Procurement of Products through E-Catalog and Ban on Purchasing from Iran: February Procurement Changes

On February 9, the Cabinet of Ministers adopted Resolution No. 131, which made further amendments to Procurement Resolution No. 1178 dated October 12, 2022. The changes boil down to two novelties: firstly, the Islamic Republic of Iran was added to the list of prohibited countries for procurement; secondly, since March 14, procuring entities are obliged to buy certain food through the electronic catalog. If the ban on Iran seems logical, then the obligation to use Prozorro Market raised questions with some procuring entities.

Iran joins Russia and Belarus

First of all, the Islamic Republic of Iran was included in the list of undesirable countries in domestic procurement.

It is prohibited to purchase from:

• its citizens, residents;
• legal entities whose ultimate beneficiary, member, or participant with a share of at least 10% is an Iranian citizen or an Iranian resident legal entity;
• anyone, if the procurement item is a product originating from Iran.

The list of reasons for rejecting the participant’s tender bid was supplemented with its belonging to the cases outlined above and the corresponding origin of the goods.

The exception is the cases when the participant’s assets are transferred to the management of the ARMA, as well as cases when the goods originating from Iran are necessary for the repair and maintenance of goods purchased before October 19, 2022.

Basic food to be purchased through the e-catalog

From March 14, 2024, the requirement for procuring entities to purchase certain food starting from UAH 100,000 through Prozorro Market will come into force, by requesting proposals from suppliers. It will cover the following products:

• vegetables: potatoes, onions, cabbage, beets, carrots, cucumbers, tomatoes, zucchini, as well as apples;
• meat: chicken, beef, pork; frozen fish, chicken eggs;
• sunflower oil and a wide range of dairy products: milk, butter, hard and cottage cheese, sour cream, kefir;
• wheat flour, sugar, pasta, and a number of types of cereals (buckwheat, rice, corn, millet, wheat, barley, oatmeal, couscous).

If a procurement transaction through the e-catalog has not taken place, the procuring entity will have a choice: either to hold open bidding with features without increasing the expected cost or to announce a repeated request.

Motives of the Ministry of Economy

The changes are intended to simplify the procurement of the mentioned food for procuring entities and suppliers. The Ministry of Economy calls the mechanism of procurement through the e-catalog the most understandable and accessible. In particular, it notes that Prozorro Market allows competitive procurement of typical goods in 9 days and provides twice as much competition and three times higher savings than during a classic tender. It is also expected that the innovation will reduce corruption risks and prevent possible abuses.

Procuring entity response

On social networks, the introduction of the obligation to buy food through the e-catalog caused a mostly negative reaction. Procuring entities reported problems they encountered while using Prozorro Market. In particular, they mentioned a small number of registered goods under certain profiles and the fact that sometimes local food suppliers (small enterprises, farmers) are not registered in Prozorro Market. Procuring entities also report technical difficulties in using the catalog and selecting options for the request, have questions about the platforms’ interfaces. In addition, they lack training on the use of the e-catalog since the changes will come into force within 30 days from the date of their publication.

Some procuring entities have already prepared to simply allocate more time for the request for proposals as an inevitable stage, after which there will still be open bidding with features, since they are sure that no one will participate in the request.

Statistics

In general, in 2023, within the CPV unit Food, Beverages, Tobacco and Related Products, 3,491 procuring entities (excluding defense ones) announced open bidding with features. 2,773 of them did not make any requests for proposals under this code last year. They most likely have practically no experience in using Prozorro Market to purchase food.

According to the study of the KSE Centre of Excellence in Procurement, the majority of procuring entities—32,147 or 93.5% of all those registered in Prozorro—are small procuring entities. In 2021, they conducted no more than 20 tenders (and other possible ways of below-threshold procurement). In them, the procurement function, as a rule, is carried out by the procuring entity’s officials concurrently or along with the performance of the main duties. Therefore, it will be useful to simplify the procurement of common goods for them. However, it is necessary to conduct training and consider that many buyers will find it hard to cope with difficulties on their own in the case of shortcomings of Prozorro Market.

Summary

Given the statistics and reactions, it seems risky to impose a non-alternative obligation on procuring entities to use a functionality that is new for some of them and has never been successfully used by others. Currently, there are the following questions:

• Are all territorial markets provided with an adequate number of proposals for all kinds of food that are included in the mandatory list (within the relevant districts, and sometimes in settlements)?
• Is there a possibility for procuring entities to choose the characteristics of the product they need and their acceptable values, are the options for selection the same on all platforms?
• Are all the required characteristics of all products available for selection?

We hope that the use of the e-catalog will really help simplify procurement for procuring entities and participants, provide cost and time savings and a positive supply experience due to the quality of the terms of contracts. We also hope training events will be conducted for procuring entities and suppliers. Thus, the administrator of the electronic catalog of the State Institution Professional Procurement has already offered to report on issues arising in connection with its use and promises to analyze the most common ones. Therefore, we urge procuring entities to speak up about the existing difficulties, and the Ministry of Economy and administrators to listen to them.

The material was prepared within the framework of the USAID/UK aid TAPAS Project/Transparency and Accountability in Public Administration and Services.