If the relevant resolution is adopted, it will be possible to investigate the effect of innovations during martial law. If it turns out positive, certain provisions can be included in the Law “On Public Procurement.”
UPD 18.10.2022. The Cabinet of Ministers published the text of the resolution adopted on October 12. The legal norms to which we proposed amendments have remained unchanged for now. The DOZORRO team will monitor how the resolution works in its current version and, will continue to advocate for changes to improve it.
The Verkhovna Rada expanded the powers of the Cabinet of Ministers for the duration of martial law. Now, it will be able to regulate the sphere of public procurement. To this end, the Cabinet of Ministers has developed a new resolution that should unify and simplify public procurement during the war, as well as preserve competition.
How procurement will take place during the war: key changes
First of all, the two main procedures are open bidding and procurement through an electronic catalog. The alternative is a direct contract with reporting, when it is impossible to conduct bidding. To purchase goods and services, it is also possible to conclude framework agreements.
The resolution defines new value thresholds for open bidding:
- for goods and services (except for maintenance services) — from UAH 100,000;
- maintenance services — from UAH 200,000;
- works — from UAH 1.5 million hryvnias.
The procuring entity can choose whether to conduct open bidding or purchase through an electronic catalog for any value. Through the electronic catalog, the selection of the supplier is carried out by requesting the price of suppliers’ bids. If such a procurement transaction did not take place, or the product profile contains only one supplier bid, it is necessary to conduct open bidding. The electronic catalog can also be used for procurement below the proposed thresholds.
It is also planned to provide the opportunity for separate divisions of procuring entities (branches) to conduct procurement independently to meet their needs.
The draft resolution allows not specifying information about the country of origin of goods. Why collecting this information through Prozorro is a bad idea, we explained in this material.
Among other changes are the following:
- reduction of procurement and appeal periods;
- participants may submit a bid that is higher than the expected value;
- this contract can be concluded even if only one participant comes to the open bidding.
The rejection of simplified procurement for the period of war is the right step because in such procurement, the business practically cannot protect its rights. Instead, the threshold for updated open bidding from UAH 100,000 in today’s conditions could be higher, considering inflationary processes and the burden on procuring entities. In addition, we consider it controversial to introduce a separate value threshold for current repair services. We propose to preserve the threshold for goods and services (including current repairs) at UAH 200,000.
The resolution also proposes to shorten the period of open bidding. Specifically, to establish a single minimum deadline for the submission of proposals of 7 days, regardless of the cost of procurement transactions. In general, we support the idea of reducing the time frame for open bidding. At the same time, we believe that the establishment of a single minimum deadline for submitting proposals requires additional research and coordination, in particular with business. Such changes may create situations when participants do not have time to prepare and submit their bids in time, which may affect the competition and the cost of the procurement transaction itself.
This is particularly important in circumstances where, at the same time, other facilitating norms to reduce the time frame for contesting are proposed, as well as the possibility to submit a bid that is higher than the expected cost, and to enter into a contract, even if only one participant has come to the procurement transaction. There is a chance that some dishonest procuring entities will simply provide “convenient” participants with the tender documentation before the announcement of the procurement, and put a minimum deadline for the submission of documents. Then only the “convenient” participant will be able to take part. And since the resolution provides for such an opportunity, it will be possible to conclude an agreement with the participant immediately — without competition and probably with overpayment.
The draft resolution also allows not applying open bidding with publication in English. This may have a negative reaction among international partners, especially in the context of granting Ukraine the status of a candidate for membership in the EU. Most likely for the duration of the martial law, this may be possible, but after the end of the war, it will be necessary to return to this procedure.
Problems may also arise with how the resolution stipulates the procedure for checking subcontractors/co-executors for the absence of grounds for rejection specified in Article 17, part one of the Law. The resolution obliges procuring entities to check them, but does not specify how. Such vague wording may cause ambiguous interpretations. We call for the unification of the verification of subcontractors with the verification of the participants themselves — to oblige only the winner, together with their documents, to submit the relevant documents regarding their subcontractors (if any) in order to confirm the absence of grounds for rejection specified in Article 17, part one of the Law.
In addition, the resolution retains the provisions on the localization of some goods in the field of mechanical engineering, which the Verkhovna Rada introduced last winter. We have repeatedly explained why localization will do more harm than good. For the period of martial law, it carries even more risks, problems and additional burden, both on participants and procuring entities, and on the Ministry of Economy.
Finally, the resolution does not provide for the application of the negotiation procedure at all. We consider it advisable to provide for its application, if necessary, reducing the time frame for its conduct and appeal.
In addition, for reporting, we propose to provide at the level of the electronic procurement system that the procuring entity must choose the basis for using the report on the concluded contract, indicating the justification, introducing the appropriate fields. This information can be an important source of information, including for making the necessary decisions in the future.
How to improve the resolution
Transparency International Ukraine in general supports the draft resolution, but calls for finalization of the problematic points:
– Preserve a single threshold for procurement of goods and services at open bidding — UAH 200,000.
– Coordinate the reduction of the deadline for submission of proposals with the business and agree on the optimal minimum deadline or differentiation of the deadline, depending on the expected cost of the procurement transaction.
– Provide for the application of the negotiation procedure.
– Not to apply localization.
– Finalize the provision on checking subcontractors for the absence of grounds specified in Article 17, part 1 of the Law.
In addition, we propose to develop a mandatory field in Prozorro, where the procuring entity will choose the basis for concluding the contract directly from the list. On the one hand, it will simplify the lives of both procuring entities and supervisory bodies. On the other hand, it can become an important source of information, in particular for making the necessary decisions in the future.
In general, if the innovations give positive results during the martial law, some provisions of the resolution can be included in the Law “On Public Procurement.”
This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.