On November 15, 2017, Transparency International Ukraine presented the report Reform of Public Procurement in Ukraine and Results of the Work of Electronic System ProZorro in January to June, 2017. It is already a second analytical semiannual report of this kind, which covers all the principal changes in legislation, technical support and administration, as well as demonstrates the main statistical data of the ProZorro system. Yevhen Bilyk, project manager of TI Ukraine’s Innovation Projects Program, presented a summary of the report to a big audience of those interested in the public procurement reform. Oleksandr Shatkovskyi, deputy manager of the EU project Harmonization of the System of Public Procurement in Ukraine with the EU Standards, acted as the proofreader of the report. Acting manager of the project Transparency and Accountability in State Governance and Services Lesia Chmil delivered a congratulatory speech.
You can download the full report at https://ti-ukraine.org/wp-content/uploads/2017/11/1_1_2017_prozorro_tiu.pdf
Summary and Main Findings of the Analytical Report:
During the first six months of 2017, the procurement done through ProZorro included over 410,000 lots with the expected value of over UAH 247 billion. Over 80 thousand enterprises and private entrepreneurs participated in the procurement. The competition provided for the average saving of 5.5% (the difference between the expected and actual price).
67% of agreements have been concluded based on the results of non-competitive procedures, the value of these agreements added up to almost 41% of the total value in the system. The most common non-competitive procedure is reporting on the concluded agreement (59% of all lots in the system). The procedure of negotiations resulted in almost 9% of agreements of the total number of the total number of lots (26% of the value, or UAH 63 billion). TI Ukraine’s lawyers single out the following typical violations of non-competitive procedures: overpricing, possible avoidance of the open bidding procedure, violations of the terms of agreement.
Competitive procedures added up to almost 33% (of the number of concluded agreements) or 59% of procurement (based on the expected value of all lots in the ProZorro system). The average number of proposals at the pre-threshold procurement was 2.15, at the open bidding – 2.71, at the open bidding with publication in English – 2.8. Overall, the level of competition has decreased in comparison with the data of the previous research by TI Ukraine (from August 1 to December 31, 2016). However, its level remained relatively stable throughout the half-year period, without the tendency for monthly reduction. The only type of procurement with a strikingly negative tendency of competition is the procedure of negotiations for defense procurement. Overall, like in the previous report, TI Ukraine stands by the opinion that such numbers testify to the fact that ProZorro is developing faster than the market. The number of lots of increasing more intensely than the number of participants who are ready to submit their tender proposals.
The share of disqualifications in the competitive procedures was almost 10%. The most common reasons for disqualification, according to the survey of customers done by TI Ukraine, is failure to meet the documentation requirements, such as the documents not corresponding to the requirements, the discrepancy between the participant’s proposal and the technical characteristics of the tender documentation and absence of certain documents as part of the tender proposal. The unsatisfactory situation with disqualifications can be connected with the quality of sate monitoring of procurement. 56.3% of the participants admitted they had never been inspected by the State Audit Service from the moment of launch of the ProZorro system.
Procedure of Negotiations for Defense Needs
TI Ukraine’s experts note a significant increase of use of the procedure of negotiations for defense needs. Compared to the period analyzed for the first report (August-December 2016), the number of agreements grew by 24%, and their value by 20%.
Open Bidding with Publication in English
In comparison with August-December 2017, the use of open bidding with the publication in English grew in the first half of 2017. This type of procurement was used to buy 4 151 lots with total value of UAH 77 billion, which means four times as many lots and almost five times as much money spent as in the second half of 2016.
The use of open bidding has grown, though not as rapidly as that of open bidding with publication in English. For instance, during the review period, this procedure was used to procure 36,032 lots with total value of UAH 33.4 billion. These numbers are more than twice as high in volume as in the previous period and 1.5 times as high in value of procured items.
Typical violations in this procedure include discriminatory requirements, groundless disqualification, conspiracy and unfounded determination of the winner. Like in the previous period, the open bidding procedure is the one where most violations are identified, which is a positive fact, since more clear rules of this procedure than of other types of procurement enable better tracking of violations.
The use of pre-threshold procurement remained at the level of the second half of 2016 in the number of lots: 92.6 thousand vs 91 thousand, while their expected value grew by a third – from UAH 10.3 billion to UAH 15.4 billion.
Overall, pre-threshold procurement remains a problematic type of bidding in terms of transparency of the procedure. Its high level of economy (13.3%) occurs due to a big number of cheap lots that have many potential suppliers, while the regulation is insufficient. The main risk is still a low number of price offers, which occurs in 55.8% of procurement cases.
Competitive dialogue was used in 8 cases of regular procurement in the first half of 2017 and in 1 case of procurement with publication in English. The total expected value is UAH 254.5 million.
Legislative Framework for Public Procurement
The reform has entered the stage of protection from attempts at discrediting and gradual introduction of the necessary improvements. For instance, the Cabinet of Ministers of Ukraine and the Parliament have adhered to the Strategy of Reforming the System of Public Procurement through rejecting draft law 2126a in the version which rendered the rights of customers and authorized electronic platforms more vague as well as 9 draft laws which suggested introducing exceptions to the Law. Draft law 4738-d has been prepared, which establishes the new procedure of monitoring of public procurement by the regulatory agency with the use of risk indicators. The critical issue as of now is its approval and practical implementation of the use of risk indicators by State Audit Service employees.
Activity of Central Attestation Body
Besides, the first instances of procurement were done through the State Institution “Profesiini Zakupivli,” aimed at aggregating the demands of customers and reducing the administrative workload of suppliers. To develop the effective activity of this institution, it is critical to improve the legislation of framework agreements. The recommendation in this respect is for MEDT and CMU to approve the documents provisioned by the law.
Changes in Procurement Monitoring
Another important result is transfer of functions of the public Committee on Review of Applications of Possible Violations in Pre-Threshold Procurement to the DOZORRO portal. Activists of numerous CSOs and state agencies received an opportunity to react to complaints about procurement through this portal, which allows to process a greater number of applications than the Commission could. Unfortunately, the results of this review still only carry out advisory function and are not binding for the customers due to the lack of legislative consolidation.