Public Procurement 101: Navigating Prozorro

What are budget funds spent on during the war? How much money was spent on road repair/generators/advertising in a certain oblast this year? Was a plastic bag with a BMW logo purchased through an auction?

Writing about public procurement for the general public is a noble but challenging cause. It’s about the government spending taxpayers’ money. Since this spending takes place under certain rules, it makes sense to understand them before writing about public procurement. This helps to speak about procurement professionally, too.

The DOZORRO project of Transparency International Ukraine has compiled a list of things that journalists should know to better navigate Prozorro and much more.

Why Is Procurement “Public”?

Let’s start from the beginning. Procurement in Ukraine became public after the Revolution of Dignity. This sector was reformed. At the end of 2015, the old law “On State Procurement” was replaced with a new one — “On Public Procurement.” At the same time, the electronic public procurement system Prozorro was launched.

This was a platform which would collect all procurement carried out for the funds of the national and local budgets: public authorities, their departments, ministries, municipal institutions, municipal and national enterprises. That is, Prozorro covers not only state (national) procurement but also procurement for the funds of the local budgets, as well as companies owned by the state. It includes not only purchases made by city councils, hospitals, and schools, but also by Oshchadbank, Urkgazvydobuvannia and Naftogaz.

Another point is that Prozorro includes — albeit with a separate set of rules — purchases by enterprises working in specific sectors important for the economy and have certain characteristics which make them subject to the Law. This includes oblast gas and power companies.

Therefore, public procurement is public because it is not only about the expenses of the state and local budgets. Essentially, state procurement is just part of public procurement.

Prozorro, Prozorro.Sale, DOZORRO, BI Prozorro

We already know that Prozorro is an electronic public procurement system.

In addition to this system, there is also the Prozorro.Sale system, which hosts auctions for the sale and lease of national and municipal property. Even though the names of these products are similar, they are not to be confused. Prozorro is about procurement. Prozorro.Sale is about the sale (privatization) and lease of property. 

Though both systems were created under the auspices of Transparency International Ukraine, they are very different. Now, they are managed by two separate state enterprises, which find it very upsetting when the two entities are confused.

DOZORRO is different from Prozorro as well. It is also a project of Transparency International Ukraine, designed for civic monitoring of public procurement. Among other things, the organization administers a web portal of the same name, which is not fully operational at the moment, unfortunately.

And then there is BI Prozorro, a public procurement business intelligence module. This tool uses data from Prozorro and allows for its comparison and interpretation. It is also administered by DOZORRO.

Yes, these things are complicated and interconnected. Most importantly, keep in mind that these are different things.

Procurement Glossary

Procurement item is what is purchased. It can be goods, works or services.

A procuring entity or a buyer is the entity that buys (orders) something.

* The law denotes what the “procuring entity” is separately. The Law “On Public Procurement” has quite a broad notion of a procuring entity. What is more, depending on whether a legal entity meets the legislative definition of a procuring entity, the rules for conducting procurement may be different.

For example, a city council, a department of education and a regional unit of Ukravtodor (Ukrainian Car Road Service) are definitely procuring entities under the law. They are obliged to hold tenders for above-threshold amounts. But Privatbank, although owned by the state, is not a procuring entity in the sense of the law. It is only obliged to report on its procurement in Prozorro. But it can also conduct a tender if it so chooses.

In a broad sense, a procuring entity is just an entity that buys something.

Thresholds are value limits that define the procurement method.

You read above that procuring entities are obliged to hold tenders for above-threshold amounts. In general, according to the Law, there are several such thresholds for procuring entities (in the legal sense of the word):

up to UAH 50,000 — you can contract the item directly, but you have to publish a report on Prozorro;

UAH 50,000 to UAH 200,000 for goods and services and to UAH 1.5 million for works — simplified procurement or purchase through an e-catalog (more on that later);

above UAH 200,000 for goods and services and above UAH 1.5 million for works — open bidding;

above EUR 133,000 for goods and services, above EUR 5,150,000 for works — open bidding with publication in English (Euro-bidding).

Thresholds for procuring entities operating in certain sectors of business (for example, oblast gas or energy companies) are as follows: open tenders — from UAH 1 million for goods and from UAH 5 million for works.

During martial law, the thresholds are different, but that’s another story.

A bidder / participant is someone who participates in procurement (a business bidding for a tender). When somebody wins a tender, it is called an award.

Expected value is the amount indicated by the procuring entity while announcing the tender. This is essentially the maximum amount that the buyer is ready to spend.

The contract amount is the amount specified in the contract that was signed as a result of the purchase. Ideally, in competitive bidding, it is lower than the expected value. But they should not be confused!

Tender documentation is a document in which the procuring entity describes all the details of the tender: its stages, conditions, requirements, etc.

A tender proposal is a package of documents that a participant / bidder submits for a tender. It should contain all documents required by the procuring entity in the tender documentation.

The bid is the price that the participant / bidder is willing to set for the item that the procuring entity intends to buy. There is an initial bid — the one which the participant filed for a tender. The final price is the offer that remains after the gradual decrease in the price during the auction.

E-platforms, or simply platforms, are websites where procuring entities announce purchases and bidders participate in them. Indeed, it is not done via Prozorro. Prozorro is just an auction system and database. It is integrated with a number of private bidding platforms. Essentially, both procuring entities and participants interact with Prozorro via these platforms. The latter receive money for service. And this is especially good because they compete for profit and try to draw in as many clients (tender participants) as possible. The government has less work to do, while procuring entities and participants have a choice (platforms have different interfaces and additional perks), and this competition drives success.

Procurement methods

You already know that some purchases on Prozorro are direct, while others are not. It depends on the expected value. That’s what thresholds essentially mean.

Direct procurement (a.k.a. single-sourcing or reporting on the concluded contract) is when the procuring entity signs a contract with a contractor of their own choosing without auctions. Such purchases would typically involve lower amounts. For example, if a plastic bag with a BMW logo or a piece of pie is purchased for budget funds, this is not a tender, it’s direct procurement. It will simply be reported in the system: they will explain what they bought, where, and for what price.

Simplified procurement is a kind of symbiosis of tendering with direct procurement. A procuring entity announces this purchase publicly so that everyone can bid on it (like in a tender). If there are two or more participants, it takes place like a tender but faster. If only one participant makes a bid, the contract can be signed immediately. It also has slightly fewer requirements than a tender.

It’s also important to say that it cannot be called a “simplified procedure.” Simplified procurement is not a procedure in the sense of the law. That is why “carried out simplified procurement” would be correct to say, while “bought something though a simplified procedure” would be technically wrong.

Open bidding (aka a tender) is the very legal procedure for which we all love Prozorro so much. Procuring entities decide what they want to buy. The purchase is announced through a platform. 

This is followed by several days when businesses interested in participating in procurement can approach the procuring entity for clarifications (for example, if they are confused about a certain item of requirements) or contest the terms of procurement (if they are potentially discriminatory, e.g., requiring a certificate which is not even valid in Ukraine).

Every tender also has its submission deadline — the date by which participants can file their sets of documents to participate in the bidding. There is the auction date and time. Thereafter, participants can reach the auction via their platform and lower their price in several rounds to win. Since January 2023, three-round auctions were suspended for a while. Recently, they were brought back. Read more about this in the section on wartime procurement.

Each auction has its own minimum price reduction step — the amount or percentage of the expected value by which a bidder can reduce their price in one round. That is, if the minimum step is UAH 10,000, the participant cannot lower the price by only UAH 8,000. Still, they can reduce it by, say, UAH 12,000.

An auction requires at least two participants. If there is only one bidder or if no one makes a bid, the procurement fails. In this case, the tender is announced again. If a tender fails twice, the procuring entity can enter into a direct contract.

So, is the lowest bid at an auction always awarded the contract? Not necessarily. The participant’s offer must meet the procurement requirements. For example, a bid can be made by a sole proprietor registered two days ago, without experience, qualified employees or equipment, offering a suspiciously low price. This company will simply be disqualified for not meeting the requirements. Procuring entities usually write the qualifications, experience, quality of goods and other things in great detail. When they receive documents, they verify whether they are consistent with tender requirements.

Euro-bidding, or open bidding with publication in English is procurement for the expected value above EUR 133,000 for goods and services or EUR 5,150,000 for works where announcements are translated into English to ensure that companies outside Ukraine can participate. This drives competition.

Procurement through the E-Catalog (a.k.a. Prozorro Market) is a simpler alternative for simplified procurement. It is similar to Amazon or other marketplaces, except this one is for procuring entities in legal terms. They will have less work to do here because the administration of Prozorro Market has already verified all the documents filed by suppliers. Depending on the expected value, the procuring entity can either simply purchase the product directly from one of the vendors in the marketplace, or conduct a request for quotations (something like a very short auction with much less paperwork).

There is also a negotiated procedure (negotiation) — a procedure without an auction for an above-threshold amount, which procuring entities are allowed to conduct only in very specific cases. Putting it very simply, this means that the procuring entity asks one or several participants how much they would like to receive for what the procuring entity wants to purchase. In the negotiation process, the participant or participants must provide documents that prove that they can do it (that their goods are of the necessary quality, or that they can actually provide this service or perform the work).

A framework agreement is an auction in which multiple awardees are selected to work with over a period of time. Framework agreements are convenient if you buy certain goods or services regularly. Then you select contractors within the first stage. And every time you need to buy the product or products, you select the best offer out of those who ended up within the framework. This helps speed up regular procurement.

Justice and Control in Procurement

Compliance with the rules in the field of public procurement is monitored not only by the public. First, the State Audit Service has the most authority in this area. It can monitor procurement procedures. Monitoring can be initiated vis-à-vis open bidding, negotiating, framework agreements. But it cannot be done for direct contracts and simplified procurement.

If auditors find a violation during their monitoring, they demand that the procuring entities correct it: terminate the contract, make changes or eliminate it in another way. If the procuring entity does not fix it, the auditors can fine the entity by themselves for minor violations and via trial for significant ones.

In addition to monitoring, the State Audit Service controls procurement through other measures: audits, inspections and revisions. In this case, the agency can verify all kinds of procurement (not only procedures in the legal sense) and assess the use of budget funds comprehensively.

However, the State Audit Service doesn’t handle all violations. For example, punishing bidders for collusion is under the purview of the Anti-Monopoly Committee. It is the very agency where bidders can contest procurement. They can contest both the terms in the tender documentation, e.g., if they are potentially discriminatory, and decisions of the procuring entity — on rejecting your bid, awarding the tender or canceling procurement. And it is not only open bidding that can be challenged. For example, if a business notices that a procuring entity used a negotiation due to the alleged lack of competition for a purchase where competition is very much present, the choice of procedure can be challenged. If AMCU confirms that the negotiation is unreasonable, the procuring entity will have to cancel it. It will have to announce a tender, and the company can compete for the government order.

Procurement during Wartime

When the full-scale war began, procuring entities were quickly allowed to buy everything they needed directly. They weren’t even forced to report on the purchases — they could upload all the information after martial law was over.

At the end of June 2022, procurement was partially brought back into the system — procuring entities were required to use simplified procurement or the electronic catalog. At the same time, the rules still allowed plenty of loopholes for direct contracts that could be reported after the victory.

In September 2022, there was a requirement to report on contracts signed directly, without waiting for the end of martial law. Procuring entities didn’t have to publish the contract and some details of the procurement, in particular related to addresses, but were now obliged to publicize the very fact of conducting procurement within 10 days after concluding the contract.

On October 19, 2022, a separate set of rules developed specifically for wartime appeared in public procurement. The government introduced open bidding with additional features, a variation of tenders adapted for wartime procurement. They are faster, simpler and are even valid with one participant (like simplified procurement).

Open bidding with features has its own thresholds:

• above UAH 100,000 for goods and services;
• above UAH 200,000 for maintenance;
• above UAH 1.5 million for works.

Accordingly, if the purchase is for a sub-threshold amount, procuring entities can buy the items directly or through the e-catalog. Goods for an above-threshold amount can also be purchased through the E-catalog.

In early 2023, three-round auctions in Prozorro were suspended. Traditionally, auctions in Prozorro took place in several stages: participants submitted initial bids, which they could then lower within three rounds of the online auction. Due to power outages after massive Russian shelling, the Ministry of Economy decided to temporarily abandon the multi-round operation. Therefore, from the beginning of January until May 19, participants submitted their final price right away. Recently, multiple rounds were brought back but remained optional. That is, a procuring entity doesn’t have to use the three-round auction if they can justify this choice.

At the end of February 2023, the rules were slightly changed again. If procuring entities sign direct contracts for above-threshold amounts, they have to publish them on Prozorro in specific cases. They also need to justify why they chose the direct purchase.

In general, during the war, it’s worth keeping a close eye on when the purchase you’re analyzing was made. We also advise regularly checking for possible amendments to legislation.

Procurement Page on Prozorro

Each purchase made in the system or reported to it has its own page. The structure of such pages is standard.

Let’s consider the example of the purchase of trolleybuses in Chernivtsi.

When we go to the page of the specific purchase on Prozorro, we see the Procurement name in a large font in the top left corner. It is followed by the procurement code. Below is the method. In this case, it is open bidding with features. Next to the method is the status — this particular purchase is completed. At the end of this block, there is also a link to the DOZORRO portal, where you can conveniently view all purchases of this procuring entity.

At the top on the right is information about the expected value of the purchase. Below is the procuring entity’s point of contact. If you need to clarify something about the purchase, you can try calling this number. There is also a button to report violations to auditors. They say that they do not consider it as an official appeal. Therefore, to make sure the complaint reaches them, it is best to use the official form on their website. There is also an option to leave a review about the purchase on DOZORRO (temporarily suspended).

Further there is a section with information about the procuring entity with the name, EDRPOU code, address, and contact details.

It is followed by a section about this particular purchase: period, expected value, amount of the minimal price reduction step.

Then comes information about the procurement item (what is purchased). Here you can find the CPV code of the purchase — the code of the group of goods or services to which our item belongs. This is a very useful tool if you need to find similar purchases to compare something. If you search by name alone, you can find a lot of unrelated things. But if you also filter by CPV code, the sample will be much better. CPV is available in the line “Classifier and corresponding code” after DK 021:2015.

Below is information about the payment terms.

Further below you will see a section with tender documentation. This includes information about criteria for awarding the tender: price only or also other criteria. Here, you can also find the file of the tender documentation itself with all amendments.

If the auditors monitored the purchase, you can read about their work further below.

There is also their conclusion about finding a violation, or not.

Below the monitoring section, you can see who made a bid on the tender. If you click “Documents,” you can additionally see all the documents that make up the bid. This would include all certificates, licenses, etc.

In this case, only one participant took part in the procurement, offering a price slightly under the expected value.

Look for the contract based on the results of the purchase, with annexes and all amendments, at the very bottom of the page.

Useful Tools

You already know how procurement takes place and what information you can find on the page of a specific purchase in Prozorro. Now, we can look at more advanced procurement tools. If you’ve worked with investigations before, some of them will be familiar to you.

YouControl will come in handy if you need to check a company. For example, if you want to know if tender participants are linked in any way. Maybe the sole proprietor who was awarded the contract for advertising services for your local council was only created a month ago? It is always best to search by the EDRPOU code, not by the name. By the way, journalists and activists can apply for free access.

BI Prozorro is an advanced free tool for public procurement analysis. Using this tool, you can filter purchases of a specific procuring entity for the entire period, view auditors’ checks, and calculate how much money a specific oblast spent on procuring cars, for example. One issue is that it is not very user-friendly and has a steep learning curve. Before using it, try reading or watching some guidelines. But if you master BI, the sky is the limit.

Spending is the official state portal where you can check government payments. On the one hand, here you can check whether the contract resulting from the purchase you are analyzing has been paid. On the other hand, it also is helpful when looking for purchases that were never reported to Prozorro. For example, those that took place in the first months of the full-scale war. The only issue is that search by transactions is limited to data for the past three months.

If you need a longer period, use 007. This is another resource about the use of public funds. But this one has been created by the public.

Opendatabot’s Case Registry is a useful tool to search for criminal cases related to procurement, procuring entities, and participants you are analyzing. In some of them, you can find interesting details for your material.

The material was written jointly with a journalist of the DOZORRO project of Transparency International Ukraine within the USAID / UKaid project “Transparency and Accountability in Public Administration and Services / TAPAS.”