The Cabinet of Ministers recently launched two pilot projects that remove part of construction procurement from current statutory regulation — despite having no authority to do so. This has created substantial corruption risks. Transparency International Ukraine calls for these experiments to be canceled.
In effect, the Government has allowed the centralized procurement organization under the State Agency for Restoration, regional state administrations, and local self-government bodies to use special open framework agreements in place of standard construction tenders, without a number of important anti-corruption safeguards. This procurement method:
– limits businesses’ ability to defend their rights before the AMCU;
– undermines monitoring by the State Audit Service.
This opens up substantial opportunities for abuse in the construction sector under the guise of streamlining and acceleration. In practice, it creates room for awarding contracts to favored contractors.
On top of this, the changes run counter to current legislation and EU directives.
“The very fact that the Cabinet of Ministers is introducing — for specific categories of procurement and specific procuring entities — a procedure different from the one prescribed by the Law sets a dangerous precedent. Today it is a separate procedure for construction by local governments and regional state administrations; tomorrow, will we have separate rules tailored to every contracting authority? Procurement rules must be uniform and predictable for everyone. And the Cabinet of Ministers must not exceed its powers,” explains Ivan Lakhtionov, Deputy Executive Director of TI Ukraine for Innovative Projects.
An experiment of this kind makes sense only in a limited form — for a single procuring entity, SE Infrastructure Projects. This newly established centralized procurement organization for construction genuinely needs new tools, which will otherwise take at least another year to arrive. The standard framework agreement under the current Law does not allow for procuring works or prequalifying potential contractors on an ongoing basis. So this CPO is precisely where such new instruments can be piloted. Even there, however, it is essential to preserve businesses’ right to challenge these procurements before the AMCU, and to draft the changes carefully so that they do not introduce corruption risks or conflict with the key regulations currently governing the sector.
Transparency International Ukraine warned of the dangers of these experiments as early as last autumn. Unfortunately, the Cabinet of Ministers did not heed the recommendations. We are therefore now calling for both resolutions on the pilot projects to be canceled as soon as possible. Instead, the relevant changes for piloting the new procedure for the construction CPO should be introduced through the sector-specific Resolution 1178, with all anti-corruption safeguards preserved. We are currently engaged in discussions with the Ministry for Communities and Territories Development to support the implementation of this initiative.
Procurement rules must be uniform and predictable for everyone. And the Cabinet of Ministers must not exceed its powers
Ivan Lakhtionov
