Terms of Reference
Financial and Operational Improvement Plan and
Corporate Development Plan
1
Background
The City of Kyiv (the “City” or “Kyiv”) with the population of 2.8 million people is the capital of
Ukraine and is a financial, commercial, political, scientific and cultural centre. The City is
currently receiving financing from the European Bank for Reconstruction and Development
(“EBRD” or the “Bank”) for the Kyiv City Public Transport project (the “Project”). The Project
includes loans to three municipal public transport companies in aggregate amount of EUR 115
million, secured by the guarantee from the City: (i) EUR 60 million loan to KyivPastrans to
procure new buses and trolleybuses; (ii) EUR 40 million loan to KyivMetro to procure new metro
wagons and (iii) EUR 15 million loan to KyivDorservice to finance traffic management solutions
in the City. KyivMetro project is completed while KyivPastrans and KyivDorservice are in
implementation stage.
Circa 1 078 million passengers per annum are carried by the public transport systems in the City.
Metro services are the backbone of the public transport system carrying about 47 per cent of all
public transport demand. Trams and trolleybuses carry 390 million passengers, while buses carry
179 million passengers. The public transportation network was planned with the objective of
finding a balance between available budgets for essential mobility needs, and ensuring high
capacity service on the core corridors. The system includes 3 metro lines, 20 tram routes, 38
trolleybus routes, and 140 bus and minibus routes. Most of the minibus routes are operated by
private operators. There is currently no functional integrated electronic ticketing system in place.
The City coordinates transport service supply through licensing and tariff setting and monitors
the provision of services through a Central Dispatching Service. Urban transportation services
are the responsibility of the City’s Transport Department for Public Services.
The Metro as well as tram and trolleybus services will remain an essential service for inhabitants
with lower income and those eligible for concessionary fares. Kyiv Metro and Kyiv Pastrans are
expected to retain their market share and the role as the backbone of the transport system,
providing frequent and relatively higher capacity services at more affordable prices.
Kyiv PasTrans, a public transport company wholly-owned by the City, responsible for the
provision of ground services (bus, trolleybus, tram and light rail). The Company operates 20
tram routes using 436 trams, 38 trolley routes using 546 trolleybuses, 140 bus routes using 1,645
buses, plus one funicular railway. The Company employs approximately 9, 419 staff.
The Kyiv City Council sets tariffs for public transport services (until last year with approval at
the Ministry of Infrastructure level, a practice that has now been discontinued). The tariffs were
increased 2 times per cent starting from February 2015. A single flat-rate metro ticket costs UAH
4 (EUR 0.16) significantly below prices of either Warsaw (EUR 1.05) or Sofia (EUR 0.51). A
single flat-rate tariff for public on the ground transportation has also been increased 2 times to
UAH 3 (EUR 0.13) which is also significantly below the European levels. The
privileged/concessionary passenger fares are funded from the State budget (with delays and
insufficiently) apart from students and pupils who are co-funded by the municipal budget
covering 50 per cent of the full price.
1
The Company is currently developing a reorganisation plan focused on key service delivery
indictors and efficiencies. The Bank’s financing is focusing on renewal of the rolling stock but
is conditioned upon the reorganisation plan being timely implemented and as part of the project,
the Company will have to improve its corporate governance, maintain financial ratios and other
covenants of the legal agreements. The Company wishes to engage a Consultant (the
“Consultant”) to help develop and implement the Reorganisation aimed at improving efficiency
and financial sustainability of its operations.
2
Assignment Objectives
The Consultant shall assist the Company in improving its commercial standing, service and
environmental performance by helping to identify and implement the necessary corporate,
financial and operational improvements required to meet the related covenants included in the
EBRD finance documents and to implement the Reorganisation. This will be achieved via the
development and implementation of the FOPIP and of a detailed strategy to roll out the
Reorganisation. The Consultant shall also assist the Company in implementing the
Reorganisation and to develop short and medium-term focused corporate development plans and
to improve their corporate planning capacity to assist their ongoing transition towards becoming
self-sustaining entities and commercial operations.
The main objectives of the assignment are to:



3
3.1
assist the Company in identifying and implementing the necessary corporate, financial
and operational improvements, including the Reorganisation, to meet the related
covenants included in the EBRD finance documents. This will be achieved via the
development and implementation of a Financial and Operational Performance
Improvement Programme (“FOPIP”);
assist the Company in developing and implementing a short to medium term focused
Corporate Development Plan (“CDP”) and corporate planning process, so it may continue
its transition towards an entirely commercial operation;
propose amendments to the existing Public Service Contract (“PSC”) and assist the
Company with negotiations and signing of the amended PSC with the City.
Scope of Work
DEVELOPMENT OF THE FOPIP
The Consultant will initially prepare a FOPIP for the Company, which will focus on ensuring
that it meets the covenants set forth in the financing documentation with EBRD. These include:


Maintaining satisfactory accounting, cost control and management information systems and
books of account in accordance with International Accounting Standards starting from a date
to be agreed with the Bank (this may require support in restating existing financial reports in
an IAS type format);
Providing the Bank with annual financial statements restated to IFRS on a semi-annual basis
along with the financial covenants compliance statement;
2



Maintaining financial covenants, including a Current Ratio of not less than 1.0 to 1; a Debt
Service Coverage Ratio of not less than 1.2 to 1; Financial Debt in the amount not exceeding
Euro 35 million; the Lien over the assets the aggregate value of which does not exceed EUR
50 million;
Providing the Bank with financial and environmental reports as required under the project
agreements; and
Reporting on the implementation of the FOPIP and the relevant efficiency indicators.
To this end, it is expected that the FOPIP will include both corporate development actions as
well as financial and operational improvements.
To this end, the Consultant will, inter alia undertake the following tasks:
3.1.1. Corporate development
i)
Control over assets and service agreement
 Review the legal basis for the Company’s control over the fixed assets and the provision of
services and agree on obligations and responsibilities relating to use, including maintenance
and replacement of assets, service quality and operational performance targets; and
 Classify non-current assets of the Company based on technological and functional purpose.
Analyze technical and operating characteristics of non-current assets and existing databases,
as well as provide recommendation on their optimization;
 Provide recommendation on the most effective use of non-operational real estate; develop
strategy on non-core assets management and/or disposal incl. guidance to determine market
value or leasing terms. Develop system for monitoring market value of non-core assets;
 Prepare recommendations and amendments to the existing PSC in line with the Ukrainian
legislation, which will define: the basis for the right of the Company to use the physical
infrastructure; their obligations and responsibilities relating to its use, including maintenance
and replacement of the assets; service quality and operational performance targets; and
related performance based remuneration (including financial and other incentives to achieve
targets). The PSC will focus on the key commercial terms required for the Company to
effectively meet the covenants set forth in the financing documentation with the EBRD.
ii)
Organisation
 Review and identify development needs (incl. by transport means – electric transport, motor
transport, suburban train) related to the Company’s current corporate status, management
structure, internal and external reporting lines, decision making bodies, and staff employed
including with a view to implement the Reorganisation.
 Recommend an institutional set-up that ensures that the Company is incorporated as an
autonomous and financially accountable legal entity or separate legal entities or subdivisions
by transport means – electric transport, motor transport, suburban train) with corresponding
justification;
 Recommend an efficient organisational structure including an organisation chart with jobdescription and staff qualifications attached toe ach position or group of positions, which
clearly divides tasks and responsibilities between staff and departments with labour
efficiency targets;.
3


Propose transparent decision making procedures, bodies, specifying compositions and
powers, including a system of delegation of responsibilities and effective internal and
external control mechanisms.
Recommend a personnel development plan, including programmes for recruitment, training,
advancement and remuneration.
iii)
Management Information System
 Review and analyse the Company’s existing management information system (MIS) and
procedures, including the extent of automation and computerisation, identifying any
immediate shortcomings and development needs.
 Recommend a computer-based MIS that would register, monitor and provide key
management information across all areas of the Company’s activities, considering, in
particular that the system can produce such financial and other information which is required
for reporting to third parties (in particular reporting to the EBRD as are defined in the
financing agreements), public authorities and the general public.
 Recommend an information technology strategy which should include hardware and
software specifications.
3.1.2. Financial performance improvement
i)
Tariff Policy
 Analyze the costs of passengers transportation and their structure by mode of transport–
electric transport, motor transport, suburban train);
 Analyze the current tariffs for public transport by mode of transport– electric transport,
motor transport, suburban train)
 Develop recommendations for a tariff policy for public transport services, satisfactory to the
Company (and to EBRD). For the purpose of this task the Consultant shall carry out a tariff
study including social analysis to determine the affordability of charges and willingness to
pay. Follow up work may need to be conducted by the Consultant with representatives of
general public, consumers, media etc. Particular consideration should be given to the poorest
households Under the proposed tariff policy revision, the Consultant should provide (i) an
affordability analysis (in line with the EBRD methodology), (ii) review of the existing
subsidy scheme, and (iii) propose possible mitigation measures in case of breach of
affordability thresholds (i.e. propose amendments to the PSC on subsidies from the city to
the company).
ii)
Accounting, budgeting and cash management
 Analyze the structure of current assets and solvency of the Company;
 Analyze efficiency of working capital management providing recommendations to optimize
it;
 Review and analyse the Company’s current accounting system and budgeting and financial
management practices, and the legal basis relating thereto, identifying any immediate
shortcomings and development needs;
 Review and provide recommendations on optimizing the Company’s internal processes
related to organization of sales and procurement, including fixed assets and inventories;
4





Review and provide recommendations on optimizing the Company’s payroll, accounting of
personnel and their working time, motivation and encouragement of staff;
Recommend an accounting system, which is in compliance with international (IAS) and local
accounting practices and is integrated in the MIS;
Assist the Company in restating current financial statements into IAS;
Recommend a system for budgeting, with an integrated budget control system (this shall
allow to keep the accounts and budget for the forthcoming Project separate from the
Company’s operating accounts); and
Recommend adequate administrative (authorisation and controls) procedures for cashmanagement and payments.
iii)
Revenue Collection and Payments Procedures
 Review the existing ticketing collection procedures identifying any immediate shortcomings
and development needs;
 Develop tariff collection procedures, including enforcement measures against illegal riders
that ensure that the Company receive full and timely payments for public transport usage.
The Consultant shall give special attention to measures that increase the farebox recovery
ratio, and present a plan to gradually increase this ratio over time.
 Review existing procedure on accepting invoices for payment, recognizing liabilities and
ensuring payments, identify all the shortcomings and provide recommendations on
improvement;
 Develop control procedures for the Company’s and budget expenditures, payables repayment
and/or restructuring.
3.1.3. Operational performance improvement
i)
Operational efficiency
 Review the Company’s current operating practices with a view to identify immediate
shortcomings and development needs;

Recommend an action-plan necessary for improving the quality and reliability of services
and increasing the operational efficiency. The Consultant shall give special attention to
measures that increase the fleet availability as well as to ensuring that assets are regularly
maintained and renewed. Outsourcing of non-core activities shall be considered by mode of
transport– electric transport, motor transport, suburban train);

Establish a fleet management programme to increase operational efficiency ratio;
ii)
Environmental management
 Review the environmental management system currently in place, and recommend short and
medium term improvements to bring the system in line with the principles of ISO 14000
standards, and compliance with local and European Union environmental standards;


Assist the Company in implementing the Environmental Action Plan agreed with the Bank;
and
Identify no-/low-cost improvement measures, including good housekeeping as well as
enhanced service, maintenance and operation of the facilities.
iii)
Public and customer relations
 Recommend a public participation and consultation campaign to be carried out in the course
of the preparation and implementation of the Project. The programme shall disseminate
5
information about the Project, its aims, progress and activities and how it will impact on the
public. This will be developed in close co-operation with the City authorities, and making
efficient use of various media;

Recommend a public participation and consultation campaign related to tariff increases. This
will be developed in close co-operation with the City authorities, and making efficient use of
various media;

Recommend a customer relations improvement plan, including mechanisms for dealing with
complaints, and on-going information dissemination.
3.2
IMPLEMENTATION OF THE FOPIP
Following approval by the Company, the City and the EBRD, the Consultant will actively assist
the Company to implement the FOPIP. Links with other public transport companies which have
either acted as a twinning partner for a FOPIP or have implemented a FOPIP of their own would
be a useful way to improve institutional capacity.
The Consultant shall undertake the following tasks:
Financial Performance Improvement
 Work closely with the Company to provide support in implementing the measures identified
to improve financial performance, including the Reorganisation. Specifically, the Consultant
will assist the Company in ensuring that tariff increases are implemented as agreed in the
tariff policy as well as ensuring that fare collection procedures are implemented.; and
 Assist the Company to ensure the recommendations identified and agreed to improve
accounting, budgeting and cash management are being implemented. As part of this, the
Consultant may need to provide ongoing support to assist the Company in preparing financial
statements in accordance with IAS and in implementing any new budget procedures.
Operational Performance Improvement
 Assist the Company in implementing the action plan to improve operational efficiency,
including the asset management programme and the Reorganisation.
Capital investment planning
 Assist the Company in development of systematic routines for short- medium and long-term
planning of prioritised capital investments for improvements of the services and the
environmental performance of the Company. A first version of such a 3-year rolling
investment program should be prepared and presented.
Environmental management
 Assist the Company in implementing the Environmental Action Plan.
Public and customer relations
 Assist the Company in implementing the customer relations’ programme and the public
consultation programme for the project.
6
3.3
CORPORATE DEVELOPMENT PLAN
Building on the FOPIP and other project documentation, the Consultant will assist the Company
to develop its first CDP focusing on medium and long term corporate, financial and operational
improvements. The CDP will define the aims and institutional objectives of the Company, which
will govern further development and transformation of the enterprise to a viable commercial
entity. The CDP will cover all aspects of public transport management and operations. This will
include, but not be limited to, the areas covered by the FOPIP. In the medium term, the CDP
should pay particular attention to the development of a more substantial Public Service
Agreement. In the longer term, the CDP should focus on the potential for private sector
participation.
The first CDP is intended to be the start of an annual rolling plan that will evolve with time to
reflect changing circumstances, improved information and progress made. To this end, the
Consultant will assist the Company to develop procedures and systems to build a corporate
planning process into the existing budget and business planning processes. The Consultant will
also identify other areas of management, finance and operations that should be considered in
future corporate development plans, depending upon the progress made by the Company.
3.3.1. CAPACITY BUILDING PROGRAMME
Capacity building of the Company’s staff will be a key part of the Consultant’s work.
Throughout the Assignment, the Consultant will improve the capacity of the Company’s staff
through on-the-job assistance and close collaboration.
In addition, the Consultant will arrange formal training aimed at senior and middle-level
managers in all aspects of utility management, so as to enable the Company to implement both
the FOPIP and the CDP effectively.
To this end, the Consultant, in close cooperation with the Company, will identify key training
needs and develop an appropriate training plan. This will be agreed with the EBRD prior to
implementation.
4
4.1
Implementation
REPORTING
The Consultant will report to the Company’s General Manager.
The Consultant will develop both the FOPIP and the CDP in close cooperation with the
Company and, where necessary, the City. The draft FOPIP and CDP will be discussed with the
Company, the City and the EBRD.
4.2
STEERING COMMITTEE
7
A Steering Committee will be formed, including representatives of the Company and the City.
The EBRD may attend as an observer. The Consultant will organise the following Steering
Committee meetings:
The Consultant will organise the following Steering Committee meetings:
i)
ii)
iii)
4.3
Inception meeting – this meeting will be held at the outset of the Assignment to discuss the
overall implementation of the Assignment;
Mid-term meeting – A meeting will be held following the completion of the draft Financial
and Operational Performance Improvement Programme and a separate meeting will be
held following the finalisation of the reorganisation;
Final meeting – this meeting will be held following the completion of all tasks, and the
delivery of the draft final report.
CONSULTANT’S PROFILE
The Consultant should ensure that the appropriately qualified experts are available, as required,
for each of the different tasks outlined above. It is expected that the Assignment will be led by an
appropriately qualified project manager, accompanied by both key and supporting experts (the
“Experts”). It is expected that the team will include a resident team leader, who will spend a
significant portion of the Assignment working on site.
4.4
FACILITIES FOR THE CONSULTANT, AND ACCESS TO INFORMATION
The Company will provide furnished and services office accommodation for the consultant, plus
suitable office space for meetings. The Company will also provide access to all relevant
information, maps, studies, models, legal documents etc. at no cost to the Consultant. The
Company will deliver the materials in the original version (i.e. not necessarily in English).
The Consultant will be responsible for all local and international transport, living
accommodation and expenses for its staff, together with communications materials, printing,
report production and translation.
4.5
TIMETABLE
The Assignment will have a total duration of 12 months, and is due to commence in []
4.6
DELIVERABLES
All reports should be submitted to the Company. The copies of reports will be submitted to the
EBRD.
8
Deliverable
Inception report
FOPIP
CDP
Training plan
Quarterly reports
Final report, including exit
strategy
4.7
Draft Submitted
2 weeks
2 months
5 months
6 months
quarterly
9 month
Comments
2 weeks
1 month
1 months
1 months
Final Submitted
1.5 months
3.5 months
7 months
8 months
1.5 months
12 months
PERFORMANCE MEASURES
While the ultimate responsibility for meeting performance related covenants included in the finance
documents rests with the Company, the Consultant will be expected, on a best effort basis, to ensure
that the Company meets the following targets for financial and operational improvements:
Target
Date
End of 2016
Farebox ratios of at least 50%
End of 2016
Effective operation under the PSC, including
transparency of payments for services
Productivity improvements (e.g. vehicle-krn End of 2016
per employee)
Further targets to be developed/se by the
consultant
4.8
STAFFING
The Consultant’s team is expected to include the following disciplines:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
project management;
financial and operational;
public transport;
management and business planning;
environmental; and
legal expertise with expert knowledge of Ukrainian legislation.
The Consultant should ensure that the appropriately qualified experts are available, as required,
for each of the different tasks outlined above. It is expected that the assignment will be led by an
appropriately qualified project manager, accompanied by both key and supporting experts.
It is expected that the team will include a team leader, who will spend a significant portion of the
assignment working on site. As the key to successful outcome of the assignment is participation
of the Company staff in development of the work, the required Consultant’s presence in the field
is 80%.
It is expected, that the Consultant team will include both foreign and local experts. The
Consultant team will be able to efficiently operate in Ukrainian and English.
9