certain Types of Legal Entities” and the Unified Procurement Regulations of Rostec State Corporation dated 18 March 2015.
Only 43 companies of the Concern are subject to Federal Law 223-FZ of 18 July 2011 “On Procurement of Goods, Work, Services by Certain Types of Legal Entities”. The remaining companies conduct their procurement operations in accordance with their own internal regulations. The procurement-related information is placed on the official corporate website and is publicly available.
In order to organize a unified system of packaged supplies of the electronic component base of domestic and foreign make, the Concern created a unified electronic trading and procurement platform. This has helped considerably cut costs for procurement of necessary components and streamline the logistical processes.
The key objectives of increasing the effectiveness of procurement operations are:
- to create a transparent and reliable procurement management system;
- to establish unified procurement rules for the Concern’s companies;
- high level of objectivity;
- high quality equipment, machinery, materials and services at optimal prices;
- to ensure compliance of the procurement processes with the requirements of regulators and laws of the Russian Federation.
These objectives are attained by:
- wide use of electronic procurement procedures;
- preventing irregularities and ensuring strict compliance with the effective laws and internal regulations;
- approving the internal procedures for determining and justifying the level of the initial (maximum) contract price;
- clearly regulating the instances when products can be procured from a sole supplier and well-founded reasoning of such instances.
Preference is given to those suppliers which have the QMS certificate of conformity according to GOST ISO-9001 and GOST RV 0015-002.
Plans for 2016:
- most part of the Concern’s companies will accede to the Unified Procurement Regulations of Rostec State Corporation;
- the focus of procurement will be on small and medium-sized businesses, who will enjoy specific privileges under Resolution 1352 of the Russian Government of 11 December 2014 “On Specifics of Participation of Small and Medium-sized Businesses in Procurement of Goods, Works and Services by Certain Types of Legal Entities”;
- increase the volumes of procurement in a competitive manner;
- automate procurement processes;
- internal audit of procurement operations to identify irregularities and discontinue any wrongful activities, if any.
- 5,678.0 million RUB in 2013;
- 4,610.6 million RUB in 2014;
- 7,300.7 million RUB in 2015.
4.7 Upgrade and reconstruction
The upgrade and reconstruction of the Concern’s production capacities is intended to improve its competitiveness on the global market. These efforts are taken under Federal Target Program No. 1 and Federal Target Program No. 2.
The key objectives of the upgrade and reconstruction are:
- to complete the tasks of the state defense order,
- to improve productivity of labor
- to increase profitability of production,
- to improve product quality,
- to reduce the cost of production,
- to lower the environmental impact.
Under Federal Target Program No. 1 and Federal Target Program No. 2, in 2015, 45 capital construction projects were underway in 28 Concern’s companies with the total target financing of RUB 45,405.6 million, of which the 2015 funding liabilities amounted to RUB 7,300.7 million.
Results of 2015:
- under Federal Target Program No. 1, two capital facilities were commissioned (Signal PJSC, Radiopribor JSC);
- under Federal Target Program No. 2, six capital facilities were commissioned (BEMZ JSC, two projects of Signal PJSC, NPO V.I. Shimko Radioelectronics Scientific and Production Association JSC, PPO EVT JSC, RSIE JSC).
Plans for 2016:
- commission 12 capital facilities under Federal Target Program No. 1;
- implement investment projects intended to resume production of 70M2 products in seven companies (Tekhpribor PJSC, AP-Voskhod JSC, MIEA JSC, OKB Elektroavtomatika JSC, UKBP JSC, UPPO JSC, NPP Izmeritel JSC). The total funding amounts to RUB 2,690 million, of which RUB 2,410 million will be funded from the federal budget;
- MIEA JSC to implement investment projects to develop new technologies for serial production of highly-precise INS and their components for the modern and advanced weapons, military and special purpose vehicles.
Ryazan State Instrument-making Enterprise Joint Stock Company (RSIE JSC), Ryazan
Federal Target Program No. 2: in 2015 we completed the upgrade of the equipment for production of multilayer printed boards meeting the today’s level of special-purpose digital devices.
Federal Target Program No. 1: construction and upgrade of the company is underway. The expected results are:
- growth of the technical and organizational level of production,
- higher productivity of labor through automation and advanced process solutions in electroplating and environment protection,
- improving the quality of coatings and lowering the labor intensity in coating processes,
- increasing the production capacity by streamlining it according to the cost-effectiveness ratio
- better working conditions
- reducing the harmful effect on the environment.
Р45.Liabilities to finance capital construction projects in Concern’s companies under Federal Target Program No. 1 and Federal Target Program No. 2 in 2015, million RUB
4.8 Environmental impact
The Concern strives to fully comply with the environmental laws and use the best practices in securing environmental safety of production.
As a result of their operations, the Concern’s companies do not have substantial impact on the environment. The only significant impact is from electroplating in some of the Concern’s companies.
As part of the reconstruction and upgrade investment projects (see Upgrade and reconstruction), steps are being taken to ensure that the produced products are in compliance with the effective and future environmental requirements, and to upgrade productions to lower the impact of the electroplating on the environment (see Table 11).
Т11. Results of 2015
|Company||Results of 2015||Positive effect|
|Ryazan State Instrument-making Enterprise Joint Stock Company (RSIE JSC), Ryazan||
|Penza Computer Engineering Production Association Joint Stock Company (PPO EVT JSC), Penza||Efforts have been taken to implement electroplating equipment with inbuilt process solution filters and dust and gas catchers in ventilation systems||
|Ekran Research Institute Joint Stock Company, (NII Ekran JSC), Samara||New low-waste technology of closed-cycle waste-water-free treatment of rinse waters from electroplating||
- restrictions on the temperature of waste waters for treatment
- complex automated control and management of the waste waters treatment system,
- need to dispose of the exhausted sorbent.
Plans for 2016 and mid-term perspective
In order to reduce the environmental impact of electroplating processes, it is planned to introduce state-of-the-art environment friendly systems and technologies (for more details, see Table 12).
Т12.Planned steps to reconstruct Concern’s companies
|Company||Planned steps||Expected effect||Timeline|
|Ural Instrument Engineering Plant JSC (UIEP JSC), Sverdlovsk Region||The production capacities will be relocated from the city center of Ekaterinburg to the industrial site near Aramil, Sverdlovsk Region. Commissioning of treatment facilities with the advanced environment friendly technology of closed-cycle wastewater-free treatment of rinse waters.||
|Ryazan State Instrument-making Enterprise Joint Stock Company (RSIE JSC), Ryazan||Construct new plating and painting shop with two stage rinsing system.||
|Taganrog Research Institute of Communications Joint Stock Company (TNIIS JSC), Taganrog||Introduce new electroplating area in a standalone building using modern environment-friendly equipment. Install ventilation systems with wet cleaning filters for harmful emissions from the electroplating equipment.||
|Set up waste water treatment facilities designed in accordance with the advanced environment-friendly two stage waste-water-free treatment technology||
|Place the production equipment into isolated rooms (machining and painting production processes). Relocate any production capacities which generate noise. Install modern exhaust ventilation systems with optimal filtering elements||
- growth of labor productivity;
- reduction of the production cycle;
- improvement of quality and reduction of defective products;
- release of production space;
- lowering equipment downtime.
4.9 Lean production
A number of Concern’s companies started to systematically introduce lean production principles in 2015 as part of the federal target programs. In 2015, most part of the Concern’s companies developed and proceeded to implementation of lean production concepts and personnel training programs.
The lean production implementation plans mostly include:
- mapping and identifying losses at workplaces;
- introducing Five Sigma system;
- introducing continued improvement system;
- introducing SMED system;
- introducing TPM (Total Productive Maintenance) system;
- introducing the JIT (“just-in-time”) Kanban system.
4.10 Energy efficiency
In its operations, the Concern pays much attention to increasing energy efficiency of production. Depending on the condition of the utilities, the energy saving and energy efficiency improvement program is developed on a case-bycase basis and implemented in the Concern’s companies further to the results of the energy audit.
Key tasks of the energy saving and energy efficiency improvement program:
- saving fuel and energy resources by introducing energy efficient equipment;
- reducing heat losses by streamlining boiler operation modes and heat insulation.
Actions to reduce energy consumptions taken in 2015:
- optimizing heating condition through reconstruction of premises and use of heat insulating coating on heating systems in buildings, boiler house and heating lines;
- using energy saving lighting devices;
- replacing compressors with higher class energy efficiency equipment with target focused gas distribution system;
- developing energy resources rationing system and financial encouragement of efficient use of utilities;
- introducing energy control and metering systems so that to timely identify any irrational use of energy resources.
Higher use of fuel for motor vehicles and heat energy in 2015 by value, compared to 2014, is a result of an increase in utility tariffs and growth of production thus requiring introduction of longer work shifts and work on weekends in a part of production areas.
Lowering consumption of electricity and natural gas in 2015, compared to 2014, was triggered by energy saving measures as described above.
P46. Use of energy resources in monetary terms, million RUB
Т13.Use of energy resources by volume
|Fuel for motor vehicles, liters||2,578,430||2,731,710||2,885,757||2,512,427|
|Heat energy, Gcal||167,459||184,010||155,086||177,039|
|Natural gas, 000 m³||172,627||173,710||164,212||177,891|