COVID-19 PROCUREMENTS: APPROACHES NEED TO BE CHANGED

In March, public procuring entities were allowed to procure the most necessary goods and services required to fight against the coronavirus without auctions.

The Cabinet of Ministers approved a special Directive that defined the list of such goods and services as well as the procurement procedure.

This step was necessary at the beginning of the pandemic, when nobody was prepared for a sudden outbreak.

Transparency International Ukraine advocated to simplify the procedure, because people’s lives depended on it. As a result, hospitals did not have to wait a month to hold an auction and buy vital medicines, ventilators, masks.

With the simplified procedure, it is enough to find a supplier, sign a contract and publish it in ProZorro. According to the Directive, if necessary, this can be done in a day. By this procedure, procuring entities have been buying for almost half a year. During this time, 50 thousand procurements were conducted and published in ProZorro with an estimated value of almost UAH 6 billion.

How efficient is the Covid-19 procurement?

Efficient procurement is when a quality product is purchased at the lowest possible price, received on time and in full scope. With COVID-19 procurements, questions arise about each component of efficiency. Let’s recall few episodes.

Medical protective suits for doctors: price and quality

The purchase of medical protective suits by the Ministry of Health is one of the most high-profile scandals related to coronavirus procurements. The Ministry first assigned the SOE “Medical Procurements of Ukraine” with the purchase of medical protective suits. SOE analyzed the market and selected a Ukrainian company with the most favorable offer.

However, its products did not satisfy the Ministry, because they did not have the appropriate quality certificates. Then the Ministry of Health signed an agreement for the delivery of Chinese suits with the company “Meddiv”, which is famous for cooperation with organizations from the Ministry of Internal Affairs.

As a result, the Ministry of Health bought fewer suits for a higher price. This happened because the Chinese costumes had an international quality certificate. We sent a request to the Ministry of Health to provide this certificate but received only a typical response letter.

Ventilators that won’t be delivered

In April, we wrote about a significant number of canceled procurements of ventilators. The reasons were different: somewhere the customer made a mistake during the procedure, somewhere the transaction was canceled by mutual agreement of the parties. One company signed contracts with public procurers and then notified that it could not deliver the product.

LLC “Company elimited” received 9 orders for the supply of 15 ventilators, 4 of the 9 – for Zhytomyr. The contract had to be terminated, although under some agreements the contractor even received payment.

Typical violations

Our regional coordinator working on the project related to monitoring of medical procurements, Tatiana Rudenko, says that most of the violations occurred at the beginning of the epidemic. This makes sense, because customers did not know how to use the procedure, and it was necessary to procure urgently.

However, time passes, but violations do not disappear. Tatiana finds them in more than a quarter of the procurements that she analyzes. Often, they are quite typical.

Procurement of items not included on the list as set forth in the Directive

Some procurers unknowingly or intentionally buy something that cannot be purchased using the simplified COVID-19 procedure. For example, UC “Informatyka”, which is subordinate to the Kyiv City State Administration, tried to buy cameras to fight COVID-19 for almost UAH 65 million via a direct contract.

This happens not only in the capital. In Odesa, the hospital bought furniture, and in Dnipro, the hospital tried to procure repairs. There is nothing wrong with furniture or repairs, they are just not that important at the moment. That is why they should be purchased via open auctions and the contractor with the best price offer should be chosen.

Overpricing

At the beginning of the pandemic, the price gouging had a rational explanation: in the face of scarcity, suppliers sold their products to those who could offer and pay more money.

We have been monitoring the procurements of personal protective equipment since the beginning of the pandemic. The typical situation was the procurement of masks. Prices for them increased in March and did not change for several months. Some customers were forced to buy them for 25-27 UAH per piece.

This is normal when there is a shortage on the market, but now anyone can buy a mask at a pharmacy or supermarket for 8 UAH. So why do some customers still pay 15-20 UAH?

What can be done

The COVID-19 procedure was completely justified at the beginning of the epidemic, but now it is time to return to more effective and controlled procurements. Some customers have already started to conduct competitive procurement of goods to fight COVID-19.

In particular, Ukrposhta held an auction to buy 300 thousand reusable masks. The expected purchase price was 6.6 million UAH. At the same time, the cheapest offer was 3.5 million UAH. We hope that it will be possible to sign the contract at this price and save more than UAH 3 million.

The SOE “Medical Procurements of Ukraine” is also efficient in conducting procurement. In July, it procured medical masks. The winning price offer was UAH 2 million lower than the estimated value. The approximate price was UAH 2 per piece.

Such savings are the result of healthy competition on the market, which will help to use funds more effectively. By amending the Directive, the government can make COVID-19-related procurements more competitive. Another option can be to amend the Law of Ukraine “On Public Procurement”.

The situation changes and the procurement procedure need to be adjusted

The situation of uncertainty and panic is over. According to the Ministry of Health, the main hospitals are equipped with personal protective equipment for several months, even in the worst-case scenario, when the hospitals would need to operate at full capacity. Part of the procurements were centralized, and they are now successfully carried out by the SOE “Medical Procurements of Ukraine”.

Even in case the epidemiological situation will get worse, there are enough supplies, so procurements can be planned and carried out in advance, and their effectiveness should be monitored by controlling and law enforcement agencies.

State Audit Service: how effective is it

The State Audit Service should be at the forefront of the fight for efficient public procurement, but it pays little attention to coronavirus procurements.

The auditors explain that they do not have enough powers. In particular, they can’t react quickly to violations and initiate the audit whenever they want. They are allowed to check one client only once a year.

The situation can be corrected by making changes to the legislation, but the auditors themselves must determine such procurements as a priority. Otherwise, even expanding the powers of the main controlling body won’t change anything.

Huge amounts of public funds are spent on purchasing goods and services to combat COVID-19. It is very important to use them effectively. Almost five months of uncontrolled procurements via direct contracts is too much. It’s time to regain control and efficiency.