On November 8, the European Commission recommended opening official negotiations on Ukraine’s accession to the European Union and published a report on our state’s compliance with EU criteria and rules. It is currently the most comprehensive, complete, and up-to-date document on the subject. Find out in the material how the EC is currently assessing the state of Ukrainian public procurement and what we need to change.
In general, the European Commission noted partial progress in the development of the field and the need to further align public procurement rules with the EU acquis. In particular, in the coming year, we need to:
- work on the harmonization of legislation, especially in terms of concessions and public-private partnerships;
- appoint more public procurement complaints commissioners to the AMCU commission;
- reduce the number of exceptions to the law on public procurement to the minimum necessary during martial law.
The European Commission points out that we need to abandon the fixed minimum weight of the price criterion; currently in Ukraine it can seldom be less than 70%. Instead, the EU encourages the use of other criteria as much as possible to choose the most cost-effective bid at tenders. In addition, Ukraine should introduce a mandatory energy efficiency criterion in public procurement. Read more about the European experience of awarding a contract and tips to develop Ukrainian non-price criteria in the TI Ukraine study.
Another important requirement is abandoning mandatory electronic auctions. We are referring to the cancellation of a three-round auction to reduce the price, not online tenders in general. In European procurement rules, this mechanism is optional; that is, the procuring entity can decide whether to apply it or not.
In Ukraine, there was a period when three-round auctions were not held at all, from January to June 2023. According to analysis by DOZORRO, at that time, without the mandatory game of price reduction, the savings on tenders decreased, especially on expensive procurement transactions. Therefore, although a three-round auction is optional in the European Union, it is worth discussing ways to preserve it in Ukraine in relevant cases. Perhaps this will be one of those experiences that we pass on to our European colleagues.
The European Commission also pointed to the need to improve electronic catalogs. It is worth noting here that e-catalogs in the EU and in Ukraine are different things. In the European Union, this is a proposal with many items; for example, many medicines under one procurement code. What we have is an electronic marketplace. The EC also indicates that framework agreements should be used more often.
In addition, Ukraine is expected to develop centralized procurement, especially at the regional and local levels. In turn, in 2023, the DOZORRO team researched the current state and effectiveness of centralized procurement organizations (CPOs) in Ukraine and identified several shortcomings, for example:
- it is currently impossible to conclude a framework agreement on the aggregate need (the solution to this problem is currently being developed);
- CPOs can receive a request from the procuring entity at any time during the year, which complicates aggregation;
- most of the procurement functions remain with the authorized person of the procuring entity and are not transferred to the CPO.
That’s just part of the problem. We need to resolve these issues before creating new CPOs in the future.
The European Commission paid special attention to the system of legal protection and control in public procurement: the Antimonopoly Committee, the State Audit Service, and the Accounting Chamber.
The report notes that before the full-scale invasion, the AMCU was overwhelmed by complaints. Therefore, to strengthen the capacity of the body, according to the European Commission, it is necessary to increase the number of complaints commissioners in the AMCU and introduce specialized commissions. At the same time, it is necessary to expand and strengthen the internal administrative staff; presumably, we are talking about a specialized department for processing complaints.
The impact of the Accounting Chamber in the field of public procurement was called minimal. The EC points to the lack of internal audits of local self-government and preliminary verification of procurement.
In general, the EC describes the control of public procurement in Ukraine as complex and, at the same time, weak, that is, ineffective. Among the reasons are the lack of qualified personnel, duplication of duties, suboptimal quality of control, and non-unified law enforcement. Accordingly, it is necessary to change approaches, in particular in the work of the State Audit Service of Ukraine, and finalize automatic risk indicators. Recommendations to increase the effectiveness of public procurement monitoring were provided by the DOZORRO project team in a study and a legal analysis of one of the parliamentary initiatives. We are confident that their implementation will improve control and contribute to the implementation of this EC recommendation.
The EC expects professional development not only on the part of the supervisory body but also on the part of procuring entities in public procurement. This is in reference to the introduction of professional standards, a professionalization strategy, and a training policy based on a needs assessment. By the way, quite recently, in October, a new professional standard for procuring entities was approved in Ukraine.
In general, the recommendations of the European Commission are not something new; a significant part of them coincides with the results of our research. For example, we consistently note the small impact of the State Audit Service’s monitoring and advise on how to change this. It should be considered that the Ukrainian context differs from the European one, so perhaps not all European approaches will work as effectively. Therefore, it is important that the negotiation process be bilateral. Perhaps our experience will help improve European procurement practices.
In any case, negotiations and preparation for them provide space and an opportunity for quality changes, in particular in the field of procurement. We at TI Ukraine will work to ensure that Ukraine makes the most of this opportunity.
The publication was written with the support of USAID/UK aid project “Transparency and Accountability in Public Administration and Services/TAPAS.”