Procurement up to UAH 500,000 Does not Need Three-Round Auctions: A Study by TI Ukraine

According to the results of the analytics by the DOZORRO project of Transparency International Ukraine, the government’s experiment with the cancellation of three-round auctions worked well for procurement up to UAH 500,000.

Experts analyzed procurement three months before the cancellation of auctions and three months after. In general, during the period under study, the share of savings in completed bidding decreased from 8.03% to 6.83% — by 1.2%. Theoretically, the state could have saved more than a billion hryvnias. At the same time, the savings decreased the most in expensive procurement — by more than UAH 1 mln.

However, in procurement with an expected cost of less than UAH 500,000, after the auction was canceled, the savings indicator even improved. Accordingly, for such procurement, it is advisable to preserve blind auctions or introduce optional ones: so that the procuring entity decides whether to use rounds for price reduction or not.

Transparency International Ukraine warned the Government about the risks of cancellation of auctions in Prozorro at the beginning of the year. At the same time, this decision made it possible to test in practice and confirm that multi-round auctions promote competition for expensive procurement.

Therefore, the experiment indicated that thresholds are necessary for efficiency in public procurement. Procurement for amounts up to UAH 500,000 and more should be conducted differently.

“We support the decision of the Government to restore three-round auctions and preserve the opportunity for procuring entities to refuse them if there are objective reasons. At the same time, we emphasize that any important decisions must be adopted after weighing the risks and preferably on the basis of calculations. For example, our study highlighted that approaches to procurement for amounts up to UAH 500,000 should be different from those to more expensive procurement,” explains Volodymyr Datsenko, Transparency International Ukraine project manager.

The government has restored three-round auctions in Prozorro — they will take place if two or more bids are submitted for open bidding with features. They were canceled at the beginning of the year, allegedly due to the fact that the business was unable to participate in electronic auctions because of power outages due to shelling.