In February, the Verkhovna Rada of Ukraine approved the widely discussed Law No. 2759-IX, which obliged procuring entities in the defense sector to report on their procurement in Prozorro. However, the amount of information in reports on defense procurement transactions is much lower than in regular ones, and the contracts themselves are not published. Therefore, people interested in public oversight were concerned whether there would be full reporting on defense procurement — with data on full prices, with scans of agreements — at least after the victory.
In general, the details of defense procurement during the period of martial law are regulated by Cabinet Resolution No. 1275. Until May 11, 2023, it contained rules that within 90 days of the end of martial law, procuring entities must report on defense contracts and make public all annexes and changes to them if they have not done so before.
When Law No. 2759-IX was adopted, which required partial reporting but now — the question arose how the government would align these standards with the new Law. There was a risk that the Government would simply follow the provisions of the Law, and we would lose the opportunity to see defense contracts after the victory.
Fortunately, the government approached this issue with intent and responsibility.
On May 9, it adopted Resolution No.465, which combined partial reporting now with full reporting later.
What is currently published?
As required by the Law, procuring entities in the field of defense publish reports on contracts concluded outside Prozorro, and notices of changes in their essential conditions — within three months from the entry into force of the Law, that is, almost until the end of June this year.
Let us remind you that the reports include: the name of the procuring entity, the name of the procurement item (code, nomenclature items, lots), the price per unit of each nomenclature item of the goods (indicating the unit of measurement), the price of works, services.
If services for the provision of food sets were purchased, regarding the provision of food and for the organization of catering of military units, then information on the cost of all components of services needs to be uploaded as a separate annex, in particular, the name of food products (goods), the price per unit of product with a unit of measurement, the cost of individual services, the total cost, and terms of payment for such food products (goods).
For the procurement of food services (provision of food sets, catering services), the Governmentspecified by Resolution No.465 that procuring entities should publish the Annexes to the reportsin the Excel format.
To clarify: procuring entities should not publish data on the defense procurement constituting a state secret, procurement of weapons and military equipment, ammunition and related services.
What will the defense procuring entities publish after the Victory?
Within 90 days from the date of completion of martial law, procuring entities will have to attach files with the relevant procurement agreements/state contracts (agreements), all annexes and amendments to the reports.
This can be considered a success because thanks to the texts of contracts, the public will be able to get answers to all the questions that were not given by partial reports: the full cost of procurement, terms of payment, delivery, technical specifications and requirements for non-food goods and services, other pricing conditions.
Why is this important?
In the first two months of reporting, defense contractors published more than 38,000 reports on defense procurement. More than 81% of them relate to the procurement of goods, 17% — to services, approximately 2% — to works. We can already assess the reporting practice and identify its shortcomings:
- The data are currently incomplete.
Analyzing the reports, we can see that there are often not enough data to compare prices with market prices. Especially when it comes to the procurement of services or works.
A little more than 2,000 reports concern car repair and maintenance services. But the provisions of the law do not require specifying in detail the make and model of the car or the content of the service — only its nomenclature position under the contract. Therefore, procuring entities report on such services in different ways.
For example, the report of the military unit No.3033 on the procurement of repair and maintenance services for vehicles indicates the price of the service at UAH 27,270 per unit. But it remains unknown what kind of vehicle it is, how it will be repaired, what parts needs changing, what the total number of services is, what the cost of the contract is, and whether the contractor gave a discount for a large volume of order, etc. Such reports are quite frequent.
Instead, in other reports, procuring entities indicate the price of the components of the service and the name of the car, which allows analyzing the information. For example, at the request of the A4076 military unit, the VOLKSWAGEN Sharan 1.9D will undergo changing the brake tube, its system will be diagnosed and pumped. But procuring entities are not always so responsible in their reporting.
Military unit No.3066 purchased deratization services at UAH 15,081.80 per unit and disinsection services at UAH 22,691.20 for premises with unknown area.
Sometimes procuring entities do not even indicate the exact name of the product. For example, military unit 3061 purchased a computer for UAH 20,551.98 including VAT, but did not specify which one.
But the least informative reports are about works and current repairs. About 1,000 such reports have already been published, worth about UAH 2 bln, but, apart from the unit price, they contain little information. For example, Military Unit A1788 reported on the procurement of major repairs to the roof of the building for a total amount of UAH 6,206,354, including VAT, but the law does not require the publication of the contract price and other information now. Therefore, these data do not carry valuable in an analysis.
Military unit A0501 purchased current repairs with the replacement of windows in the barracks and housing stock worth UAH 1,494,714.74 excluding VAT. But, of course, the report does not contain information even about the number of windows, not to mention their characteristics.
The same applies to the design work and expertise on the object: “Reconstruction of the building***,” which was purchased by the Northern Department of the procuring entity of works for UAH 3,031,640.40 — nothing is known about these works.
Consequently, often without the text of the contract or at least a part of it, it is impossible to determine what influenced the price per unit, what was included in it, and whether it was inflated.
- It is unknown if the procuring entity reported on all items.
Many contracts have a specification with multiple items. But without a scanned copy of the contract, we cannot be sure that the procuring entity reported on the prices of all the items that were in it.
For example, military unit 3005 reported on the procurement of vegetables, which included carrots at UAH 27.5 per kilogram and onions at UAH 29 per kilogram. We hope that the contact did contain only two positions, but we will be able to make sure it is so only after the specification is published.
- Food procurement reports do not always contain complete and clear information, and there are no effective mechanisms to monitor this.
The example of the procurement of food services published by the Ministry of Defense indicates that the unit of measurement of products in the annex (catalog) is indicated as “kg/item,” which complicates the analysis.
Another report of the Ministry of Defense indicates “g,” as the unit of measurement in the annex (catalog), but the price, even considering the quantity, does not look like the price for the number of grams (after all, 1 gram of fresh cucumbers cannot cost UAH 123, can it?).
Military unit A1624 defined catering services with a price of UAH 14,160.50 per unit according to the code DK 021:2015: 55310000-6: Restaurant services and did not upload information on the cost of all components of services (product names, unit price of each of them, units of measurement, cost of individual services, total cost, and terms of payment for products) as a separate annex.
The report on the procurement of food preparation services for the military unit No.3033 neither contains a file with prices for products and components of services. Similarly, the report of the Military Unit E6117 on the procurement of food services for contingents of servicemen and the report of one of the regional Departments of State Courier Communications do not contain the very file.
As we can see, the publication of contracts and their annexes after the Victory is really necessary if we want to effectively monitor defense procurement and identify possible abuses.
Other changes: procurement of products
The publication of contracts after the Victory was not the only change that the Government made to the defense procurement. The Cabinet of Ministers approved the Procedure for defining the procurement item during the procurement of food products, services for the provision of food sets, services for the provision of food and catering services for the personnel of the Armed Forces.
In particular, when carrying out such procurement transactions, procuring entities should be guidedby the Procedure for defining the procurement item, approved by Order No. 708 of the Ministry of Economy dated April 15, 2020.
At the same time, if the cost of food is higher than the cost of related services (organization, refreshment), then the public procuring entity must define the procurement item as a product.
The exception is the provision of food in educational institutions and in certain military units in which cooks are not provided for, or their engagement is impossible for objective reasons; it should be evidenced by documents. In such cases, the procuring entity may define the type of procurement item as a service.
On the one hand, reporting on the procurement of goods is more indicative and acceptable for analysis: such reports often contain clear and accessible data on unit prices. At the same time, if the goods are purchased together with services, the price per unit will look inflated.
Other changes: publishing notices
Another point that the Government aligned with the updated Law on Defense Procurement and detailed was the publication of notices. Now, when conducting a procurement transaction, a procuring entity must prepare a notice and send it for publication with the following information:
- name and EDRPOU code of the procuring entity, their category;
- name of the procurement item (with code, lot names);
- technical, qualitative and other characteristics of the procurement item;
- estimated quantity and place of delivery of goods or volume and place of performance of works or provision of services (can be specified as a locality or district, or region);
- terms of delivery of goods, provision of services or performance of works (including the delivery / performance period);
- payment terms;
- full name, position, and e-mail address of one or more officials of the procuring entities authorized to communicate about the published notice;
- other information that the public procuring entity deems necessary to include.
This list looks much more informative than those partial reports that are already published by procuring entities. We hope that through the publication of notices, defense procurement will really become more transparent. It is important that the technical implementation of this provision combines the notice and the contract report on one page. Then it will be possible to compare the information about the price per unit with the technical characteristics, terms of delivery, as well as payment, and analyze it.
Other changes: the possibility to conduct simplified procurement
In addition, the methods of procurement have changed. As before, defense procuring entities are authorized to conclude direct contracts for the procurement of goods, works, services — except for some types of clothing, shoes, and bags worth from UAH 200,000, for which framework agreements for defense needs should be concluded.
But with the entry into force of the amendments, defense procuring entities can, instead of concluding direct contracts, conduct simplified procurement through Prozorro.
As always, these requirements and possibilities do not apply to secret procurement and purchasing of military equipment, services related to such equipment.
These procurement transactions are not included in the annual plan. But under their results, procuring entities must report in the way we wrote above. Within 90 days after the end of the martial law regime, contracts, annexes, and additional agreements to them must be uploaded.
As we can see, the May amendments to Resolution No.1275 were a good addition and specification of the legal framework created by the updated Law on Defense Procurement. We hope that defense procuring entities will choose simplified procurement as a competitive method as opposed to direct contracts, and the technical implementation of defense procurement notices will allow them to be compared with reports. If this happens, it is not too bold to say that the amendments to Resolution No.1275 blocked the shortcomings of Law No.2759-IX to some extent.
Author: Anna Kuts, legal advisor at TI Ukraine.
The material was prepared within the framework of the USAID/UK aid TAPAS Project/Transparency and Accountability in Public Administration and Services.
