Winning Strategy for the Moscow St Petersburg line for Deutsche Bahn For International project class

1. WINNING STRATEGY
Call for tenders : Moscow –
St Petersburg High speed line
21/03/2011
BEAUREGARD Caroline
CLUZEL Thomas
DAUCHY Louis
MILLER Chloé
SPIRIDONOVA Inna
TOUSSAINT Antoine

2. Executive summary
1 OPPORTUNITY DESCRIPTION
2 HOT BUTTONS
3 BIDDERS COMPARISON MATRIX
4 WINNING STRATEGY
5 ACTION PLAN
6 NEGOCIATION PLAN

3. Deutsche Bahn
Deutsche Bahn AG is the German national
railway company, a private joint stock company
headquartered in Berlin that came into existence
in 1994.
The DB group is divided into 3 Business units: DB
Bahn (passenger), DB Netze (infrastructure), DB
Schenker (logistics). These subsidiaries are
companies in their own right, although most of
them are 100% owned by DB AG.
DB has been able to combine its geographical
positions to its aggressive and conquerent
strategy by buying companies, creating joint
ventures and coopetitive relationships in order
to achieve its goal: remaining the number one in
the transportation sector.
A strong leadership culture as well as a political
support have also combined to bring about
Deutsche Bahn's influence across Europe and
across the world.

4. Description of the HSR 1 project
Main characteristics of the project:
Objective: Unification of the two capitals in one
agglomerate
Deadline: End of 2017 to be prepared
for 2018 Fifa World Cup
Length: 660 km
Travel time: 2h30
Maximum speed: up to 400 km/h
Forecast traffic level: 42 pairs of trains/day
Forecast traffic: 10 million/year by 2030
Structures: 256 per 72 km
Procurement basis: PPP (LCC)
Budget: 18€ bn

5. Opportunity description
Customer / end user Firm: RZD - Russian Railways / Subsidiary: JSC “High-Speed Rail Lines”
name Customer intimacy: Medium (Past experience on projects and collaboration)
Opportunity name Moscow – Saint-Petersburg High-speed rail project (HSR 1)
Line design, construction and provision of maintenance services for 30 years
Customer CONOPS, Unification of the two capitals in one agglomerate and development of the regions between the capitals
Needs and Vision Increase the prestige of the country (HSR system as an essential element of the developed country)
Scope of procurement Procurement Basis: PPP (Public-Private Partnership) – LCC (Life-Cycle Contract)
Budget / Winning Estimated budget of the project: €18bn
price Introduction of CLM (Contract Lifecycle Management) + European standards = 30%/40% reduction of the
budgeting expense (Estimated reduction: €6,3bn)
Key requirements Key design parameters of the high-speed Moscow - St Petersburg line:
 Journey time - 2 hours 30 minutes; Maximum speed - 400 km/h
 Predicted passenger volume - 8 million per year in 2018
 Engineering structures - more than 250
 Time constraint: Fifa WC 2018
 Formation and development of a unified system of intermodal facilities "airports - HSR - public transport“
 European standards implementation
Customer Critical
Manage the « hot » buttons (Time constraints, etc.)
Success Factors
Acquisition Process & Tender > Design > Construction > Operation & Maintenance
Key Milestones Financing
Customer Evaluation
See « hot » buttons evaluation and ranking
Criteria

6. Hot buttons
HOT BUTTONS WEIGHT REMARKS
 Delivery by the end of 2017, before 2018 FIFA World Cup
Time constraint 30  Beginning of the project : 2013
 Maintenance
Operations 25  Knowledge transfer
 Life-Cycle Contract
 Cutting edge technology
 Speed: up to 400 km/h
Technology 20  Capacity: around 10M per year
 Safety : European standards
 New line parallel to the existing one but trains arrive at the same stations
 Estimated budget = 18€ billion
Cost 15  Financing = PPP (International Financing / Russian government)
 Climate constraint : low temperatures, snow
Environment 10  Topography constraint : 250 structures to be engineered

7. Bidders comparison Matrix
DEUTSCHE
HOT BUTTONS WEIGHT SNCF HYUNDAI
BAHN
Time constraint 30 22 15 25
Operations 25 20 22 10
Technology 20 15 18 10
Cost 15 8 4 12
Environment 10 5 3 8
TOTAL 100 70 62 65

8. Winning Strategy
TIME:
WEI HYU Prove German experience in meeting deadlines in previous similar projects HYU
HB US SNCF Previous delays were linked to Siemens US SNCF
GHT NDAI We will NDAI
 Dedicated subsidiaries
emphasize
OPERATIONS:
our German experience in the development and upgrading of infrastructure
Strengths  DB is the largest railway operator and infrastructure owner in Europe
Time 30 22 15 25  Various successful high-speed railway line project : line Taipei-Kaoshiung, line 25 15 20
Ankara-Konya …
COST :
We will Meet with the expected budget
Op. 25 20 22 10 Propose a Life Cycle Contract 25 15 8
mitigate our ENVIRONMENT :
Weaknesses Previous experiences in Russia + Feasibility studies for a High Speed Rail Network in
Southern Norway
Tech. 20 15 18 10 SNCF high operational quality: 20 15 10
-> Op: Low experience with Russian culture and specificity
SNCF state-of-the-art technology :
We will -> Low experience and feedback on new generation train and speed limits of TGV
downplay and AGV in other markets
Cost 15 8 4 12 our Hyundai deadlines respect : 8 4 10
competitor’s ->Never achieved such a large project (in terms of time constraint and scale)
Hyundai knowledge of the environment :
strengths
-> No experience in this type of climate and region
Environ Hyundai low prices :
10 5 3 5 -> Problem of reliability of the material (low cost, no retrospect on quality) 5 2 4
ment
SNCF environmental unadaptation :
-> Low reliability on extreme climate
We will SNCF high prices :
10 emphasize -> Cost: public subventions, partnership, internal crisis
TOTAL 70 62 65 83 51 52
0 our -> Many different subsidiaries
competitor’s Hyundai operational unefficiency :
-> Many problems of maintenance (accidents and failures in the KTX 2, …)
Weaknesses
Hyundai technological uncertainty:
-> Difficulty to reach European Standards

9. Action Plan - Proposal
Priority Target Status
Serial Action Owner
(L,M,H) Date (Open/Closed)
1 H Supervision and consolidation of the various parts Director End 2012 To be started
International
2 M Analysis of the request for proposal Projects Dept
Apr 2012 To be started
3 M Redaction of the juridical part Legal Dept mid 2012 To be started
Redaction of the technical part for rail: FDMS aspect Development
4 H Dept
Mid 2012 To be started
(Fiability, Disponibility, maintenability, safety)
Redaction of the technical part for engineering
Development
5 M structure: FDMS aspect (Fiability, Disponibility, Dept
Mid 2012 To be started
maintenability, safety)
Redaction of the economical part : Construction, Operations
6 H Dept
Mid 2012 To be started
operation and maintenance
External
7 M Setting up the PPP and find partners Relations Mid 2012 To be started
Dept
Head of the During the
8 M Coordination meetings project project
To be started
9 H Validation of the proposal Direction 03/30/12 Open

10. Winning Strategy
HB WEIGHT US OUR SOLUTION ALIGNED WITH HOT BUTTONS US
Time 30 22 Deliver a first efficient solution by the end of 2017 25
Op. 25 20 Make transfers of technology and help operate the infrastructure during 30 years 25
Tech. 20 15 Provide a state of the art solution that meets the European Standards 20
Cost 15 8 Offer a win-win cost solution that matches with the budget 8
Environm
10 5 Provide a solution adapted to the Russian specific environment 5
ent
TOTAL 100 70 83

11. Winning strategy
HOT
WHAT YOU PROPOSE WHY, HOW, WHERE, WHEN AND WHO EVIDENCE
BUTTONS
Time constraint is vital and existing lines between two cities.
The project will provided step by step section beginning with extremities.
Deliver a first efficient
Time In case of delay at the beginning of 2017, use for a limited period of time the Delivery of an efficient
solution by the end of
constraint existing line (same train stations but a need to adapt existing lines and a train line in time
2017 :
temporary solution
In relation with RZD and Russian government
Ensure a proper knowledge transfer so that they can reproduce this technology in DB and Russian
Offer guaranties and a other places in Russia and for the demand for the World Cup Railways after the
Operations
Life-Cycle Contract : Russia EU Summit in
Train the staff so that they are able to operate the infrastructure delivered Brussels in Dec 2010
Provide a state of the art With our expertise and experience we will decide on Transport Infrastructure,
Compliance with
Technology solution that meets the Rolling Stock Technology, Control-Command and Signaling, Railway Electrification
European standards
European Standards : and the power system which meet our European Standards
Life-Cycle Contract : DB builds the line at its own expense, and Russian Railways
 Cost of previous
Offer a win-win cost begins to pay only from the time of the project’s commissioning, and then
projects lead by DB
Cost solution that matches throughout the depreciable asset life of the structure during 30 years.
 Russian Railways
with the budget : €12bn when the railway is operational
expectations
€20.000.000 each year during 30 years
 Supervision of
The region between Moscow and St Petersburg has many asperities and is very
Provide a solution bridges and tunnels
cold, so it needs adapted materials.
adapted to the Russian for the Nuremberg /
-> specific knowledge and expertise to adapt the rails to the Russian ground and
specific environment : Leipzig railway line
to adapt the materials to the climate
Environment adapt our technology to  Study for a high
An accurate study will be run to know exactly the region, and to define the best
the specificities of the speed line in Norway
route possible for the railways.
Russian landscape and  Consulting for the
Also, we will seek for skilled partners, and control the operations during all the
climate high speed line
project.
Ankara / Konya

12. Negotiation phase
Our GET VALUE GIVE Projected
priority Customer
Priority
Receive each stage 5 3 months Project completed earlier
1 1
payment earlier months
Increase the proportion 10% 300 Provide more services (ex:
2 of the payment when the employees Training center) 2
railway is operational
Increase budget 5% 30% from CLM implementation with cost
3 the initial reduction 3
bid price
Extension of the 10 years 20% from European standards
4 maintenance contract the initial implementation with cost 4
bid price reduction
Time schedule warranty 15% Increase the number of
5 passenger/year 5
6 Position on other projects Environmental standards 6
NOT NEGOCIABLE
1 Quality standards of the spare parts and materials corresponding to the DB standards
2 Working conditions for DB engineers
3 Environmental standards of construction corresponding to the DB standards

13. THANK YOU FOR YOUR
ATTENTION
Q&A