In the fourth year of the full-scale invasion, neither procurement specialists nor the public can easily be surprised by changes to the sector’s legislation. Still, at times, initiatives with potentially far-reaching impact appear in unexpected places. In August, the Ministry for Development published its draft Procedure for implementing an experimental project on procurement through framework agreements for the recovery of communities and facilities damaged by hostilities, terrorist acts, or sabotage caused by the armed aggression of the Russian Federation (the Draft).
If adopted, the Draft would allow procuring entities to use framework agreements in reconstruction procurement. Initially, they would conduct a qualification selection into the framework. To choose a contractor from among the framework participants, they would then be able to launch either open bidding, a request for proposals, or a competitive selection.
The mention of an experimental procedure, intended to shorten the duration of procurement and introduce a two-stage selection of contractors, even appears in the draft Government Action Program under the Ministry’s tasks. While there is no explicit reference to this particular Draft, the task clearly signals the Ministry’s serious intent to change the standard approach to procuring works.
Our analysis of the Draft reveals substantial risks for the sector. This material outlines the experiment and explains why it should not proceed.
Summary
The Ministry for Development proposes a new procurement method for reconstruction — special framework agreements. Although the project is labelled “experimental,” the new rules would apply to a broad range of procuring entities and an unlimited list of potential procurement items.
The initiative’s key risks together create wide opportunities for corruption. Most importantly, businesses would have almost no means to defend their rights within such procurements. Appeals to the Antimonopoly Committee would be unavailable for the qualification stage and for two of the three options at the second stage. At the same time, the Draft provides a low level of legal certainty and a high degree of discretion for procuring entities — opening the door to artificially restricted competition and corrupt arrangements. Particularly risky is the “competitive selection,” which would rely on non-price criteria and withhold part of the bids from public disclosure.
Beyond this, the initiative contradicts the principles of European directives on public procurement, potentially harming Ukraine’s progress toward European integration.
Transparency International Ukraine therefore calls on the Ministry for Development of Communities and Territories of Ukraine to abandon further advancement of this Draft.
Who will buy what under the Draft: first, imagine the scale
Participants in the experiment will not be limited to the Agency for Restoration and its subordinate enterprises, but will also include other central executive authorities, regional and military administrations, the Kyiv City State Administration, and — with consent — local self-government bodies and business entities. Under these conditions, practically any local council, as well as state and municipal enterprises and monopolists, would be able to conduct procurement under the Draft. By the most conservative estimates, more than 7,000 procuring entities could potentially “experiment” under this framework.
The range of what they could buy through this experimental mechanism is equally vast. Primarily, it covers construction works, the development of project documentation and its expert review, and supervision services. But it also extends to the procurement of “goods and other procurement items related to recovery.” The Draft provides no clear criteria for linking a good or service to “recovery.” It only broadly defines that “recovery of a settlement is”:
“…a set of interconnected and coordinated measures, including those related to the construction of real estate objects, aimed at restoring in the settlement social, engineering transport, and energy infrastructure, as well as residential and other buildings and structures, to a state ensuring the creation of a full living environment.”
As is evident, this definition can, at the discretion of the procuring entity, cover virtually any consequence of hostile attacks — for instance, replacing destroyed buses or replanting damaged flowerbeds. Thus, all the risks discussed below will apply to a wide range of procurement transactions.
Without proper appeals and outside the law
Under the Draft, the procuring entity must first announce a qualification selection of candidates for the framework agreement. It publishes an announcement and “tender documentation,” sets qualification and other requirements, and then reviews applications to decide whether to reject a candidate or include them in the framework. Once the agreement is created, the procuring entity may procure only from participants admitted into the framework.
This approach departs from the provisions of the Law of Ukraine on Public Procurement (hereinafter referred to as the Law), under which framework agreements are concluded through open bidding, not a qualification selection.
Under the Draft, candidates would not be able to appeal to the AMCU against discriminatory and/or non-transparent qualification requirements, decisions rejecting them, or decisions admitting competitors into the framework. This is because such a selection would not count as a procurement procedure. Even the deadlines for submitting complaints under Article 18 of the Law are calculated from the deadlines for submitting tender proposals, not applications. Therefore, candidates would have no effective remedy other than going to court.
At the second stage, there are three options for conducting procurement: special open bidding, a request for proposals, or a competitive selection. Of these, only the first option includes a mechanism for appeal to the AMCU. If the procuring entity chooses, for example, a request for proposals, the entire process will take place with no possibility of appeal. In such cases, candidates and participants would be deprived of the key effective means of protecting their rights.
“Turnkey projects”: over 60% non-price criteria and hidden documents
If it is impossible to define all essential terms of a future procurement contract in a framework agreement, the Draft allows the procuring entity to conclude the agreement as is, and at the second stage select a contractor through competitive selection. This method is intended for implementing “turnkey” projects, when the procuring entity plans to procure a package of design and construction services.
Competitive selection is among the riskiest aspects of the Draft. At least 60% of bid evaluation would be based on specific (non-price) criteria. This directly contradicts the Law, which requires that price must account for at least 70% of the evaluation weight — not 40% or less.
The choice of non-price criteria would be left to the procuring entity. The Draft merely provides an indicative list of possible “advantages” to consider when assessing the technical component. This list includes numerous evaluative notions such as “aesthetic appeal,” “originality of architectural solutions,” and “visual representation of the future object.” Building requirements around such subjective features and deciding which projects best comply can easily be done in arbitrary and discriminatory ways. Some provisions of the Draft even suggest splitting the technical component into parts, with the procuring entity setting its own criteria and weighing each.
At the same time, procurement of “turnkey projects” would lack transparency. The information described as the “procurement decision description” would be disclosed only to the procuring entity. Participants and the public would not be able to review — let alone challenge — this description in order to verify the rationale behind the decisions. The Draft also does not clearly define the relationship between the “decision description” and the “technical component.” Thus, it remains unknown what will be included in the “decision description” and therefore hidden from access.
Moreover, the deadline for submitting bids for turnkey projects would not exceed 30 days (and may, therefore, be shorter).
Taken together, such regulation would create favorable conditions for awarding victory to any participant at the discretion of the procuring entity. The procuring entity would be able to embed a subjective approach in the evaluation methodology and implement it under conditions where participants’ proposals are partly concealed, and appeals are impossible.
Even without “turnkey projects” — still risky
Beyond competitive selection, procurement under framework agreements could also be conducted through special open bidding or through a request for proposals. Yet these options are not free of shortcomings.
Most importantly, the Draft carries risks of insufficient transparency and discrimination at the qualification stage and during subsequent requests for proposals. For example, the indicative number and/or volume, place, and indicative timing and/or schedules of delivery or performance are to be stated in the qualification documentation only “if necessary.” In our view, procuring entities should be obliged to provide exact information wherever it is available.
Similarly, when creating a framework agreement, the estimated value of the procurement is calculated only “approximately and indicatively.” This approach allows virtually any estimated value to be stated. It could become a tool for excluding outside participants, since eligibility requirements for turnover — and for turnkey projects, potentially up to 100% of the estimated contract value — are tied to the estimated value. In addition to qualification criteria, the procuring entity would also have the right to set other requirements.
It is doubtful whether sufficient information and time would be available for preparing applications and bids in works procurement. Candidates would have 10 working days to submit applications for inclusion in the framework — potentially including a technical component, if required by the procuring entity. Later, if a request for proposals is announced, bidders would have no more than 3 working days from its publication in the Prozorro system to submit proposals. It is unrealistic to rely on the supposed simplicity of preparing a proposal for a request, since this requires fully calculating the contract price. Furthermore, the Draft is written in such a way that participants might only learn the quantity, place, timing, and estimated value at the request stage, unless the procuring entity provided this earlier. The Draft does not require disclosure of the data needed to calculate contract prices in formats of specialized cost-estimation software, which may also complicate preparation.
The Draft also does not explicitly require the procuring entity to publish a draft contract at the framework qualification stage, though it regulates what to do if essential terms cannot be determined in the framework itself. Without clear rules, there is a risk that candidates will not be properly informed about the terms of future contracts. Moreover, the Draft treats the framework agreement as a procurement method rather than as a legal instrument with specific terms.
In a request for proposals, the procuring entity may establish, if necessary, procedures for agreeing on the contract price. In practice, requirements in Prozorro Market requests are often abused, with additional conditions inserted and non-compliance treated as a refusal to conclude a contract. The Draft provides no safeguards against such practices.
There are also procedural risks. To announce a procurement, applications submitted before the original deadline must first be reviewed. While the Draft commendably allows applications to be submitted after this deadline, it does not prohibit announcing tenders without considering later applications. This creates a risk that procuring entities will launch procurement transactions despite the existence of unreviewed applications submitted during the validity of the framework, thereby ignoring them.
Overall, the Draft offers a low level of legal certainty and grants a high degree of discretion to procuring entities on matters crucial to preparing applications and bids. This approach creates risks of limiting business access to procurement and encouraging the spread of corrupt practices.
What about the limits of authority, compliance with the Law, and EU requirements?
When analysing the Draft, it is important to take a broader view: what place will it hold within the procurement legislation system, and how will it affect that system?
We caution that the Draft, though positioned as experimental, in fact covers an overly wide circle of procuring entities and an unlimited range of procurement items. In such conditions, a significant share of procuring entities, as defined under the Law, would be able to conduct procurement in a manner that deviates from the procedure prescribed by law, for an unlimited scope of items. Such an approach does not reflect the characteristics of an experiment, introduces legal uncertainty into the procurement sector, and will complicate the assessment of procuring entities’ actions by oversight bodies.
As is well known, the authorized body in the field of procurement is the Ministry of Economy. It is the Ministry of Economy that develops and approves legal regulations and implements state policy in the sector. The development of a Procedure that would serve as a source of law for more than a quarter of all procuring entities exceeds the competence of the Ministry for Development, contradicts the Law, and would complicate the regulation of the industry. If each ministry were to develop and submit for Cabinet approval its own procurement procedures for its respective segment, this would threaten the stability of regulation across the field.
Finally, the Draft contradicts the principles of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC. Such steps could harm Ukraine’s European integration progress, provoking a negative response from the European Commission and international partners. This is particularly critical at a time when aligning Ukrainian procurement legislation with the EU acquis is a core focus of the Ukrainian state’s efforts.
If the mechanisms of the Draft were applied to procurements financed under the Ukraine Facility, this could alter previous agreements on the use of certain procedures and mechanisms, and could even jeopardize the disbursement of subsequent tranches under that financing instrument.
What should be done?
To prevent rising corruption risks and regressive steps in the procurement field, Transparency International Ukraine calls on the Ministry for Development of Communities and Territories of Ukraine to abandon further advancement of the Draft.
If existing procurement procedures are indeed insufficient for reconstruction or for addressing other objectives of the Draft, then it is necessary to:
- identify the shortcomings of current procedures
- determine any additional objectives of the Draft, if they exist
- establish a working group to prepare a Procedure that complies with the Law and with EU integration commitments, with the involvement of relevant experts.
This material is funded by the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.
