In continuation of our educational material on small-scale privatization we suggest that you read the step-by-step instruction for monitoring small-scale privatization lots. For a better understanding, let’s take one specific object as an example.
Selecting an object to monitor
To analyze the privatization procedure, we first need to find the object that interests us on the ProZorro.Sale portal. To do this, apply search filters: select “Registers” — “Objects of privatization.” Then you can sort items by status, organizer, region, and so on. Using this example, we sorted by organizer — the RO of the SPFU in Kyiv.
Next, we can go on directly to the analysis of auctions that have been announced or have already taken place in the system. This search can be performed in two ways: by using filters on the main page of the ProZorro.Sale portal or using analytical module of the system.
Method 1: search by filters
We have selected lots for checking small-scale privatization which were announced by the RO of the SPFU in Kyiv and were interested in the already completed procedures where the purchase and sale agreement was signed.
We sort by filters: “Organizer,” “Status;” and the “Announcement” filter to choose the auction type.
You can also sort by date, region, and property type. The principle is the same.
Method 2: search using the analytical module
Auctions can be sorted by year (for example, 2020) and type of procedure (small-scale privatization). All filters in the analytics module are clickable, meaning that by clicking on any of them, the data on your page will change automatically.
Next, select the status of the auction and organizer. Then follow the link on the left to go to the auction page that interests you.
Checking the auction
We have chosen to monitor the auction of the RO of the SPFU in Kyiv on the sale of an administrative building: UA-PS-2021-01-17-000007-2.
The page always indicates what kind of auction it is: an auction with or without conditions, an auction with a reduction in the starting price (by 50%), or a Dutch auction (an auction using the method of step-by-step reduction of the starting price).
It is worth checking whether there have been other auctions for this object. To do this, find the “informational message” in the documentation section.
Scroll down to the page that opens and see all the auctions.
In our case, the first one was successful. If it were not possible to sell the item the very first time, the second auction would automatically start. If the second one is not successful either, then the third auction takes place. All auctions with active links will be available on the informational message page. If these auctions are available, we recommend that you analyze each one separately.
When monitoring an auction, the first step is to check the documentation. We start by searching for a text informational message.
In this case, the information message is available in the “Auction documentation” section. Since the launch of privatization auctions is automatic, violations can most often be detected using an informational message.
Firstly, we check the available information about the object.
The list of information that must be indicated in the announcement is defined in Article 21 of the Law of Ukraine “On Privatization of State and Municipal Property” and paragraph 24 of the Procedure for Conducting Electronic Auctions for the Sale of Small-Scale Privatization Objects and Determining Additional Terms of Sale under the Resolution of the Cabinet of Ministers of Ukraine No. 432.
Let’s take a look at the informational message of our administrative building. At once we can see violations — a lack of necessary information, in particular:
1) there is no data about the land plot on which the building is located. The information message must indicate: location, cadastral number (if any), area, purpose of the land plot, information about the person to whom the land plot belongs on the basis of ownership or use rights, information about the presence of encumbrances (for example, arrests) on the land plot.
2) All information about the lease agreement is not specified: the announcement indicates the contract number and date of conclusion, as well as the term of validity of the agreement, but there is no data on the name of the tenant, the amount of leased space, and the amount of monthly rent.
Secondly, it is worth checking whether the property you have chosen does not belong to objects of unfinished construction and social and cultural purposes.
Separate requirements for issuing an informational message are also established when selling enterprises (single property complexes or portfolio of shares). They are defined in Article 21 of the Law of Ukraine “On Privatization of State and Municipal Property.”
If you monitor the sale of state-owned objects, then you should look for your object on the privatization.gov.ua portal. The virtual data room contains additional documents and object presentations. Here is, for example, our administrative building on this portal.
Thirdly, you should check the participants of the completed auction that you are monitoring.
As a result of collusion, auction participants can force the organizer to sell their property for 50% cheaper, for example, if one of the possible conspirators who turned out to be the winner, refused to sign the contract, and, therefore, the auction was declared invalid, and this triggered a second auction with a 50% reduction in the starting price.
It is worth paying attention to the signs of possible collusion of auction participants: the same documents are drawn up; the same initial document numbers and errors; the same beneficiaries, addresses, or contact details; the same surnames of participants of individuals or beneficiaries (managers) of legal entities which could testify to relationships of such persons.
There are signs of possible collusion in the auction we have selected for monitoring. The auction participants of LLC “CC ‘BUDIVELNI TEKHNOLOHII’” and LLC “SISTEMBUD” have the same names and issued documents uploaded on the same day:
The texts and application forms for participation in the auction are identical. Guarantee and registration fees are made at the same bank branch.
In addition, the winner of the auction — LLC “CC ‘BUDIVELNI TEKHNOLOHII’” refused to sign the contract after which the right to sign the contract passed to the participant with the next lower price offer — LLC “SISTEMBUD.” The latter signed the contract and is fulfilling it.
Such facts give grounds to assume that there was collusion between these auction participants which can be interpreted as distortion of the auction results in accordance with the practice of the Anti-Monopoly Committee of Ukraine.
Now Prozorro.Sale does not allow yet to track information about the fulfillment of the agreement, changes to it, or termination. Only the concluded contract is published on the portal. However, this information can be checked on any electronic platform. Here, for example, is information about the fulfillment of the contract for our lot which is contained under the “Completion of privatization” button.
To sum up, let us note that in the 2.5 years since the introduction of electronic auctions of small-scale privatization, the system has become so automated that the most frequent violations are the lack of certain information about the object and collusion of participants.