During martial law, procuring entities will have to report on direct defense procurement in Prozorro if the amount is equal to or exceeds UAH 200,000 for goods and services and UAH 1.5 mln for works. This does not apply to procurement related to weapons and state secrets.

Procuring entities will begin to publish reports a month after the official publication of the adopted law. In the future, the procurement report must be published within 10 working days from the date of conclusion of the contract. It should contain:

• the name of the procuring entity;
• the name of the procurement item with indication of the code according to the Unified Procurement Dictionary;
• the price per unit of each item of goods (indicating the unit of measurement for goods), the price of works, services.

The adopted law also obliges them to report on direct contracts concluded after February 24, 2022.

Additional rules were established for the procurement of food and services for the military. In contracts for such goods and services, procuring entities must indicate prices and units of measurement of all items of goods and describe the calculation of services with all their components. The report on the direct procurement of food services must additionally indicate information on the components of services, including the name of products, their price and unit of measurement, the cost of individual services, the total cost and terms of payment for products. Moreover, the Cabinet of Ministers will establish the procedure for determining the marginal prices for food and the grounds for changing the essential conditions of such contracts.

The Verkhovna Rada Committee on National Security was given full access to information on defense procurement — it should be provided on request within 10 working days.

Transparency International Ukraine warned about several shortcomings of the draft law No. 8381 and provided proposals for its improvement. They were partially considered.

Thus, the document leaves the risk of cancellation of full reporting on defense procurement after the end of martial law, does not introduce control over the compliance of published information with reality, does not consider the lack of indications of a number of units of measurement in relation to goods and generally has a limited range of data that must be published.

“We maintain the position that defense procurement should be as transparent as possible. And that systematic problems in this procurement should also be solved systematically. Therefore, although a step towards the publication of part of the data on defense contracts is a good thing, the newly adopted law will not be able to fundamentally change the situation,” says TI Ukraine project manager Volodymyr Datsenko.

In procurement not related to weapons, the following information may be sensitive:

• about the supplier, if their goods are unique and critical for the Armed Forces, and the characteristics of such goods;
• the exact place of delivery and sometimes the number of goods, if this can indicate the number of troops in a particular region.

These data must be kept closed. There is no need to hide all the other information. And in addition, it is necessary to improve the processes of supporting the defense sphere and improve the quality of 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.

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The post Presentation of NAKO’s Research on Corruption Risks in Ukraine’s Defense Housing System first appeared on Transparency International Ukraine.

The post International audit for Ukroboronprom is an important step towards reform first appeared on Transparency International Ukraine.

June 18, 2018 was the deadline for submitting procurement offers for advisory services with the
initial cost of UAH 130 million. These services include strategic consulting and implementation
of corporate governance according to OECD standards, legal analysis and evaluation,
independent financial audit in accordance with international standards
(https://prozorro.gov.ua/tender/UA-2017-12-20-003453-c).

This is the first time that such a comprehensive approach is used, with the integration of OECD anti-
corruption policies, as well as the implementation of corporate governance and international
audit standards for more then 130 state companies that are members of the enterprise.

Press Conference participants will answer the following questions:

• Why does Ukroboronprom need this service?
• Is it possible to consider the auction completed?
• Which companies took place in the call for proposals?
• What are the next steps for those who participated?

The event will take place on Tuesday June 19 at noon in the Ukrainian Crisis Media Center, 2
Khreshchatyk st.

Speakers:

• Volodymyr Ogryzko – co-head of NAKO
• Drago Kos – member of NAKO
• Olena Tregub – Secretary General of NAKO
• Mykhailo Zghurovskyi – head of the supervisory board of Ukroboronprom

The post Press Conference Announcement “The Deadline for Submission of Tender Proposals Concerning the Provision of Independent International Audit Services for Ukroboronprom Passed. What’s Next?” first appeared on Transparency International Ukraine.

These issues are raised in the report, Making the system work: enhancing security assistance to Ukraine, by the Independent Defence Anti-Corruption Committee (Nezalezhny Antikorrupciynii Komitet z pytan oborony, or “NAKO”) and Transparency International Defense and Security.

Since the start of the conflict with Russia, Ukraine’s defence sector has received significant material, technical and advisory assistance. The US alone has earmarked approximately $658 million (7% of total military budget of Ukraine in 2016) since 2014. Ukraine has also received significant aid from the UK, Canada, and other donors. Donors have provided armored SUVs, night vision devices, thermal imagers, drones, devices for communications, medical equipment, uniforms etc.

However, the lack of transparency in the procurement and planning process means that donors are providing assistance without the full picture of Ukraine’s capabilities and how they can fill the gaps. Key defence procurement documents, such as the State Defense Order (the annual armaments and military equipment procurement plan) and the “Priority Directions” (which sets out Ukraine’s security assistance requirements), and the detailed defense budget, are secret.

Oleh Rybachuk, co-chair of the NAKO, said:

To overcome the corruption in the defense sector, political will is required. If donors determine specific conditions for international aid, this would create more incentives for our leaders and then they will finally begin to solve critical issues: to reduce the level of secrecy in state defense order, for example, and reform of Ukroboronprom.

According to the report the Ministry of Defense (MOD) has improved in terms of monitoring and reporting on the use of assistance since 2014, when the inefficient use of international assistance received significant media attention. But problems remain.

The report found that independent planning often results in the inefficient use of assistance. For example, the US granted Night Vision Devices (NVDs) and mounts for this devices (according to those interviewed, 2.5 times more mounts than NVDs themselves). But those on the front reported that soldiers received devices without necessary mounts, making them impossible to use in combat.

In another example, the US provided armored HMMWV (Humvees), as requested by Ukraine. But the military did not have training on how to repair or maintain the vehicles, or spare parts. As a result, HMMWVs had to be repaired at civilian auto-repair shops, using volunteer funds.

The problem of insufficient training also applies to the RQ-11 Raven drone. At times, military personnel who did not pass any training were provided drones to use, even while personnel with American certificates on drone operations did not receive them at all.

NAKO developed 14 recommendations for reform, including:

– Making the majority of the State Defence Order and “Priority Directions” for security assistance available to the donor community and public. To do this, the Rada should amend the law of Ukraine “On State Secrets” to allow for more information to be publicly available. In general, the report calls for a reduction in secrecy in budgeting and procurement, and clarity on the role of Ukroboronprom in this process, to enable the formation of clear strategic plans and ensure that security assistance is targeted effectively.

– Establishing a single legal and regulatory framework for the management of security assistance coming to Ukraine, with assistance being registered with the MOD and a single planning and coordination body.

– Donor states should determine precise criteria for the Government of Ukraine regarding the reduction of corruption risks in the defense sector.

The full list of recommendations are available in the report, available at: nako.org.ua.

The NAKO confirmed that it is willing to assist in the preparation of legislative changes.

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Experts of the Secretariat of the Independent Anti-Corruption Committee (NAKO) took active part in the development of recommendations to improve the Draft Law on National Security for its second reading in the Parliament. NAKO worked as part of Working Group on Defence and Security of the Reanimation Package of Reforms initiative in close collaboration with Ukrainian MPs and international partners.

The Draft Law on National Security was introduced to the Parliament by the President of Ukraine. It was developed with participation of the international experts. The Law is aimed at providing a legislative framework for the national security and defence reform and clarifying responsibilities of institutions within the sector.

Following the analysis of the draft Law, NAKO developed recommendations for introducing concrete amendments which help to ensure the democratic oversight and civilian control of the defence and security sector in compliance with NATO standards:

1. Parliamentary oversight over SBU and intelligence

Parliamentary oversight over SBU and intelligence is an integral part of the democratic oversight and civilian control over defence and security sector. However, current version of the Draft Law does not provide for effective parliamentary oversight over SBU.

Initially, it was suggested to set up a dedicated parliamentary Committee to exercise oversight over SBU and intelligence in line with NATO standards and principles. However, in the final version of the Draft Law introduced to the Parliament by the President, SBU  that was defined as “a public authority of special purpose with law enforcement functions” was taken out of scope for oversight by that Committee.

NAKO recommended to amendments that will ensure that parliamentary oversight over SBU (see Article 6 and Article 19 in the table).

2. Democratic oversight over security and defence sector by citizens

The existing version of the Draft Law can lead to limitation of constitutional rights of the Ukrainian citizens because it states that civic control can only be exercised through civic organization, but not by individual citizens.

Furthermore, one of the ways for Ukrainian citizens and civic organization to exercise civic control is through participation in civic councils set up in the public agencies of the defence and security sector. Current version of the Draft Law does not provide for such councils.

It is therefore recommended to create opportunity for citizens’ participation in civic control both individually and through civic formations, as well as through  civic councils set up in the public agencies of the defence and security sector.

3. Civilian Minister of Defence

Another reformist provision of the Draft Law is the appointment of a civilian Minister of Defence and his or her Deputies, which represents an important tool in the exercise of civilian control over security and defence sector. However, current edition of the Draft Law makes it possible  to appoint a person practically on the same day that s/he leaves military service.

NAKO suggests to require that the candidate for this position cannot be selected from among the persons who had held senior management positions in the military or law enforcement agencies at least for five years prior to the appointment.

4. Improving governance of the state defense industry

The Draft Law provides for setting up a central government agency responsible for the development and implementation of state defence industry policy. Today, there is no such agency in place. Under current legislation, Ministry for Economic Development and Trade is only competent to prepare and summarize suggestions for the development of state policy on the functioning and development of the defense industry, while implementation of the policy is de facto exercised by State Conglomerate UkrOboronProm.

It should be noted that is not necessary to set up a new agency to ensure the development and implementation of state policy on defense industry as it would be enough to assign this responsibility to the existing central government agencies (e.g. MEDT or MoD).

NAKO recommends to set the deadlines for creating provisions for effective functioning of the central government agency responsible for the development and implementation of state defence industry policy.

5. Transparency in the defense and security sector and protection of state secrets

Protection of state secrets is a key element of national security. In this context, both under- and over-classification is equally dangerous.

Under-classification undermines the defense potential of the country and can pose a threat to national security, while over-classification results in excessive use of resources, opens the door to corruption, undermines the effectiveness of state defense institutions, leads to ineffective use of budget funds and procurement of low-quality defense equipment, and also limits the citizens’ right to access to information.

It is therefore suggested that a new edition of the Law on State Secrets is developed following the adoption of the Law of Ukraine on National Security, to ensure the balance between the citizens’ right to access to information and state’s interest in the protection of national security in line with best practices of NATO-member states.

One of important tools of democratic civilian control is citizens’ access to information on the defense procurements. Under current legislation, most state defense procurements within the defence budget are classified.

Finally, State Defense Bulletin provides that public procurement system should be extended to conventional weapons by the end of 2017. NAKO recommends introducing relevant legislative changes to ensure achievement of this goal.

Following the analysis and discussions, NAKO analysist have prepared a comparative table with suggestions for the improvement of the Draft Law. The table and supporting materials were passed to a number of the Ukrainian MPs.

The post NAKO suggests how to improve the Draft Law on National Security first appeared on Transparency International Ukraine.

Healthcare and safety of our military people have to be one of the priorities of the Ukrainian army. Actively supported by representatives of the public, the state has achieved considerable progress solving a number of strategic problems in military medicine. There has been a significant increase in government funding – in 2017, the Ministry of Defense has allocated UAH 327 million ($12.4 million) for medical needs, which is 25% more than the previous year. Out of these funds, UAH 205 million ($7.8 million) has been allocated for medical treatment and the remaining part is meant for procurement of medicines and medical equipment. Shortcomings of the medical supply system, however, often stand in the way of efficient use of public funds.

The NAKO’s research describes problems and risks in the area of medical supply using three specific examples. The first case considered in the report is connected with the procurement of 30 000 tourniquets to control bleeding in autumn of 2015. Volunteers and tactical medicine experts brought up the low quality of the tourniquets on numerous occasions – sometimes they would tear when used. This example indicates such problems as failure to put the products through thorough testing, the absence of an effective feedback mechanism and a lack of financing.

The second example concerns procurement of medicines. One of the potential risks is procurement of medicines by lots, which may indicate a conspiracy between the procurement coordinator and the supplier. In the process of formation of a lot the inventory can include one unique item name supplied by only one company. Thus, the order can only be completed by a specific supplier.

In 2017, the MoD’s Medical Department made the decision about decentralization of procurement – now, medical supplies are purchased not by the Ministry but by regional clinical centers. It allows providing for urgent needs faster, but requires additional control both by the authorities and the civil society.

The analysts also pointed out the lack of mechanisms that would prevent the Ministry of Defense from working with dishonest suppliers.

The third example describes classified procurement of transport for extraction that Ukraine started producing in 2016. The vehicles in question are cars built from Chinese parts at the cost of $32,000. The example points out excessive secrecy of the state defense order, which renders control over procurement and detection of potential irregularities impossible. Besides, potential suppliers may fall under the impression that decisions concerning the choice of the supplier are influenced by the conflict of interest.

In order to mitigate problems and risks in the system of medical supply in defense, the experts of  Transparency International Ukraine and the NAKO have developed a number of recommendations for the authorities:

• The government needs to reduce the level of secrecy while processing state defense orders. As the first step, the Verkhovna Rada has to review the legislation on protection of state secrets;
• The Ministry of Defense of Ukraine has to develop mechanisms that would prevent further cooperation with dishonest suppliers who violate the terms of agreement. Another recommendation to the Ministry is to implement an efficient feedback mechanism to receive information on the quality of medical products. In addition to that, the Ministry needs to introduce additional principles of lot formation to prevent irregularities in procurement;
• The MoD’s Medical Department is advised to ensure transparency of creation of medical and technical requirements with the aim of efficient procurement of medical products. It is also advisable to review the system of decentralized procurement and consider the possibility of introducing a combined system instead.

TI Ukraine and TI Defence & Security hope that the Ministry of Defense will heed the NAKO’s recommendations and apply them to eliminate problems and risks in the area of medical supply in defense. It is exactly the fruitful cooperation and constructive dialogue between the authorities, civil society and experts that will enable Ukraine to increase the standards of Ukrainian military medicine to the NATO level and strengthen the army amidst the military conflict in Donbas.

The post What the Doctor Prescribed? Corruption Risks in the System of Medical Supply in the Ministry of Defense of Ukraine first appeared on Transparency International Ukraine.

Specifically, Pavliuk has revealed the structure and volume of procurement by  MOD. The MOD’s main purchaser is the Department of State Procurement (the DSP); the total value of its 2016 completed procedures exceeded UAH 6.6 billion (while other purchasers averaged UAH 0.87 billion).Much of this money goes to food. 98 percent of these funds went to five companies, which is leading to the purchaser’s dependence on the provider, which is essentially creating a monopoly. Meanwhile, an experiment on new methods of troop provisions, carried out in compliance with new procedures, has been highly praised by TI Ukraine. Provisions for the National Army Academy and Ukraine’s Western Naval Base turned out to be cheaper, while providing a wider variety of food. Pavliuk noted the negative consequences to arise out of the current procurement practices employed by the Ministry. The result is that the manufacture and supply of large quantities of goods are often demanded by the MOD in just a few days (eg 4 days for the supply of 40 000 pillowcases). TI Ukraine’s expert considers it worthwhile to abandon the practice of using the technical specifications of some providers; especially because the purchaser is not usually capable of consulting with other participants on technical specifications. Other purchasers of MOD, aside from the DSP, often preferred to arrange public procurement outside of the ProZorro platform (31%). They published reports only, with no contracts enclosed, the total value of which exceeded UAH 53 million. They also spent UAH 175 million on heating. What drew attention was the purchasers’ difference in the price per 1 calorie: from UAH 597 up to UAH 2,580. Pavliuk highlighted one positive example, of procurement carried out by the 3^rd Separate Special Forces Regiment and Kharkiv University of Air Force, which was both competitive and cost-effective.

Yurii Biriukov, advisor to the President of Ukraine and the Minister of Defence, agreed with the significance of these conclusions. According to him, the issues with planned procurement in the army are caused by the peculiarities of the budget process of Ukraine and persistent lack of funding for the Armed Forces of Ukraine. Switching to medium-term budgets, as well as applying long-term framework agreements with the suppliers could improve the situation. In addition, according to Biriukov, untrustworthy suppliers have found way to paralyse the procurement of several types of goods and services by the Ministry in their interest.

Coordinator of reform for the food supply system Diana Petrenia explained the origins of the monopoly of the market. According to her, big suppliers, while bidding, intend to replace smaller ones artificially; the Ministry cannot influence this process. The situation has not fundamentally changed, despite an increase in the number of bids in 2017: 19 in 2017 in comparison with 7 in 2016. Just three companies in the market are “competitive”.

Yaroslav Yurchyshyn, Executive Director of Transparency International Ukraine has provided MOD with preliminary recommendations in order to improve the public procurement process. Among these are: further increasing the number of bids for provision procurement, experimenting with new food supply systems, improvement of the planning system, application of technical specifications specific to the Ministry of Defence, and conducting an audit on the heat supplies of military bases.

Final recommendations will be sent to the Ministry of Defence of Ukraine.

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