How Corruption Takes Root in Public Procurement

This summer, parliament is set to approve a new Anti-Corruption Strategy — the document that will set the state’s anti-corruption priorities through 2030. It lists the main problems the country needs to solve and what it wants to achieve by then. The strategy also has a section on public procurement, based on a study of corruption risks in the sector that TI Ukraine’s DOZORRO team prepared at the request of the NACP. 

But before getting into the problems themselves, two points are worth noting. First, not every issue spotted through Prozorro is a flaw in procurement itself. Take the 2022 case in Kolomyia, where officials tried to procure a giant metal Easter egg sculpture for UAH 600,000. Even a flawless procurement wouldn’t answer the real question: did the city need that statue at all? Wouldn’t the money have been better spent elsewhere? That’s a question about how the budget gets allocated, not about the procurement itself. After public outcry, the city canceled the procurement and received the sculpture as a gift instead.

Second, not every violation in the sector counts as corruption. The people who run procurement transactions can also make mistakes, run short on time, or not know the law well enough. Many bodies and institutions simply don’t have enough staff, so someone ends up handling procurement on top of their main job — often for very little extra pay. All this affects quality. 

During the study, we found more than a hundred problems and weak spots in the sector, ranging from small and specific to large-scale. So rather than compare apples to oranges, we filtered out the flaws that have nothing to do with corruption and grouped the rest. After talks and discussions with the expert community, we were left with five priority problems.

Discrimination and excessive requirements

This is a wide-open field for contracting authorities looking to cut corners dishonestly. You can write product requirements so narrow that only one manufacturer’s goods qualify. You can give bidders too little time to submit proposals, so no one but the preferred contractor manages to make the deadline. Or you can demand a hundred and one certificates, or require delivery within a few hours — and plenty more. In coal procurement, for example, we’ve seen requirements for businesses to submit a certificate proving fluency in the state language and an expert opinion from a “competent authority” on market conditions (we’re still trying to work out what the contracting authority hoped to see there). This kind of discrimination drives prices up — in those same coal procurement, contracting authorities that imposed illegal restrictions overpaid by 40% on average.

Tightening the rules so contracting authorities simply can’t set discriminatory requirements isn’t the answer, since that would also stop them from setting reasonable conditions that fit their real needs. Instead, the fix should be targeted: correct the worst practices, help businesses challenge such tenders, and help the Antimonopoly Committee handle those complaints. This would keep flexibility for contracting authorities acting in good faith while strengthening the response to those that aren’t. We also propose digitizing more of the tender documentation, so red flags in tenders are easier and faster to spot.

Abuse of contract amendments

This problem partly follows on from the last one. Once an unscrupulous contracting authority has loaded a tender with complicated conditions to keep everyone else away, the next step is changing the contract terms with its chosen supplier to something more favorable. Contracts can’t be amended freely — rules and limits exist for that too, meant to prevent delivery deadlines from stretching out for no reason and prices from creeping up. But, as you might guess, not everyone follows those rules. And the rules themselves aren’t perfect either. 

A good illustration of what these contract-amendment schemes can lead to is the diesel fuel case involving Ukrzaliznytsia. In 2024, the High Anti-Corruption Court convicted the head of one Ukrzaliznytsia branch’s management unit, sentencing him to three years in prison, and the head of a private company, sentencing him to more than five years, for unjustified price hikes written into their contracts. The scheme cost the railway operator nearly UAH 103 million.

Here, we propose improving the rules to close the blind spots — spelling out exactly how a contract should be signed and how it can be changed, so the rules are clearer for contracting authorities, businesses, oversight bodies, and courts alike. Developing e-contracting would help too: it would partly block changes to a contract when they shouldn’t be allowed, and let the rest be tracked automatically. 

Abuse of direct procurement

During the full-scale invasion, the government allowed contracting authorities to sign large-value contracts without a tender in a number of cases — just sign the deal and report it on Prozorro. This let contracts get signed quickly in critical situations. But some contracting authorities interpret these exceptions too loosely and use direct contracts where a full competitive tender would have made more sense. In Kryvyi Rih, for example, a direct contract worth UAH 77 million for heating-network repairs was signed in November 2024. Officials justified it by citing the urgent need to prepare before winter. But the State Audit Service found that the repairs had already been included in the plan back in July 2024 — plenty of time to plan things properly and hold a tender.

And overall, the procurement sector is far more stable now than it was at the start of the full-scale invasion.  So the list of grounds for direct contracts should be cut back significantly. Contracting authorities should also publish more documents justifying their use of direct contracts, and clear guidance should be developed on how to calculate fair prices so they don’t end up overpaying. 

Weak oversight

However good the e-procurement system is, and however carefully the rules are written, the human factor never goes away. Violations can’t be eliminated entirely, so catching them early and effectively matters most. In public procurement, the State Audit Service plays a key role here: it monitors purchases and can catch violations at an early stage. 

Unfortunately, in practice auditors often start their reviews too late. By then, the damage from a violation has often already been done and there’s little left to fix. That’s what happened with the monitoring of a shelter procurement in Dnipropetrovsk region: the contract was signed in June 2023, but the review didn’t start until July 2024. Auditors did find violations and ordered the contracting authority to terminate the contract, but it was already too late — the contractor had finished all the work, and the rebuilt shelter had already been accepted as fit for use. Last year, the share of preventive reviews grew from 20% to over 30%, but there’s still a way to go before reaching where we want to be.

Getting there will mean starting more reviews early, allowing enough time to carry them out, streamlining the procedure, and possibly even making monitoring mandatory for the largest tenders. It would also help to set specific ways to fix each type of violation and introduce a fast-track court process for challenging State Audit Service findings.

Hard to hold violators accountable

Finding a violation isn’t enough — if the person responsible hasn’t fixed it, they need to be held accountable. Without real consequences, violators will keep ignoring the rules: if nothing is at stake, why bother following them? Holding people accountable has run into plenty of obstacles: no access to violators’ personal data needed to file reports against them, short court deadlines for hearing cases, an outdated list of violations in the law, and, in some cases, weak work by auditors. As a result, in 2024, only 211 reports from procurement reviews reached the courts. Of those, courts held only 67 people accountable. In some cases, courts settled for a verbal warning or didn’t confirm a violation had occurred at all.

We believe this problem needs deeper study to come up with solutions that actually work. For now, though, the priority is to update the list of violations in the Code of Ukraine on Administrative Offenses and integrate Prozorro with court registries. 

Solving these problems won’t be easy, and it’s a long road — one that didn’t start today or yesterday. In recent years, for example, the Antimonopoly Committee has managed to cut back on certain kinds of discriminatory requirements, such as demanding that businesses submit product samples or documents the contracting authority itself was supposed to issue. Last year, the State Audit Service also worked to improve the quality of its reviews and its record on holding violators accountable. On most of the problems described here, Ukraine isn’t unique, and there are no quick fixes elsewhere either. But step by step, over the next five years, procurement can become fairer and more honest. 

This material is funded by the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.