Reconstructing the Shehyni Checkpoint with Poland: Anticipating the Contract with a Polish Contractor

On February 21, the State Customs Service of Ukraine announced a tender for the reconstruction of the International checkpoint for cars “Shehyni” on the Ukrainian-Polish border. The estimated cost is EUR 27.7 million or almost UAH 985 million. The financing will be sourced from a loan that the Polish government agreed to provide back in 2015.

The sole bidder for the auction is Unibep SA, offering to complete the work for 23.5 million euros. The State Customs Service issued a request to address nonconformities, specifically, to provide a certificate confirming the company’s fulfillment of its obligations under the preliminary contract. After providing the required certificate, Unibep was recognized as the winner and expressed its intention to conclude the contract.

Unibep SA is one of the largest construction companies in Poland, which has been operating on the market for 70 years. According to the group’s website, in addition to projects in Poland, the company built Retroville complex in Kyiv, Nikolskyi Shopping Mall in Kharkiv, a hotel, a logistics center, and a windmill in Belarus, as well as a hotel and shopping mall in Russia in 2015 and 2009, respectively.

The draft contract, in fact, outlines the continuation of the process that remained incomplete during the pre-order phase (further details will be provided later). The contractor will receive documents from the previous contract’s “Draft” stage for development, create working documentation based on them, and update them as necessary to align with current technical conditions.

After that, they are required to undergo all necessary examinations, obtain permits, carry out construction and installation work, and provide author supervision. The deadline for completion is until the end of 2028.

According to the plan, construction will take place in two stages: first the exit section from Ukraine (the first launch), then the entrance section (the second launch). Beyond the construction work itself, the prospective contractor must also fully equip all systems essential for customs control and the seamless operation of the international checkpoint for automobile traffic. This includes X-ray monitoring, in-depth inspection boxes, video surveillance, weight control checkpoints, aviaries for service dogs, warehouses for confiscated goods, diesel generators, service buildings equipped with heating from boilers, and public toilets.

The scanning and server equipment, video monitoring systems, and computers, as well as fences, must come with a 3-year warranty. The structured cabling system equipment and road surface should have a 5-year warranty, road signs a 2-year warranty, and building and structure frames, walls, coverings, and ceilings a 10-year warranty.

In two years, Ukraine spent 360 thousand euros of a Polish loan on securities for the reconstruction of the checkpoint

In fact, this is the second attempt by Ukraine to use loan funds. In 2017-2018, the State Fiscal Service of Ukraine conducted a tender in the format of a competitive dialogue for the reconstruction of the Shehyni checkpoint with a deadline set for 2021. Then the contract was signed with the above-mentioned Unibep SA Group, which offered to perform the work for 15.6 million euros. At that time it was UAH 502.9 million. In addition to the construction itself, the contract also provided for related design and obtaining all necessary permits.

Under the terms of the loan agreement with Poland, the reconstruction contract began to operate in July 2019. And the contractor started working on the design and estimate documentation. A year later, the Customs Service was appointed as the counterparty on behalf of Ukraine, replacing the Fiscal Service.

In November 2020, Unibep received 135 thousand euros for engineering-geodetic and engineering-geological surveys, architectural proposals, and conceptual solutions for the general plan. In June 2021, the State Customs Service provided the contractor with urban planning and technical conditions, along with restrictions. Based on these, the company developed project documentation and submitted it for examination. For that, they received another 225 thousand euros in April 2022.

In October 2022, Unibep handed over to the Customs Service a positive expert opinion and a package of documents with the project, which did not contain working documentation. As of March 2023, this part of the documents was not handed over, and the State Customs Service was negotiating with the contractor to sign an amendment.

The parties, unable to reach an agreement for an extended period, eventually shortened the potential payment term for work that had not commenced to 16 months. According to the loan agreement with Poland, payments must be received within 5 years from the date of the contract with the contractor. Nevertheless, based on the schedule, the projected duration for the work is 26 months. Therefore, the Customs Service terminated the reconstruction contract with Unibep, paying 360 thousand euros.

In May 2023, the State Customs Service tried to conduct a new tender with an expected cost of 21.4 million euros. However, after several dozen complaints and additional questions, the tender was canceled due to the lack of proposals.

Reconstruction will be paid for by the Polish government through its bank

The design and reconstruction costs will be covered by the Polish budget and allocated to a Polish contractor, subject to agreement by the Ukrainian side. These are some of the main terms of the loan.

The governments of Ukraine and Poland signed this loan agreement on the terms of related assistance back in September 2015 in Warsaw. The Verkhovna Rada ratified it in February 2016. It was amended three times, in 2018, 2021, and 2022.

One of the articles of this international treaty, as well as the Law of Ukraine “On International Treaties of Ukraine” stipulates that its terms hold precedence over the provisions of domestic legislation in Ukraine. In other words, in case of discrepancies, the rules set out in this document signed between the two governments apply.

Key loan terms and conditions:

• the loan shall not exceed 100 million euros,
• the funds can be allocated for the development of roads and checkpoints on the border with Poland, or other projects approved by the Polish government,
• projects must be large – at least 500 thousand euros per contract,
• If the Organization for Economic Cooperation and Development (OECD) has objections to the compliance of projects and contracts, they will not receive funding,
• contractors and suppliers must be Polish companies,
• products for execution must also come from Poland, with at least 60% localization,
• payments shall be made by the Minister of Finance of the Republic of Poland, through an authorized bank.

Ukraine can repay the loan amount over a period of five years, through 50 equal installments every six months, starting from the first transaction with a Polish contractor. However, interest on the loan must be paid earlier, specifically after the first payment to the Polish company and before March 15 and September 15 of each year. The interest rate is 0.15%.

If Ukraine is late in any of the payments, an additional 3% per annum will be charged.

The checkpoint is now not in the best condition, although it has undergone minor repairs

Frankly, the automobile checkpoint has long needed, at the very least, repairs. Judging by the video posted by Suspilne on February 13, 2024, the WCs are far from being in the best condition, exhibiting issues such as rusty pipes, mold, and non-inclusive descents.

According to Prozorro data, the Lviv Customs Service of the State Fiscal Service and the Halytska Customs of the State Customs Service have spent approximately UAH 1.8 million over the past five years to improve the conditions of the Shehyni checkpoint. These expenditures mainly focused on the construction of an access road to the truck inspection system and patching the asphalt surface.

We would like to note that under the same loan agreement with Poland, the State Customs Service signed a contract for the construction and restoration of the Krakivets checkpoint in March 2018. The works were then valued at 6.9 million euros and carried out by the engineering and construction company Ids-Bud SA, based in Warsaw. It is currently undergoing bankruptcy proceedings.

The contract was terminated in 2020 but the amount paid under it remains unknown. A new tender for the continuation of construction in 2022 was anticipated, but it was canceled because the new contract was not published within the required 45 days. In February 2024, the State Customs Service conducted another open bidding, and as of now, the sole proposal from Budownictwo Kamiński has been rejected. The bidder failed to submit certain documents, and the remaining portion does not meet the tender requirements.

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