Changes on Prozorro You May Have Missed

Bilateral meetings began in Brussels within the framework of the screening of Ukrainian legislation—the stage when the provisions of Ukrainian legislation are assessed for compliance with European ones. The first such meeting was held in terms of public procurement.

Many more innovations are on the horizon, in particular those that we and the EU will agree upon during such meetings. But even before that, the field was actively changing. We at DOZORRO have identified several trends in public procurement over the past year and a half.

Restoring transparency and competition

At the beginning of the full-scale invasion, procuring entities were allowed to purchase everything directly and report on it to Prozorro after the end of the war. It was a radical decision, but justified at the time so that procurement would at least somehow continue. But since summer 2022, procurement on Prozorro had been gradually restored, and a few months later, in October, the government approved the procurement rules that are still in use. In particular, open bidding with features was established—a simplified version of the usual tenders that is faster, easier, and is conducted even with only one participant.

Due to this, in 2023, procurement for UAH 892.8 billion was announced under competitive procedures, which is 72.6% of the total amount. And the number was growing. If in Q4 2022, when the new rules only began to operate, the share of the cost of competitive procurement was 60.4%, then a year later, in Q4 2023, it was already 77%.

Competition in these procurement transactions also grew—from 1.79 to 2.06 at the end of 2023. But it is still difficult to attract businesses to compete in open bidding. Almost two-thirds of the bidding is completed with only one participant.

There is more transparency and competition in defense-related procurement as well:

• In winter 2023, defense-related procuring entities were obliged to report to Prozorro on contracts in the amount of UAH 200,000 for goods and services and UAH 1.5 million for works within 10 working days from the date of conclusion of the contract. Exceptions include procurement of weapons, ammunition, and classified procurement.
• In spring and summer 2023, the government introduced simplified procurement, open bidding with features, and procurement in the electronic catalog. These are all different types of competitive procurement. In February 2024, dynamic framework agreements were introduced as well. These agreements allow the procuring entity to select participants to subsequently conduct bidding for several years quickly and without additional checks.

Last year, the government created a procurement agency, the State Logistics Operator, that ensures the non-lethal needs of the Armed Forces of Ukraine, for example, clothing, food, and fuel. According to the agency, the body managed to save more than UAH 13 billion over six months.

Preparing for procurement at the expense of international donors

International partners that finance reconstruction projects have their own rules and features of procurement. However, the goal is to collect all the procedures in one place—on Prozorro. This will allow seeing the full picture of how reconstruction-related procurement is carried out, what is purchased within it, who gets awarded, and so on. It is also a relief for business: entrepreneurs will not need to look for open orders and figure out how to use different systems; everything will be aggregated in one place.

To achieve this, last year, a special procedure was developed on Prozorro based on the principle of a construction kit so that a procurement transaction could be drawn up in accordance with the rules of international organizations. It has already been tested. For example, the Ministry of Health conducted a procurement transaction to create a structured cabling system in Okhmatdyt hospital at the expense of the World Bank. As part of their joint project with the Ministry of Social Policy, tenders for WB money will be conducted by the Professional Procurement centralized procurement organization.

Of course, just having a special procedure is not enough for both the EIB, the EBRD, and other international donors to switch to Prozorro. For example, it is necessary to finalize other functionality of the system and establish control over procurement. But the first steps have already been taken.

Control is still weak

The main control body in public procurement is the State Audit Service. It monitors procurement (it is the most common control measure) online on Prozorro and conducts inspections at the procuring entity’s site.

So far, the control of the State Audit Service is not effective enough. Experts mostly select procurement transactions for manual monitoring because automatic risk indicators are outdated. They often record minor violations that have almost no effect on the result of the procurement transaction and focus too little on finding significant ones.

In recent years, procurement monitoring began after the contract had been concluded in more than 80% of cases, although this should be a preventive control measure. This raises a number of other problems because if the violation is found too late, it can be difficult to rectify. It is impossible to award another participant after the contract is concluded; the funds are often already paid, and the termination of the contract may result in lawsuits on the part of the business.

However, we have a reasonable hope for change. The State Audit Service is currently developing and testing new risk indicators. TI Ukraine, together with KSE and the Support Digital Transformation project with the support of USAID and UK Dev, will help the body analyze and establish processes in the coming years. These tasks are not short-term, but they cannot be postponed.

European integration and other plans

In the course of European integration, public procurement will be assessed in a separate section. In particular, the European Commission has already provided its recommendations regarding procurement in the report on Ukraine, which it published in November 2023. We are expected, for example, to enhance procurement centralization, abandon the minimum weight of the price criterion and the mandatory three-round auctions, and improve control.

Harmonization of Ukrainian legislation with EU directives is one of the government’s priorities in its procurement reform strategy for 2023–2026. In particular, the main changes should be included in the draft of the new law on public procurement, which is currently being developed by the Ministry of Economy. Having more publicity would be appropriate in this regard: the final draft of the document has not yet been published, so there are no discussions of Here, I would like more publicity—the final draft of the document has not yet been made public, so there are no discussions about it. Open meetings with the community were held only at the initial stages of drafting the law. It is expected that the draft law can be published and registered in the Verkhovna Rada this summer.

In addition to European integration, in the coming years, the government has planned to:

• develop the institutional structure of the procurement field and the Prozorro system: introduce performance indicators for procuring entities; hold meetings of the Ministry of Economy with the State Audit Service, the AMCU, the Accounting Chamber, the NACP, the NABU, and other authorities; continue digitalization of procurement, in particular, launch e-contracting;
• work on reconstruction projects: integrate Prozorro and DREAM systems; prepare for procurement at the expense of donors in our system;
• work on the professional development of procuring entities: train them, set a new professional standard, review testing, centralize part of procurement;
• engage the public more and enhance international cooperation.

The strategy outlines focus areas; however, it should be supplemented with a more detailed plan with specific deadlines, KPIs, and persons responsible for different stages.

In general, there is still a lot of work, and new tasks will pop up constantly. So, in pursuit of them, it is important not to lose focus: what exactly we would like to do, why, and in what order. It is essential not to lose the balance between seeing weak points and remembering to celebrate achievements, as well as between quickly adopting decisions and allowing enough time to discuss ideas to hear all sides.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.