For convenience, all discovered challenges were grouped by fields or stages to which a respective challenge refer
It is important to note that this section does not aim to offer solutions to these problems, but only demonstrates the obstacles that already exist and affect the work of CPOs at the moment.
Challenges arising at the stage from the emergence of need to the announcement of procurement on Prozorro.
According to the CMU Resolution, customers who are required to make procurements through a centralized procurement organization shall submit information about the need for procurement within 10 business days from the date of receipt of a request for needs from a CPO in the manner specified in the regulations.
According to the regulations of SI "Professional Procurement", a customer may send a response to a requirement in the form of a paper letter or email to the CPO's email address.
More time is spent by CPOs and customers to collect needs and more likely to cause errors when transferring data/combining needs in one place.
The regulations of SI "Professional Procurement" specify that after receiving a letter from a CPO, a customer shall submit its need by sending regular mail or email within 10 days which means that to consolidate all needs, the CPO shall process a bunch of documents different by form, format, and content.
CPOs and customers communicate and share documents via email or other means of communication. MI "Entrepreneurship Support Fund" of Sumy Oblast Council confirmed that if there are any mistakes in a posted plan (for example, a different CPO is specified), a CPO first receives confirmation that a customer posted a plan, and then checks if it is tagged as a CPO, discovers the mistake, notifies the customers and the latter edits the plan. All that is done by mail correspondence and mobile comnunication.
SE "Medical Procurement" said that more time and effort for collecting needs and their further consolidation in one place for centralized procurement organizations and customers takes even more time for procurement and increases the likelihood of mistakes when transferring data. This could result in the procurement becoming irrelevant or unnecessary, and there might also be challenges in integrating manually collected needs from healthcare institutions into the procurement process within the Prozorro system. These constraints impact the analysis and monitoring of procurement, as there is no automated method to connect all the data, leading to added challenges in identifying genuine needs and overseeing the procurement process.
According to CPOs' regulations, customers may submit their needs up to the fourth quarter inclusive. For example, according to pargraph 4, Section II of the Regulations of SI "Professional Procurement", a customer shall ensure submission of annual plan no later than before November 10 of a year in which the need is planned to be financed.
This means that new needs can be submitted throughout the year. For example, MI "Entrepreneurship Support Fund" noted that only 20 of 120 institutions submitted their annual plans at the beginning of 2023. The rest of them submit their plans throughout the year.
According to Prozorro, in 2023, the CPOs learned about 80% of procurements to be done by them in the same month when they must announce a tender from the corresponding point of the plan. At the same time, CPOs receive requests for procurements throughout the year.
Delaying the time required to meet the need, because if a CPO has decided to purchase goods for all customers in a single tender, then the tender can only be announced when the needs of all customers have been collected.
SI "Professional Procurement" held aggregated procurement for 6 customers. The tender announcement date was October 14. The first buyer's plan was published on August 30, and the last one was published on October 12. Both customers specified "September 2021" as the approximate start date in their plans. 43 days passed between the first and the last plan, and only 2 days passed between the last plan and the announcement of the tender.
If, instead of one procurement of the same product type for all customers, a CPO announces tenders for each request, that is much more time-consuming for their personnel.
SI "Professional Procurement" announced at least 62 lots for procurement of electricity in 2021.
CPOs cannot plan their work properly and may not have time to process requests and conduct procurement if customers submit many needs at the same time.
According to Prozorro, 26.5% of CPO tenders in the interests of customers were announced more than 14 days later than planned.
Only 20 of 120 customers of MI "Entrepreneurship Support Fund" posted their annual plans at the beginning of 2023 which means that the CPO has to either request the needs from customers (spending time and resources on letters and calls) or wait until customers submit their needs. Thus, the total time spent on collecting customer needs increases.
According to the Prozorro system, 19.6% of all lots announced in 2021 by CPOs are in November and December (with the contract validity date, according to the tender, during 2021), and 31% in October. Almost 50.6% of tenders were announced in the last quarter.
Problems that arise due to the way the process of interaction between CPOs and customers is currently regulated and built
"CPO of Ivano-Frankivsk Oblast Council" said that more than half of customers never submit their needs and ignore their obligation to buy through CPOs.
Larger expenses are associated with tender arrangements, as each customer independently holds them, whereas CPOs could consolidate the demand and secure more competitive prices.
Customers arrange individual procurements instead of a unified one, which theoretically raises operational expenses (such as tender document preparation, bidder qualification, and addressing queries) and has an impact on the ultimate price. For example, in 2021, at least 4 customers of SI "Professional Procurement" (MIA, SASU, Treasury, and Ministry of Justice) announced 15 tenders under open bidding procedure with expected value over UAH 16 mln for procurement code 09310000—5 Electricity, although that type of procurement must be held by CPOs in accordance with the CMU Resolution No. 846.
A decrease in the efficiency and value of CPOs, as most of them were created, staffed, and funded to meet the needs of a certain number of customers (at least).
Regional Target Program of Ivano-Frankivsk Oblast Council "Centralized Procurement Organization of Ivano-Frankivsk Oblast Council" regarding the budget saving tasks, reducing customers' procurement expenses with the same quality of goods is not achieved by assigning procurements to CPOs.
If a customer does not come to a CPO, the customer's official does the work of the CPO's authorized official already funded by the budget (state, city, or regional). In fact, there is double funding for the same functions and budget overruns.
CPO's obligations arise from the provisions of Article 11 of the Law of Ukraine "On Public Procurement" and established in regulations on interaction between CPOs and customers. For example, CPOs shall post tender information on electronic procurement system which also covers:
Moreover, when doing all that, CPOs depend on customers since they are not actually managers of information but they are responsible for posting it.
Requirement to cancel and re-hold tenders due to inability to eliminate violations (meeting deadlines).
SI "Professional Procurement" was forced to cancel the tender because of discovered violations of public procurement laws, namely the deadlines for awarding a contract under Part 6, Article 33 of the Law.
CPOs are responsible for arranging tenders and are involved in the process of meeting a need from the moment a customer submits certain plan item. CPOs prepare tender documentation, announce tenders, determine awardees, and publish information about the contract and additional agreements. That is, CPOs are not involved in the process of drawing up the ToRs and contract implementation which follows both from the definition of the procurement process (Article 11 of the Law of Ukraine "On Public Procurement") and from CPO's рregulations.
According to the regulations, the "CPO" of the Dnipro City Council may refuse to conduct a procurement in two cases:
There is an increasing probability that the procurement will not attract a sufficient number of bidders, and questions or complaints will be filed against it, since the success of a tender depends on the terms of reference, correctly established delivery times, and expected value.
In procedure announced by the CPO, the customer determined the subject of purchase — sunflower husk, which was procured as a means of heating, and not a food product. The monitoring body found a violation regarding the definition of the subject of procurement. The CPO explained that the initiating procuring entity specified in its annual plan the procurement of sunflower granulated husk with the code DK 021:2015:09110000— solid fuel. Given that it is the initiating customer that determines the DK code of procurement, the CPO had no grounds to change the code.
CPO's potential is not fully used. For example, CPO's category managers are better versed in the specifics of the market in relation to specific items and technical requirements for them, and they know better on how to form an expected value.
According to the legislation and regulations, the customer's authorized official is responsible for:
Sumy Regional Cancer Center noted that the terms of reference and draft contract are developed by the customer for each procurement item. In addition, a customer shall fill out a procurement plan with each nomenclature procurement item, and a CPO in fact, just copies information about the procurement items and inserts it into its standard tender documentation. The same applies to the customer's draft contract. In addition, AO shall follow the tender progress since there were situations when a CPO failed to notify a Customer of failed procurement.
AOs must follow the whole tender procedure since they cannot be sure that CPO will notify them about any problems, failures, or cancellations in time.
Sumy Regional Clinical Oncology Center noted that now their AO must follow a tender progress because there were situations when a CPO did not notify a customer of failed procurement. This affects the planning of procurement by the customer, understanding how quickly the need will be met.
Additional processes appear or existing ones become more complex, which increases the load on the customer.
The customer's representative in procurements held by CPOs does not have direct access to procurements on Prozorro, so the publication of any documents, responses, etc., requires their prior transmission to the CPO by an official letter for further publication.
What was previously resolved by a phone call or in an internal document management system (for example, approval of a request/question/monitoring response with the procurement initiator) now requires more formal and longer approvals.
According to the regulations of ME "Centralized Procurement Organization" of Dnipro City Council, once the plan is published, customers shall submit a procurement request to the CPO which they should not do if they procured by themselves.
Відповідно до положень Paragraph 21 of the CMU Resolution No. 1216 says that customers shall create and submit their annual needs to a CPO within 10 days after the CPO's request.
CPOs almost does not reduce customers' tender costs because they still need to have an employee having most functions assigned to a CPO.
Customers' authorized officials have many functions established by NLAs and CPO regulations.
Within the framework of the Law, there is no mechanism for prompt prevention of violations of laws at the stage of contract implementations in the procurement by CPOs.
According to the SASU report, there was a violation found in procurement arranged by a CPO. Under the SASU report, the CPO shall ensure:
In fact, the CPO is responsible for things it has no influence on. And the customer has no reason to terminate the contract.
Monitoring found violations in the procurement by ME "Centralized Procurement Organization" of the Dnipro City Council by the initiating customer (groundless change in the essential terms of the concluded contract), but monitoring and requests were sent to the CPO, since the monitoring may be initiated only with regard to entity who arranged the procurement.
CPOs are not involved in the stage of contract implementation which follows both from the definition of procurement (Article 11 of the Law of Ukraine "On Public Procurement") and from CPO regulations.
CPOs are not motivated to select suppliers meeting qualification criteria since they are not responsible for problems at the contract implementation stage (supplier's dishonesty, etc.).
In March 2021, SI "Professional Procurement" held fuel tender in the interests of SASU. The SASU monitoring identified violations in the said procurement, the CPO decided to appeal the SASU's conclusion in court. The tender resulted a contract with a vendor whom the SASU is currently suing for unfair performance of contractual obligations.
SI "Professional Procurement" procured fuel for the state environmental inspectorate. The monitoring authority found violations regarding the illegal decision of the CPO on the awardee. In the SASU's opinion the core problem was that a bidder (the awardee) failed to provide information confirming ownership and/or partner relations with the gas station regarding the procurement item. The CPO decided to appeal the monitoring results in court. Based on the results of the tender, a contract was awarded, which was eventually terminated due to failure to deliver goods.
CPOs are not motivated to have the tender documentation written in such a way that the customer receives a problem-free vendor who fulfills the order. As the result, customers may get a problematic vendor or gets something they did not need.
Now CPO's main goal is to find a vendor to a customer. The fewer requirements for both the goods and the bidder, the easier it is for the CPO to achieve its goal. In addition, customers are required to make procurement through CPOs.
Problems caused by inconsistencies in normative documents regulating operations of CPOs
In accordance with the provisions of Part 2, Article 17 of the Law of Ukraine "On Public Procurement", a customer may decide to refuse a bidder's participation in a procurement procedure and may reject the tender proposal if a bidder has not fulfilled its obligations under the previously concluded procurement contract with the same customer, which led to its early termination, and sanctions in the form of fines and/or damages were applied — within three years from the date of early termination of the contract. However, a CPO is not a party to a contract and therefore it has suffered failures to implement contracts by a selected vendor.
The risk of non-fulfillment of the contract increases, because the customer is forced to sign a contract with a vendor who has not previously fulfilled the contractual terms, and would be disqualified if the procurement was held by the customer independently, and not by the CPO.
SI "Professional Procurement" held at least 10 fuel tenders with the participation of CONDOR LOGISTICS LLC. In these procurement, there are may be cases where customers have terminated the contract due to the vendor's failure to comply with the contract terms (the State Audit Service is currently suing that vendor). If that unscrupulous vendor submits its proposal again, a CPO will not be able to reject it based on the bidder's previous experience of non-fulfillment of the contract.
The Financial Policy Department of Dnipro City Council confirmed that if a tender is cancelled, customers are required to re-apply to the CPO in the procedure established by cooperation regulations. The Ministry of Economy mentioned in its clarification that if a CPO held a tender in the interests of customers required to procure through CPOs and that tender was canceled twice, the customer cannot apply a procurement negotiation procedure under paragraph 1, Part 2, Article 40 of the Law because the tender was cancelled by the CPO.
There is a risk that the customer's need will not be closed on time or will not be closed at all if there are fewer than two bidders who are interested in delivery at all.
Accordingly, time and resources are spent on re-declaring tenders instead of entering into a direct contract.
Department of Humanitarian Policy of Dnipro City Council, starting from April 17, 2023 has not been able to procure gas through the CPO 6 times in a row because of lacking bidders. Based on Prozorro information, as of July 5, 2023, the need has not yet been met. If the customer bought it with their own effort, a direct contract would be concluded within about 8 days (special open bidding — 7 days to submit, if no one applied, the customer can conclude a direct contract).
Neither the Law of Ukraine "On Public Procurement", nor other NLAs contain the direct definition of aggregated procurement or their procedure.
So, the question is about the legality of aggregated procurement and contractual relations arising out of it since the Law of Ukraine "On Public Procurement" clearly regulates the possible procedures of public procurement but there's no any "aggregated procurement" in the Law. Registration of aggregated procurement transactions with the Treasury is not regulated.
Contracts must be registered with the Treasury no later than 7 days after their conclusion, and when registering a contract, customers must give a reference to a completed procurement subject to a respective contract. However, if a CPO has an aggregated procurement with several customers, contracts may be concluded on different days, and procurement only becomes completed after the last contract is published. Therefore, there may be situation when more than 7 days passed since the conclusion of a contract and a procurement still has not a "Completed" status.
A "need" (paragraph two, clause 21 of the CMU Resolution No. 1216 dated December 27, 2018) different parties may understand both "something really needed this year" and "something planned to be bought for the available funds" (although much more may be needed). For example, in such cases, SE "Medical Procurement" uses different terms referring to those concepts — "100% need" and "a common need according to the quota" (how much funding is available).
The time spent by both the customer and CPO on collecting and processing information that is not clear how to interpret correctly.
Example 1. The customer really needs 100 laptops, and they have funds to purchase only 50. If a customer understands "send your need" as how many they would like to have, the customer will submit 100 to the CPO.
Example 2. The customer needs 100 tons of flour per year for its activities. It has 90 tons of flour in stock. If the customer understands "submit your need" as:
The comparison of lots announced in the period from June 1, 2022 to June 26, 2023, revealed:
CPOs must use additional resources to attract at least as many bidders as RFP attracts now.
Top-10 CPV classes of CPOs (by number of announced lots) have 1.5 to 3 times more bidders per lot on Prozorro Market than CPOs.
NB: The above statistics may be affected by the following facts:
With CPOs, customers receive contracts much more later than with an alternative method. Since current procurement methods available for CPOs are much more longer (the duration itself + preliminary approval), there is a big chance that the contract will never be signed.
For all mentioned CPV classes, the indicator of bidders per lot on Prozorro Market is higher than CPO's. For 6 of 10 specified classes, Prozorro Market's success rate is higher than that of CPOs.
For classes such as: Vegetables, fruits and nuts; Office equipment and supplies miscellaneous; Medical materials, medical equipment and medical devices miscellaneous; Oil and distillates; Meat — all indicators of Prozorro Market are higher than those of CPOs.
NB:Currently, Prozorro Market has unresolved issues regarding the qualification of bidders. For example, SI "Professional Procurement" publicly mentioned that they never check a russian trace of bidders they qualify for the market. And customers are usually prohibited from entering into contracts with such suppliers.
When qualifying customers and preparing TD, CPOs do the jobs that has been done earlier.
CMU Regulation No. 1216, paragraph 17 establishes the amount of remuneration for CPO services (for mandatory procurements from CPOs) as a percentage of a concluded contract. The text of the Resolution does not provide clarity on whether CPOs should use the percentage of the contract amount stated in the Resolution as a tax base or as the upper limit of what the customer is obligated to pay to CPOs.
Risk of violation of the Law by CPOs.
On June 9, 2023, ME "CPO" of Dnipro City Council became a VAT payer under Article 181 of the Tax Code of Ukraine.
ME "CPO" of Dnipro City Council arranged an individual tax consultation saying that "in your case, VAT base under paragraph 188.1, Article 188 and paragraph 189.4 of the Tax Code of Ukraine will be the amount of received remuneration..."
In other words, a CPO must add another 20% of the specified amount as VAT for the percentage of remuneration.
However, this is contrary to the norm of paragraph 17 of the Special Procedure for the Creation and Operation of Centralized Procurement Organizations, approved by the CMU Resolution No. 1216 dated December 27, 2018 (as amended), which defines that "remuneration of a centralized procurement organization for organizing and holding a tender shall be paid by a customer in the event that holding tenders in the interests of such a customer by the specified organization is not mandatory, in the amount not exceeding..." 3%, 2%, 1% or 0.5%, depending on the contract price.
Risk of overpayments for CPOs services by customers.
Problems arising because of improperly developed or lacking procurement methods, technical solutions in the Prozorro system to be used by CPOs in their work.
This option is not provided for by the current procurement legislation.
Time spent re-qualifying the same bidders for each similar procurement.
SI "Professional Procurement" announced at least 62 electricity lots in 2021 with 23 unique bidders of which 15 participated at least twice. A bidder with the code 41427817 submitted for 32 lots.
Time spent on organizing full-fledged open bidding/open bidding in English (announcements, working with the market, customers, and AMCU).
SI "Professional Procurement" announced at least 62 lots for procurement of electricity in 2021. However, customers require a continuous supply of electricity year after year. Therefore, rather than engaging in numerous procedures for the same procurement item, it would be far more efficient to establish a single, long-term framework agreement spanning several years.
Longer duration from the announcement of a tender to a contract award.
In 2021, the median procurement duration for stage 2 of the framework agreement was 14 days, but for open bidding that was 38 days, and 70 days for Euro-bidding.
According to Article 4 of the Law of Ukraine "On Public Procurement" as well as CPO regulations, customers independently determine the expected value.
If procurements are aggregated, certain customers may find themselves compelled to decline to sign the contract, as it will lead to a price exceeding their initially expected value.
There was an aggregated procurement where one customer refused to sign the contract since the per unit price, i.e. kilowatt-hour of energy in vendor's offer was UAH 5.22, and the customer's anticipated price was UAH 5.08. In other words, the contract price for such a customer exceeded the expected value.
If some customer has a specific weight in aggregated procurement and sets the expected per unit value significantly lower than other customers that may prevent bidders from submitting offers since the expected value of that procurement would be lower than the bidder's minimum final offer (see an example).
CPOs, especially those that have category managers, can determine the real per-unit price much faster than customers who make such procurements once a year or less.
Bidders may not come to a tender if at least one customer incorrectly specified (underestimated) the expected value of aggregated procurement.
Additional time spent by Customers to prepare procurement.
Risk of violation of the Law requirements by CPOs.
Data from the Prozorro system confirms the presence of cases when the CPO bought in the interests of other customers, while in the Prozorro system, the CPO is indicated in the "Buyers" field, and the contract was concluded between an awardee and a third party, and the procurement was made according to the type of method of the procedure "Reporting on the concluded COVID19 contract".
According to SE "Prozorro", there is currently no technical possibility of conducting the second stage of aggregated framework agreements in the system. That particular option is not currently supported by applicable laws.
CPOs spend time organizing aggregated framework procurements, not knowing that the second stage of it is technically impossible.
We could not find any aggregated framework agreements that were succesfully completed at the first stage on Prozorro. However, there are failed aggregated framework procurements (example 1, example 2, example 3). Therefore, it is currently impossible to confirm or refute this problem.
Increased time spent on procurement.
Instead of conducting 1 aggregated framework procurement, CPOs have to enter into and administer multiple framework agreements for each customer separately.
Problems related to procurements for several customers at the same time within the same tender.
Participants are forced to overpay for participation in aggregated bids if some (but not all) of the customers refuse to sign the contract.
There was an aggregated procurement in the interests of 3 customers. The expected value was UAH 1,103,300, which means that, according to tariffs to participate in a tender with an expected value of more than 1 million, each participant had to pay UAH 1,700. As a result of the tender, only 2 customers signed the contract, so the actual expected value (according to the plans published by the customers) was less than UAH 1 million, and for such tenders, the participation fee is UAH 510. That is, the participant "overpaid" UAH 1190.
There was an aggregated procurement in the interests of several customers to a large number of different products. If the lot is successful and the price is reduced during the auction for goods for only one customer, there is a risk that all other customers will receive prices higher than the expected value or face an uneven distribution of discounts on goods (example).
Losses of a bidder due to significantly lower volumes (for lower volumes, the unit cost may be significantly higher for them than what they suggested for larger volumes).
Reduced competition or lack of proposals due to participants' unwillingness to submit their proposals.
The legislation does not regulate how prices should be distributed among customers in an aggregated procurement.
If several items of the lot are procured, there is a problem with the distribution of the value for each item.
There was an aggregated procurement in the interests of several customers to a large number of different products. If the lot is successful and the price is reduced during the auction for goods for only one customer, there is a risk that all other customers will receive prices higher than the expected value or face an uneven distribution of discounts on goods (example).
ME "Centralized Procurement Organization" of Dnipro City Council held aggregated procurement in the interests of 44 customers.
If one vendor is selected at once for all customers of the central executive authorities, City Council, and Oblast Council, and if the selected vendor is unreliable, then the work of all customers may be frozen.
SI "Professional Procurement" held at least 10 fuel tenders with the participation of CONDOR LOGISTICS LLC. In these procurements, there may be cases where customers have terminated the contract due to the vendor's failure to comply with the contract terms (the State Audit Service is currently suing that vendor).
If a vendor fails to meet its obligations, all customers will be forced to wait for a new procedure to meet the need, which means additional time spent. For example, in 2021, the median duration of open bidding was 38 days and 70 days for Euro bidding.
Problems arising due to external factors that complicate CPO's operations and development.
SI "Professional Procurement" was created to hold tenders in the interests of a certain (at least) circle of customers, and appropriate funding is allocated in the budget for that purpose.
Subsequently, CPOs deprived of that function and thus financing. In 2023, they got back the function of making procurements for the benefit of other customers, as well as financing for that activity.
"CPO of Ivano-Frankivsk Oblast Council" shared that now CPOs do not have enough money for salaries or to hire lawyers.
That prevents long-term planning and development.
Before the war, SI "Professional Procurement" was responsible for procurement in the interests of other customers and planned to expand and hire personnel for that direction. Then these purchases were taken away, and they were retrained for the development of catalogs. In May 2023, the state enterprise received procurements in the interests of customers back, and they had to reformat their structure and hire the necessary personnel.
That also may affect recruitment and retention of qualified professionals by CPOs.
In 2019-2021 many employees left SI "Professional Procurement" due to insufficient financial resources allocated for salaries.
SE "Medical Procurement of Ukraine" noted that, first of all, due to the war and inflation, their salaries are no longer as competitive as they were before. Now international donors come to Ukraine, offering large salaries. And with the existing salary rates, it is very difficult to retain and motivate the required staff.
The customers of "CPO of Ivano-Frankivsk Oblast Council" said that they applied to that CPO to assign procurement of medical devices and medicines to them but they did not work with that category of goods.
CPOs cannot process requests for all types of procurement items because they do not have professionals in those categories.
CPOs' customers who applied to CPOs, actually arrange procurements by themselves.
Sumy Oblast Council established in its decision that Sumy Regional Clinical Oncology Center holds procurements related to the operation of linear accelerator in coordination with the Council Chairman without the CPO.
The lack of sufficiently qualified personnel directly affects CPOs' ability to perform their functions (for example, it is necessary to work as a qualified lawyer to represent the interests of the customer in the event of an appeal against the decision of the AMCU or a statement of position on a complaint that is being considered by the AMCU)
Sumy Regional Clinical Oncology Center participates in the qualification of bidders since it has extensive professional knowledge of the goods and services that are procurement items.
Paragraph 12 of the Resolution "On Special Procedure of Creation and Operation of Centralized Procurement Organizations" establishes too formal criteria for CPOs, namely:
The Ministry of Economy spends time on a process that is purely formal and does not guarantee the qualification of a CPO.
We learned from the interview of CPO of Ivano-Frankivsk Oblast Council that it does not have a staff lawyer which is very important considering the specifics of the CPO's work — frequent amendments in legislation, cooperation with regulatory authorities, preparation of tender documentation and draft contracts.
The customers of "CPO of Ivano-Frankivsk Oblast Council" said that they applied to that CPO to assign procurement of medical devices and medicines to them but they did not work with that category of goods.
According to the survey by the Public Procurement Reform Support Project in Ukraine, as of the time of the interview, Dnipro CPO had only three AOs evidencing that the Ministry of Economy does not follow any further changes in CPO's structure or their compliance with the minimum criteria.
CPOs' customers and initiators cannot plan their activities for the development of personal procurement capabilities.
At an event dedicated to the creation of a CPO, one of the customers said that now he does not understand what to do — either train the required number of AOs (and spend time on this, change the staffing table), or wait for the CPO to come.
The Cabinet of Ministers of Ukraine has amended that healthcare institutions are required to procure certain medicines and medical devices through the ProZorro Market E-catalog. The full list of these products can be found at link.
CPOs will be forced to hold open bidding or special open bidding for small amounts, since the total demand of customers for medicines may be higher than the threshold, but most of this amount will fall on procurements through the catalog. Accordingly, the risk that the procurement will fail increases.
According to the Prozorro system in 2021, the percentage of unsuccessful lots for the CPV 336 group (medicines) in open bidding and Euro-bidding up to UAH 50 thousand was 62%. But at the same bidding in the amount of >UAH 50 thousand, the percentage of unsuccessful lots was 30.1%. In other words, there is a high probability that knowingly unsuccessful procurements will be assigned to CPOs.
Customers are faced with a choice whether to violate the Resolution or regulations.
According to the Decision of Sumy Oblast Council, medicines are classified as procurements that CPO customers are required to conduct through CPOs, but, in accordance with the recent amendments introduced by the CMU healthcare institutions are required to procure certain medicines and medical devices through the Prozorro Market e-catalog.
At least two initiators of the creation of CPOs, represented by regional councils, could not find a person among their personnel who could answer questions about the activities of a CPO and tell about the goals for which they were created in their region.
None of the initiators of the creation of CPOs to which we applied has a stable system for evaluating the CPOs' activities and the practice of regular evaluating of their operations.
The problems of CPOs are not solved, there is defocusing because the authorities and initiators of the creation of CPOs do not set specific goals that they want to achieve using the CPOs.
Limited budget. The lack of sufficient funding from the central government limits CPOs' ability to hire qualified personnel, improve infrastructure, introduce new technologies, and develop other necessary aspects of their work. In fact, in such a situation, CPOs should think about how to survive, not how to develop.
Lack of a legal framework. The absence of political determination to promote central procurement organizations results in a deficiency of essential legislative backing needed to govern their operations. This can result in ambiguity, the absence of well-defined rules and procedures, thereby fostering inefficiency and increasing the potential for corruption risks.
SI "Professional Procurement" administers Prozorro Market and devoted a lot of time and effort to developing that very mechanism. CPOs cannot buy goods for their customers on Prozorro Market despite the fact that in many cases this could save time and money and be a more effective mechanism for meeting the need.
Today, there are no KPIs for CPOs that can be used to assess their effectiveness and achievements, in fact, just as clear tasks have not been set (there is only a description of functions).
All CPOs are actually funded from the budget. SI "Professional Procurement" noted that they have serious funding problems which makes it impossible to have sufficient staff and effectively implement the functions assigned to them.
Customers of "CPO of Ivano-Frankivsk Oblast Council" ignore the requirement on mandatory procurement through CPOs since the very period of its existence, while the Oblast Council does not do anything to resolve the situation. For example, of 90 mandatory customers of "CPO of Ivano-Frankivsk Oblast Council", less than half of them submit their needs to the CPO.
In 2020, according to SE "Medical Procurement of Ukraine", MOH management tried to interfere with their activities сcreating artificial barriers for their operations by not approving budget items on time. That is, in fact, they directly affected the ability of the state enterprise to receive funding to perform their functions to manually manage the procurement and distribution of goods necessary to combat the spread of COVID-19, as well as trying to assign a "trusted person" for the position of the CPO's deputy chairman and initiating criminal proceedings against the current head to put pressure on him.
Blocking the operations of CPOs Instead of procurements, CPOs are forced to deal with conflicts.
From what is publicly known:
In 2020, the Ministry of Health of Ukraine created artificial obstacles in the operations of SE "Medical Procurement of Ukraine" preventing them from announcing the necessary procurements so they were forced to organize an information campaign to resolve that situation.
In 2020, SI "Professional Procurement" was subject to investigation by SIB regarding a baby package procurement. According to data, CPO officials were summoned to interrogations regarding embezzlement and abuse of power, regarding a tender in which, at the time of interrogations, the proposals of bidders had not yet been disclosed and the tender had not actually been completed.
Deterioration of the image of the CPO idea.
Risks only.
There is a high risk of obtaining the necessary work due to the fact that the process from design to execution of work requires a large number of regulatory improvements so that the procurement can be organized by another party, in addition to the balance holder (Support for Public Procurement Reform in Ukraine Project).
Risks only..
The risk of longer procurement periods and potential problems at the stage of contract implementation if procurement is arranged by a CPO that do not have experience in the relevant category.
Risks only.
