What Will Procurement Be Like After the War?

The war continues, but we need to prepare for the life after it and the large-scale reconstruction of the country. The usual procurement rules will not work — circumstances have changed. Therefore, since mid-April, together with the Procurement Improvement Center of the KSE, the Department of Public Procurement of the Ministry of Economy, SE “Prozorro,” and other experts in the field, we have been preparing new approaches for military procurement. 

Let us introduce you to the final developments.

Procurement needs to be fast — because many things will need to be rebuilt urgently, transparent — to prevent corruption, efficient — to spend money economically and qualitatively, and understandable and easy for participants and procuring entities.

The developed ideas can be divided into two blocks:

1. Temporary simplified procurement procedure after the war.
2. Comprehensive improvement of procurement.

Let us tell you in more detail about each of them.

Temporary simplified procurement procedure after the war

During a specified period after the end of martial law (up to 2 years), one of the following methods can be used for procurement:

• simplified open bidding;
• selection of the contractor through qualification systems;
• other procedures provided for by law.

Simplified open bidding is an analogy to the simplified bidding that are already available in defense procurement. They are faster than regular open bidding, which last an average 38 days. And at the same time, there will still be competition.

And if the first bidding does not take place, the repeated procurement can be completed even with one participant.

Qualification systems are an option for procurement of works for the reconstruction of infrastructure projects: current and capital repairs, reconstruction, construction. For them, it is proposed to create a list of qualified participants, from which the procuring entity will be able to select a contractor to conclude the contract. Both the list and the selection of contractors for specific orders should be in Prozorro. A similar procurement method exists in the EU.

The Cabinet of Ministers should develop a procedure for the creation of qualification systems. It will envisage who is responsible for the selection of participants and their exclusion from the register. This body should ensure that the business is able to apply for qualification at any time. In addition, the results of the selection to the register can be contested.

In general, such a procedure should help procuring entities purchase the necessary works on reconstruction faster and easier. They will not need to check the full package of company documents every time, this will be done by the body that will select the contractors to the register. The business will neither have to prepare this package of documents every time — the workload will also decrease for it.

After the period of simplification of the rules is over, we all have to return to the general provisions of the Law.

There is also a proposal to raise the thresholds. The new ones were chosen considering the consumer price inflation index from 2016 inclusive to March 2022. Simplified procurement can be mandatory from UAH 100,000 (up to this amount — refusal from reporting or its very simplified version). Procurement procedures can begin with: goods/services — from UAH 500,000 for ordinary procuring entities and from UAH 1.6 mln for monopolists; works — from UAH 2.5 mln for ordinary procuring entities and from UAH 8 mln for monopolists. The electronic catalog for the procurement of electricity, gas, and fuel is proposed to be used without limitation of cost.

Comprehensive procurement improvement

There are several proposals for changes that will be valid not only during the limited post-war period, but generally all the time.

Raising the thresholds. For the calculations of this variant, inflation from 2016 to 2022 was also considered, however, not only it. Thus, these thresholds are different from those proposed in the first block.

Popularize e-catalogs and complement them with new products and simple services.

Reduce the deadlines in open bidding similarly to the deadlines of the simplified open bidding, which exists in the defense procurement, including appeal. 

If the first open bidding does not take place, repeated procurement can be completed even with one participant. 

Moreover:

• Introduce open framework agreements.
• Allow prices in the contract to be raised by up to 10% each time they go up in the market.
• Allow centralized procuring organizations to conduct a negotiation procedure if two unsuccessful auctions preceded it. So far, only a procuring entity can do this.
• Shorten the list of documents required from business.
• Reduce by half fines for minor violations.

Now, all these ideas will be finalized in the KSE Public Procurement Improvement Center. They will then be submitted to the authorities for consideration. Of course, not all proposals will eventually be included in the final version, and we still have a long way to go to agree and improve them. So, let’s not stop!