Transparency International Ukraine has published the results of its recent study titled “Abnormally low prices in Prozorro: is the client protected?”. The report was compiled as part of Transparency and Accountability in Public Administration and Services (TAPAS), a large-scale USAID/UK aid project.

The functionality that filters out abnormally low prices in Prozorro is meant to deter disingenuous tender participants that might not properly fulfill the contract terms. It searches the database for prices determined by its algorithm to be “abnormally low” – that is significantly lower than the average offered by other tender participants. The participant offering such a price has one business day to provide a justification note, or otherwise the client must decline the offer.

DOZORRO experts have conducted an analysis of international practice regarding handling of abnormally low prices and the first 855 applications of related Prozorro functionality that occurred between June 10 and July 20.

Only 24% of justification notes by participants provide calculations backing up the viability of their offered price. However, only 10% of justified offers with abnormally low prices are declined for that reason.

“More than half of justifications are unconvincing. Sometimes participants simply write that the price is low because of ‘special production techniques’ or because ‘the participant is the manufacturer’. There is no barrier in place preventing the selection of such participants as tender winners,” says Artem Davydenko, public procurement research coordinator at TI Ukraine.

The Public Procurement Law does not determine requirements for the content of a justification note. As such, the system is unable to filter out cases in which it remains unclear whether the participant is able to fulfill the contract terms, and the efficiency of Prozorro functionality surrounding abnormally low price detection is undermined.

“Our research indicates that the legal framework for handling abnormally low tender prices must be revised. However, even in its current form it benefits the client. In the past, clients were obliged to choose the participant offering the lowest price, dumping prices as well. Now, the system warns clients in cases of potential dumping, and a choice can be made,” says Ivan Lakhtionov, the innovation project program manager at TI Ukraine.

The full results of the study with information on the uncovered problems and recommendations on handling them may be accessed in Ukrainian here

DOZORRO is a project of the civil society organization Transparency International Ukraine designed to ensure fair play in the public procurement sector.

The project team has created and maintains the monitoring portal and the public and professional BI modules BI Prozorro. In addition, DOZORRO develops the DOZORRO community, a network of civil society organizations that monitor public procurement and report violations to supervisory and law enforcement agencies.