These cases are the result of DOZORRO’s systematic work in previous months, when we analyzed procurements and approached contracting authorities with comments on inflated prices. In February, we were able to record tangible outcomes: in some procurements, the parties revised the contractual prices; in others, overpayments were prevented before contracts were signed. In one case, the information from our submission was added to an already opened criminal proceeding. Here are the three most notable cases.

Construction of a shelter in Vysokopillia

In the settlement of Vysokopillia in the Kherson region, a shelter for the hub school has been under construction for more than a year so that students can study offline rather than remotely during air-raid alerts. The main procurement took place back in 2024, when Autointerstroi LLC won the contract. However, in autumn 2025, additional works became necessary, so a direct contract for UAH 21.7 million was signed for those works.

When analyzing the cost estimate for this procurement, we found likely overpricing of construction materials. In total, potential overpayments could have reached UAH 2.7 million—more than 11% of the contract value. For rebar steel used to reinforce reinforced-concrete structures (round and ribbed, grade A-III, 12 mm diameter) alone, the potential overpayment was UAH 900,000. Autointerstroi LLC planned to supply it at UAH 44,944.55 per ton (here and below, prices are VAT-inclusive), while market offers were significantly lower. For example, UTMK sells this material for UAH 32,800 per ton, and SavVats for UAH 34,290 per ton.

In November last year, DOZORRO contacted the Vysokopillia hub educational institution with calculations and a request to revise material prices. In December, the contracting authority replied that the prices would be reviewed.

The contract price is fixed, meaning it cannot be adjusted during the implementation. In addition, part of the works under the contract has already been paid for. Therefore, in February 2026, DOZORRO sent a letter to the prosecutor’s office regarding a possible overpayment. Law enforcement reported that our information had been attached to an already opened criminal proceeding and that the stated facts were being verified.

The State Audit Service monitored this procurement and identified violations. In particular, auditors noted that the contracting authority concluded a direct contract but failed to publish a proper justification for that decision on Prozorro. In addition, the contract initially lacked some mandatory clauses required for projects funded under the EU’s Ukraine Facility program.

DOZORRO also analyzed the main tender for construction of the same shelter in Vysokopillia. At the time, based on our submission regarding a potential UAH 4 million overpayment, a criminal proceeding was opened.

According to YouControl, Autointerstroi LLC was registered in Donetsk region in 2005. The owner is Oleksandr Shakhmatov, and the director is Kostiantyn Selezniov. The company has previously appeared in media coverage about shelter construction in the Kherson region. For example, Bihus.Info wrote about shelter construction contracts at schools in the region, where the company received contracts totaling over UAH 140 million.

Reconstruction of an outpatient clinic in Vysokopillia

This is the second case in Vysokopillia, Kherson region, recorded in February, where DOZORRO’s earlier intervention helped prevent inefficient spending. This time, it concerns the reconstruction of the property complex of the administrative building of the Vysokopillia settlement council into a general practice/family medicine outpatient clinic.

The procurement was announced by the Department for Territorial Development of the Kherson Regional State Administration to refurbish the building at 112 Vyzvolyteliv Street into a medical facility for community residents. Only one bidder submitted an offer—Global Build Engineering LLC—and a contract worth UAH 122.2 million was signed with the company.

DOZORRO analysts reviewed the winner’s cost estimate and saw risks. Overall, potential overpricing of construction materials could have reached UAH 5.8 million—around 4.3% of the future contract value. For metal-plastic windows (double-glazed units) alone, the department could have overpaid UAH 1.8 million. Global Build Engineering LLC planned to supply them at UAH 10,330.68 per sq. m, while market offers at the time were far lower: Masterdom sold such windows for UAH 3,437.50 per sq. m, and Oknodom for UAH 3,950 per sq. m. 

In October last year, we asked the contracting authority to revise construction material prices at the stage of approving the contract price. That same month, the department replied that it had reviewed the estimate and provided the contractor with comments on material costs.

As a result, when concluding the contract, the Department for Territorial Development of the Kherson Regional State Administration and Global Build Engineering LLC adjusted the prices of most materials to market level, saving UAH 5.8 million. 

Global Build Engineering LLC was founded by Yaroslav Shevchenko in Kyiv in 2017. The company has also appeared in investigative reporting. For example, Intent reported that the High Anti-Corruption Court obliged NABU to investigate the possible misappropriation of budget funds during construction of a shelter at the Vysokopillia school, where the contractor was Global Build Engineering LLC.

Repair of a sewer collector in Chernihiv

Another case where the cost of work was reduced after DOZORRO’s submission concerns Chernihiv. There, Chernihivvodokanal Municipal Enterprise carried out a major repair of a sewer collector on Dmytra Samokvasova Street—from Building No. 10 to Tekstylnykiv Street.

A contract worth UAH 40.5 million was signed with AutoV-M LLC. The company was the sole participant in the tender. Under the contract, the contractor was to carry out a major repair of a critically deteriorated section of a 700 mm sewer collector, including dismantling and laying the pipeline, installing inspection manholes, and other works on the network.

DOZORRO analysts found a risk of inflated material prices. In total, the potential overpayment could have been UAH 2.9 million—around 7% of the contract value. This was because AutoV-M LLC planned to supply polyethylene pipes for cold water supply (PE 100 SDR-17 (1.0 MPa), outer diameter 900×53.3 mm) at UAH 26,379.90 per meter. Market offers at the time of analysis were much lower: Trubpolimergroup sold this material for UAH 14,655.50 per meter, Megapipe for UAH 17,587.00 per meter, and Euro Trub Polymer for UAH 21,982 per meter.

In May 2025, the DOZORRO team contacted Chernihivvodokanal Municipal Enterprise asking it to revise material prices. In its response, the contracting authority said that resource costs would be double-checked and, if necessary, the contract price would be adjusted. In January this year, the parties signed an addendum reducing the contract amount by an even larger sum than the potential overpayment we calculated. 

This procurement was also reviewed by the State Audit Service. During monitoring, auditors identified violations in the review of the winning bidder’s tender offer and in the publication of procurement information on Prozorro. In particular, Chernihivvodokanal did not reject AutoV-M LLC’s offer, even though the bidder submitted documents that did not meet the tender documentation requirements. The contracting authority decided to challenge the monitoring conclusion in the Chernihiv District Administrative Court.

Auto-M LLC was founded in Zaporizhzhia in 2001. The company has been mentioned in media reports before. For example, Vilne Radio reported that the company had appeared in several criminal cases concerning possible overpricing of materials during water pipeline repairs in Dnipro.

This material was prepared within the framework of the “Digitalization for Growth, Integrity, and Transparency” (UK DIGIT) project, implemented by the Eurasia Foundation and funded by UK Dev.

The material was produced with the financial support of the UK Government’s International Development Assistance Programme. The contents of this material are the sole responsibility of Transparency International Ukraine; the views expressed do not necessarily reflect the official policy of the Government of the United Kingdom.

The public’s demand for the efficient use of budget funds has grown during the full-scale war — and understandably so. When families save a significant portion of their monthly budget to support the Armed Forces of Ukraine, it is painful to read about wasteful spending, such as unnecessary paving projects or excessive overspending. This is a completely reasonable demand: that our taxes support the army and other truly essential expenses while being spent prudently. Unfortunately, this is not always the case.

For years, we have emphasized that state oversight of public procurement is not sufficiently effective. While we work on improving it, we are also actively engaged in public monitoring. Over the eight years of the project, our team and the DOZORRO community have reviewed more than 40,000 procurements. For comparison, during the same period, the State Audit Service — the main body responsible for overseeing public procurement — monitored approximately 63,000. In other words, public oversight plays a significant role in ensuring that budget procurements are efficient and fair.

Just like state control, public oversight is effective only when it is professional, consistent, and objective. The DOZORRO project explains how to monitor procurements in a way that truly influences effective budget spending.

We all know that it is very difficult to solve an equation when there are multiple variables.  But the Cabinet of Ministers seems to think otherwise.

The idea of localization in Prozorro was promoted for almost a year and a half. Eventually, in December 2021, MPs approved this law — thus, the Law of Ukraine “On Public Procurement” was supplemented with a list of goods subject to localization and its minimal required percentage. Ultimately, this idea was formalized as the Procedure for Confirming the Degree of Localization of Production of Goods. It was published by the Cabinet last week.

In terms of the legislative bureaucracy, the process of introducing localization is complete. In terms of math and logic, we have an unsolvable problem on our hands.

When localization needs to be confirmed

According to the defined list of goods, the requirement of minimum localization applies to goods of the machine building industry: in particular, buses, freight transport, transformers, generators, rolling stock of railways, fire trucks, garbage trucks, helicopters, airplanes.

There will be a separate list of localized products for all these goods. It will be monitored and updated by the Ministry of Economy. Only goods from this list will be available for competitive public procurement.

Domestic manufacturers will apply to have their goods included into this list, along with calculations of the required degree of localization. This year it is set at 10%, but will gradually increase to 40%.

This rule will not apply to alternatives that are manufactured in countries with which we have signed trade agreements: The EU, the USA, the UK, Japan, South Korea, Canada and others.

That is, not all foreign manufacturers will be screened out, but only those to whom we do not have obligations in the field of free trade.

At this stage, it seems that there should not be any particular problems. Of course, apart from the fact that procuring entities will have to educate themselves on the thresholds and terms of agreements with various countries. But then the question arises as to how to confirm the localization.

Localization formula

While applying to be included into the list of localized goods, the manufacturer must submit the calculation of said localization.

It looks like a simple arithmetic ratio of the cost of imported components and the cost of the product. In addition, the calculation includes not only those components imported from abroad by the final manufacturer, but also imported parts used by manufacturers of individual parts of the product.

DL (degree of localization) = (Cost of important components for manufacturing of the product + cost of imported goods within parts purchased from domestic manufacturers) / Cost price of the product

In case of simple homogenous goods, like metal, flour, concrete, food products, it is generally possible to calculate localization based on this formula. But for complex engineering goods, it is almost impossible to check whether this calculation makes sense:

• The calculation includes the concept of cost price, which includes all production and administrative costs. Formally, your product can fully consist of imported parts, but you can always indicate a different figure of other expenses — depreciation, salaries, administrative expenses — and the result will be what you need it to be.
• Who guarantees that the supplier of individual product components will provide the manufacturer with reliable information about the cost of imported components, and whether this is not a violation of trade secrets?
• How is it possible to investigate the entire chain of co-manufacturers if the suppliers of parts have other suppliers of parts, and it goes on from the smallest components to the finished product?
• What to do if the manufacturer has several potential suppliers of components for this specific product, including foreign and domestic suppliers, or if there is a need to change the supplier at a certain point?
• Can depreciation of imported equipment be considered local costs in the cost structure?
• If parts from countries with whom we have trade agreements were used for production of the final product, are such goods considered localized?

All responsibility for the reliability of calculations rests with the product manufacturer. The Ministry of Economy will check the correctness of mathematical calculations and add the product to the list. Basically, what is checked is the formula itself, rather than whether the manufacturer indicated correct data. They are not required to file any documents confirming the calculations. Essentially, any information at all can be entered. In addition, the Ministry of Economy is supposed to monitor localization once per six months — this will be done with the use of Prozorro system data. That is, again, they will only be using documents and doing calculations — no confirmation needed.

In most cases, even supervisory bodies will not be able to check these calculations. If the manufacturer of goods produces more than one type of product, or has a complex network of suppliers, it is almost impossible to understand the import share in a particular product. There needs to be a big investigation with a bunch of cross-checking of different companies.

The complexity of this task is corroborated by the fact that back in the day, Ukrzaliznytsia (Ukrainian Railway) had to actually purchase services for calculation of the localization degree during the production of ТЕ33А locomotives under a contract with General Electric. At that time, according to the terms of the contract with the American manufacturer, 10% localization of production in Ukraine was foreseen. The auditing company PAT KPMG Audit had to evaluate the localization and produce an analysis based on its results. But there is no report on the execution of this contract, and there is no information how the audit ended.

More questions than answers

 

So, what is the result?

 

Procuring entities get a lot of additional work:

• write tender documentation for purchases with localization;
• figure out who can be admitted without localization and who cannot;
• publish the winner’s documents on the calculation of the actual localization together with the report on the execution of the contract.

And this is just what we can already predict.

 

Participants will be dependent on manufacturers. It is the manufacturers who will put data on their goods on the “localization list.” The winners will also obtain the documents on the actual localization calculations from them as well. And if the manufacturer does not provide these documents upon request? They can just as well provide them to one participant but not the other. There is a lot of space for manipulations and corruption here.

 

Can localization be calculated in engineering goods in the first place? Doing it once a year for all products is definitely unrealistic. On the other hand, if no one is actually validating the data, localization information can be filled out just formally, not necessarily truthfully.

 

Help or harm

We remind you that the Law on Localization is the one that made changes allegedly to create prerequisites for sustainable development and modernization of domestic industry.

 

Right now, it appears that localization is creating more problems during implementation than benefits. Ukrainian goods will continue to compete with foreign goods in most tenders, in particular for the most expensive contracts.

 

Manufacturers will receive certain benefits. They will be able to control who sells their goods to the state, issuing the necessary documents for tenders or refusing to do so.

 

However, it is not apparent how this will help to develop and modernize industry, particularly during the war.

 

And what about the American localization?

The Buy American Act and the Buy America Act do exist in the USA. However, they provide localization for relatively simple goods such as steel, cast iron, steel and cast iron components, and others.

Requirements of the Buy America Act:

Procuring entity	Threshold contract value at or above which requirements apply	Goods subject to the act	Requirements
Federal Transit Administration (FTA) — buses, metro, other public transportation projects	USD 150,000	Cast iron, steel and other components of rolling stock, made mainly of steel and iron.	70% made in the USA
Federal Highway Administration (FHWA) — highways	$2,500 or 0.1% of contract value, whichever is higher	Cast iron, steel and manufactured goods, made mainly of steel and iron.	100% made in the USA
Federal Railroad Administration (FRA) — trains	USD 100,000	Iron, steel and industrial goods	100% made in the USA
Amtrak — National Railroad Passenger Corporation	USD 1 million	All manufactured and unprocessed goods	50% made in the USA Final assembly must also take place in the US
Federal Aviation Administration (FAA) — construction of airports	No threshold	Steel and industrial goods	60% made in the USA Final assembly must also take place in the US
Environmental Protection Agency (EPA)	No threshold	Industrial goods made of iron and steel	100% of the total cost of iron and steel products must come from American components

The phrasing “must be American” or “US-made” should also be used with a caveat, since goods from countries with free trade agreements with the US are considered equivalent to American goods.

Also, localization in the US is not a mandatory requirement if there is no competition, or when the procuring entity believes that such a requirement leads to a significant overestimation of the cost of the purchase and is contrary to the public interest.

But it is worth noting that the US legislation is highly different from the EU legislation, and we are trying to integrate with the EU. All attempts at localization in the EU were unsuccessful and fell apart in European courts. EU legislation is more strict with the issue of limiting competition and free access to the market of participants from different countries.

Thus, if we need to harmonize Ukrainian legislation with the EU requirements, we will still have to come back to the issue of localization and, perhaps, it is better to cancel it now if it is not going to work anyway.

 

Ivan Lakhtionov, deputy executive director for implementation of innovative projects, Transparency International Ukraine

Volodymyr Datsenko, project manager, Transparency International Ukraine

Instead of reducing the list of what can be bought under direct contracts, recent changes to the Law have only confused the rules.

Our country was not ready to fight COVID-19, like most countries in the world. In the spring of 2020, hospitals faced a shortage of safety products, medicines, and equipment. At the same time, time was short, and all this was needed immediately.

Back then, Transparency International Ukraine supported the removal of procurement to combat coronavirus from the scope of the Law “On Public Procurement.” The Law was amended so that certain goods, services, and works, the list of which was defined by the Cabinet of Ministers, could be purchased under direct contracts.

The overall benefits of COVID-19 procurement in the first months of the coronavirus still prevailed over all the risks. Although some procuring entities immediately started abusing the new rules, hospitals could buy everything they needed, stock up, and the market gradually returned to normal.

About a year later, in the spring of 2021, prices finally stabilized.

At the same time, some procuring entities began to use competitive procedures just a few months after the start of the pandemic — to buy through auctions on Prozorro. In particular, in this way, some of them began to purchase the very same masks. And this made it possible to significantly reduce the cost.

All in all: some procuring entities have learnt how to plan their procurement to fight COVID-19 and buy at auctions. Accordingly, even then, it was possible to start a gradual return of coronavirus procurement to the competitive field. TI Ukraine called for this to be done last autumn.

However, instead of shortening the list of what can be purchased under the COVID-19 procedure, MPs created new confusing rules with new corruption risks.

In July, the Verkhovna Rada adopted a law, which divided COVID-19 procurement into three scenarios:

Medicines can be purchased directly, but only from the list that the Cabinet of Ministers had to adopt within a month, but barely approved in two.

Any products from the defined categories can also be purchased directly:

• vaccines and medical devices for vaccination;
• immunobiological medications;
• consumables;
• medical equipment for COVID-19 hospitals;
• medical gas supply systems.

However, the list for them was not provided. That is, the hospital can buy any equipment for any amount without tenders.

The third scenario — the rest of the procurement transactions to combat COVID-19 can be carried out as simplified ones. Simplified procurement is the bidding that takes place even if only one participant took part. Then the procuring entity can immediately sign the contract. If there are more bids, an auction will be conducted.

What is a corruption risk? Procuring entities are not limited in any way in what they may need to fight the coronavirus. You can write in the justification that even the construction of roads is necessary to counteract COVID-19 — and buy under a simplified procedure. And it has many shortcomings: in particular, it cannot be contested, and the State Audit Service does not have the right to monitor such procurement. Thus, discriminatory requirements may be spelled out there to buy at inflated prices. The probability of being held liable for this will be scanty because the work of law enforcement officers leaves much to be desired.

How to correct this? The only way is to again amend the law “On Public Procurement” and oblige the Cabinet of Ministers to approve separate lists of what can be purchased directly without auctions to combat COVID-19, and what can be purchased under simplified procurement.

Transparency International Ukraine urges MPs to develop a corresponding draft law as soon as possible and resolve the situation.

1988 – 1991

In the first year of Ukraine’s independence, there was no procurement as such yet. At that time, there were “state orders,” as at the end of the USSR’s existence. This term was first used by the State Planning Committee of the Ukrainian SSR during the development of the national economic plan for 1988. At that time, normal market relations were out of the question — these were annual planned tasks for enterprises to produce goods. The state order indicated the buyer organization, the list of goods, works, or services required for it, their volume and value, and the executing enterprises. The state order covered 70-80% of the total volume of the national economy and was fully provided with the necessary material resources. Products that were manufactured exceeding the state order were allowed to be sold independently by the manufacturer. In fact, it legalized the right of enterprises to engage in commercial activity and make a profit.

This way, the state not only ordered products for those institutions that were financed from the budget, but also simply managed production of the whole country.

1991 – 1996

After the first year of independence, the state order lost its function of regulating the economy. Since then, procurement was conducted only for institutions that were financed from the budget. The formation of a single state order was the task first of the Ministry of Economy, and in 1993 — of the President. Every year, he approved Decrees on State Contract and State Order — they indicated both the volume of procurement and its financing.

State orders no longer specified performing companies, and their procuring entities could choose independently and sign direct contracts. However, there were no uniform rules on how to do that yet.

However, in those days, competitive procurement began to emerge. In 1993, the Cabinet of Ministers adopted the first “tender” resolution — it allowed purchasing a certain list of goods, works, and services abroad and described how to do it. For example, if the order price exceeded USD 100,000, it was necessary to conduct competitive procurement.  During the period of validity of this decree (from October 1993 to June 1997), the Ministry of Foreign Economic Relations and Trade of Ukraine registered 66 such international tenders.

Therefore, competitiveness in procurement worked quite one-sidedly: it was necessary to conduct tenders with foreigners, while inside the country everyone continued to buy directly.

In that resolution of the Cabinet of Ministers, for the first time in the Ukrainian legal regulatory framework, the main procurement terms appeared: tender, tender bid, etc. In December 1995, the Verkhovna Rada adopted the procurement law — Law of Ukraine “On Deliveries of Products for Government Needs.” It started working a year later, and for the first time made it obligatory to select procurement performers on a competitive basis. This law introduced several other rules:

– it determined the list of procuring entities (ministries, central state executive bodies, regional administrations, other organizations and institutions that the government has authorized to conclude state contracts);

– it specified their functions and responsibilities;

– it identified sources of financing orders;

– it established control over money and responsibility for misuse of funds;

– it introduced accountability.

1997 – 2000

A year after the law on public procurement came into force, the rules were starting to be reinforced. Ukraine was preparing to join the World Trade Organization, and to do this, it was necessary to bring our practices closer to its requirements. Therefore, the Cabinet of Ministers adopted several resolutions:

·     “On the Organization and Conduct of Auctions (Tenders) in the Field of Public Procurement of Goods (Works, Services)”;

·     “On the Creation of a Unified System for Purchasing Goods (Works, Services) at the Expense of the State Budget and Foreign Loans Attracted under the Guarantees of the Cabinet of Ministers of Ukraine”;

·     “On Conducting Auctions (Tenders) in Construction.”

That’s when thresholds for different procurement procedures appeared:

– from UAH 10,000 (approximately USD 5,000 in 1997 and USD 2,500 in 1998), it was necessary to make requests for price offers from at least three suppliers/contractors;

– procurement starting from UAH 70,000 had to be announced in the “Bulletin of Public Procurement.” This is a state-owned periodical that the Ministry of Economy created in 1999.

– procurement starting from UAH 100,000 was supposed to be additionally published in foreign catalogs. 

However, often these rules remained only on paper, and institutions developed their own internal regulations.

2000 – 2004

In 2000, MPs adopted the first “tender” procurement law — “On Government Procurement of Goods, Works, and Services.”  It described all the procedures and rules in much more detail, and, for the first time, introduced the possibility to contest procurement with a separate body, and not the procuring entity, who conducts it. Since then, it was also mandatory to print all announcements about auctions and their results in the paper “Bulletin of Public Procurement.”

Over the following years, the Cabinet of Ministers issued the necessary orders; several provisions have been preserved in the modern regulatory framework. Finally, in 2003, Ukraine established rules on how to determine procurement item for the first time. Now it is the code of the state classifier (CPV code), then it was based on the goods nomenclature of foreign economic activity.

2005 – 2009

At the beginning of the millennium, procurement moved forward, but in 2005 the situation changed. At the peak of the Orange Revolution, instability and even a certain randomness in power were exploited by people who were by no means interested in fair tenders. The period of the “Tender Chamber of Ukraine” started.

Formally, it was a non-profit union of civil society organizations, which was supposed to provide public supervision over the procurement sector. However, the reality was quite different. The activity of the “Tender Chamber of Ukraine” is called one of the largest national corruption schemes. The union administered a private website where procuring entities were required to publish information on public procurement. Nominally, the site was free. However, in practice, procuring entities and participants had to pay for additional functionality; without it, it was almost impossible to announce procurement or take part in it.

For example, a business had to pay extra to private intermediaries for various services: consultations, paperwork, pseudo-guarantees for mandatory tender security, extracts, and so on.

The union’s activity is associated with MP Anton Yatsenko and his family. Now, he is a member of the parliamentary group “For the Future” and in January 2014, Yatsenko voted for dictatorial laws.

Losses from the activity of the “Tender Chamber of Ukraine” were evaluated differently, but in each case the amounts are huge:

– according to calculations of the Main Control and Audit Department, in the first six months alone, the scheme illegally pulled UAH 930 mln out of the pockets of participants (at that time — USD 200 mln). Therefore, for 2.5 years of its existence, it could cause losses amounting to USD 1 bln. 

– according to the SBU estimates, the organization and its related structures caused damage to the state of about USD 500 mln.

In the end, the public procurement crisis reached such a level that in March 2008, the current procurement law was abolished. The sphere began to be regulated by temporary provisions, and at the same time, in 2008, the Ministry of Economy developed a starting version of the national web portal “Public Procurement” (http://www.tender.me.gov.ua). This continued until 2010.

2010 – 2013

In 2010, the legislative regulation of public procurement began to revive. MPs adopted a rather progressive at that time Law “On Government Procurement.” Since then, the AMCU became the appeal body, and not the Ministry of Economy, as before. This is in line with EU standards, where the sphere regulator and the appeal body are always two separate bodies. In addition, the law introduced the concept of a framework agreement, normalized the list of exceptions to the rules, and so on.

Even despite these positive developments, the sphere was still in a zone of turbulence: the law was constantly being amended. More and more new tenders were actively withdrawn from its scope. In June 2020, the law spelled out more than 40 exceptions.

For example, procurement for Euro 2012 was allowed to be conducted without competition. According to the report of the Accounting Chamber, the National Agency for Euro 2012 approved 304 procurement transactions in 2011-2012, which were held without competition, for a total amount of UAH 18.8 bln, while the information about the purchased Hyundai trains was classified.

2014 – 2019

The Revolution of Dignity changed everything. Immediately after it, the new government quickly prepared and passed a new law “On Government Procurement,” while the hard work on an e-procurement system continued. It was created jointly by officials, the public, and the business. The Prozorro reform was officially presented in February 2015, and the name for the system was chosen just a few days earlier — by voting on Facebook. On December 25, 2015, the Verkhovna Rada adopted a new law “On Public Procurement.” The transition from old paper public procurement to new transparent and open public procurement took place. The use of Prozorro became mandatory for central authorities and monopolists on April 1, 2016, and for all other procuring entities — on August 1.

Since then, all procurement transactions have been conducted online, and every citizen can see what, how, from whom, and for how much procuring entities buy. This allowed to stop some corruption schemes, light was shed on others; now all information about procurement is visible in the system. Successful Ukrainian reform was discussed all over the world: Prozorro received international awards, and the system was set it as an example to improve public procurement in other countries.

At the same time, even after such significant changes and transformations, public procurement continued to improve. Over the next few years, MPs adopted several useful laws, in particular, the most famous of them is the 2019 version of the law “On Public Procurement.” It introduced the functionality of an abnormally low price, 24 hours for error correction, simplified procurement, authorized persons, and a number of other important innovations.

2020 – 2021

In April 2020, a new version of the law “On Public Procurement” came into force. However, this was not the only major change in the field. Ukraine, like the whole world, was forced to adapt to the new realities of life during the pandemic. To quickly provide hospitals and other institutions with everything necessary to fight the coronavirus, COVID-19 procurement transactions were allowed to be carried out directly. They were made back competitive only in the summer of 2021.

The field of public procurement has come a long way of formation, transformation, and development. Now it is important not to stop, not to return to the stages of schematosis and turbulence, but to confidently step towards the best European and international practices. We should all remember that the withdrawal of procurement from the scope of law, weak control over the sphere, and the possibility to evade punishment definitely do not contribute to the effectiveness of public procurement. Such actions do not enhance confidence in the sphere, but create conditions for the development of corruption. Therefore, before making changes to the law and especially excluding tenders from its scope, it is still necessary to honestly answer the question: what is more important for our country’s development — transparent and clear rules for all or the private interest of individual interested parties.

On August 1, the ProZorro e-procurement system celebrated its birthday. For 5 years now, it has been through it that all public procurement has been carried out in Ukraine. During this time, Prozorro managed to save more than UAH 188 bln.

Now businesses have equal access to tenders, and in 5 years almost 420,000 companies have worked with the country. At the same time, every citizen can see what the local or central government has acquired — everything from 1 kopiika.

We got used to e-procurement, to open data, and we perceive them as something mundane and completely usual. However, this was not always the case. Before the creation of Prozorro, procurement was conducted in paper format, and it was associated with corruption.

After the Revolution of Dignity, Transparency International Ukraine, together with businesses, volunteers, and government representatives, created the Prozorro system and the Public Procurement Reform in general. We remember very well what was before, and therefore decided to remind everyone why we should not go back to the past.

How were tenders announced and proposals submitted?

Announcements about tenders used to be viewed only in the paper “Public Procurement Newsletter.” In 2008, the tender.me.gov.ua. web portal, the ancestor of Prozorro, appeared. The information about procurement was published there, but it was impossible to participate in it online. Moreover, procuring entities (organizers of bidding) paid separately for some of the site’s functionality — the convenience of the basic free version, to put it mildly, was lame.

First of all, on tender.me.gov.ua, procuring entities used to publish information about the upcoming procurement transactions.

Companies that did find the tender announcement and wanted to compete for the contract had to send the procuring entity (by mail or in person) a stitched, numbered, and sealed package of necessary documents.

In turn, the tender committee manually entered all those who submitted bids for the auction in the register. Subsequently, it was published on the same portal, tender.me.gov.ua.

On the way to registering its package with the tender committee, the business could encounter unexpected obstacles.

Some procuring entities found many reasons not to accept documents on time. For example, to enter the procuring entity’s territory, you might suddenly need a pass that had to be ordered in advance. Therefore, there was no question of free access for businesses to tenders at that time.

Thanks to electronic bidding, this problem was solved — now businesses have all the information about tenders and can submit a bid online from anywhere in the country or even abroad.

How was the tender was?

Bids submitted — what’s next?

The next important day was the bid disclosure date. This was done at a scheduled time in a clearly defined office. Participants were invited to the process itself — they could come at will.

If one of the entrepreneurs joined, they could not sit very close to the tender committee during the disclosure of bids — so as not to see the confidential information of the competitors.

The tender committee took turns unpacking envelopes with participants’ documents and reading out the prices offered. Actually, this is the only information that everyone could find out. It was also published on tender.me.gov.ua.

There was no further auction. Whoever offered the lowest price from the very beginning became the winner if everything was in order with the documents.

In Prozorro, the situation is radically different: we can see in full detail what documents were submitted for the tender and how the business bargained during the auction. The final contract with all its terms and appendices is also accessible.

How did some procuring entities violate the rules?

A lot of information remained invisible, so, there were more opportunities to circumvent the procurement rules without being noticed. Most often, procuring entities tried to engage their own people in tenders.

For example, there were situations when during the disclosure of tender bids, procuring entities could first unpack the envelopes of competitors and find way round their prices, then open a bid of their person — and announce the amount that would be the lowest. Subsequently, the documents were carefully substituted, and it was almost impossible to recognize this trick.

Occasionally, the procuring entity independently prepared a tender bid for the participant, or simply ignored the lack of any documents. There are many options because opacity creates the temptation to benefit from procurement.

The introduction of Prozorro allowed us to shed light on such situations.

We cannot say that corruption in public procurement no longer exists, but the e-procurement system is neither a court nor a supervisory body. Prozorro reduces opportunities for abuse and makes them visible. Then the Anti-Monopoly Committee, the State Audit Service, law enforcement and judicial bodies of Ukraine should be involved.

How did the procuring entities go about?

Of course, not all procuring entities used to violate the rules at tenders. However, because of the fact that business and the public could not distinguish honest buyers from dishonest ones (there was too little information for this), the shadow cast on everyone.

Businesses understood that they might face corruption and discrimination at the auction, so, they were less willing to submit their bids. In general, there was a prejudice among the public that state auctions were not fair. Therefore, work with procurement was often overshadowed by distrust and reputational problems.

Now, in Prozorro, everyone can see why a particular company won the auction. There are much fewer reasons to suspect everyone of violations.

Previously, it was more difficult for honest procuring entities to conduct procurement with many competitors, in particular, because it was more difficult to simply inform the business about the tender. It was necessary to additionally place ads in the local press or call companies and invite them to the bidding. And before that, these companies and their contacts still had to be found somewhere.

Now, the system often does this instead of the procuring entity. If the tender is potentially interesting for a business, they will find it themselves.

If a procuring entity is still afraid that there will not be enough competition, potential suppliers can be found in a few clicks in BI Prozorro. Here you can also find examples of good tender documentation that will be beneficial both to procuring entities and businesses. Analytics is free.

Were there any statistics?

Before Prozorro, data on procurement was limited for citizens and businesses, let alone the country. Statistical information was obtained thanks to a special form No. 1-bidding “Report on public procurement.” It was filled out in each institution once a quarter, that is, the data was far from operational. In addition, its quality was strongly influenced by the human factor because the information was entered into the form manually.

The form itself contained general indicators and did not give an idea of the situation by spheres, procuring entities, or procurement processes. What balanced and reasonable decisions of the state can we talk about if there is no understanding of what is happening at all?

With the launch of Prozorro, the necessary information, in particular for forming a procurement policy, can be obtained in the public domain at bi.prozorro.org. This service is administered by Transparency International Ukraine, and there is no alternative to it at the national level.

If Prozorro had not been launched then, in 2014-2016, we would still be witnessing paper tenders, or, to be precise, we wouldn’t be witnessing anything.

Fortunately, the old days will not be back in full.

The Prozorro system is too firmly rooted in public procurement in Ukraine to be destroyed without a trace. However, every time the question arises of adding another point to the list of exceptions to the Law “On Public Procurement,” it is worth remembering why we started the reform and what we tried to achieve.

Therefore, for the fifth anniversary of Prozorro, we would like to wish all players of the sphere (especially those who want to change it) prudence. We need to move forward and improve the system, and not cling to old practices. And remember — everyone sees everything.

Zindex is a tool that allows you to compare procurement of different public buyers; it has been functioning in Czech Republic for 10 years. It was developed by the Czech think tank EconLab, and during its existence, this ranking with various indicators of procurement efficiency has significantly improved the conduct of tenders in Czech Republic. It had a measurable impact on the activity of over 50 buyers — cities, hospitals, ministries.

Zindex rates procurement organizers, highlights their main shortcomings and motivates them to improve — the best buyers are publicly awarded. The Zindex project received awards and recognition of the European Commission, Open Society Foundation and Open Contracting Partnership. So, what is the point of the ranking, and why has it been so successful?

You can read about procurement practices in Ukraine, Czech Republic, Hungary, and Poland at the link. It will help you better understand the field of procurement in Czech Republic and the realities in which this ranking operates.

Publication of the ranking

Each year, EconLab experts publish a detailed dashboard for each buyer (such as City of Prague ranking) and a chart of the best procurement organizers (such as Cities 2020 ranking).  Procuring entities are divided into several categories to avoid comparing apples and oranges. These include cities, hospitals, state institutions, regions, public enterprises, and so on. Additionally, in some categories the experts also distinguish big and small procuring entities.

If you clicked on the links above, you may have already noticed that only the best organizers have their place in the ranking — only 50% of all of them. The EconLab team publishes the unordered list of the others. Why is there no information about which of them is the worst? The developers of the ranking found that the impact is higher when focusing on the good practice—as buyer perception focuses more on constructive critique, rather than finger-pointing. This decision comes at a cost—the media coverage of the rating is much weaker. However, media awareness can be sacrificed when it comes to the real impact on the activity of procurement organizers. Overall, over 50% of the buyers declared that the results of Zindex.cz brought them valuable feedback (an increase by 21%). In addition, each year roughly 10% of rated buyers commit to making steps towards improvement of the procurement practices.

Buyer feedback and awarding

An important part of the rating process, however, happens before final publication of the evaluation. The experts send the preliminary results at least 2 months in advance and run a hotline for consulting on the results. Buyers can consult on the results obtained. Such an approach has multiple benefits, such as:

1. Procurement organizers have a better understanding of their results —experts explain, discuss, comment on buyers’ procurement practices and give recommendations on their improvement, so that buyers can improve and purchase more efficiently.
2. The EconLab team improves methodology‚ the think tank receives valuable feedback on shortcomings of the rating methodology.
3. This process motivates procuring entities to change — experts recalculate some indicators if buyers fix errors during the feedback period. This is the most effective leverage, which improved buyers’ procurement practices by 20-30%.

After all feedback is incorporated, EconLab awards the best performing buyers with a statue of “Neplejtvák” (could be translated as non-wasting fish), which can be seen as an Oscar for public buyers.  The idea is to foster positive competition in doing public procurement following best practice. An additional goal is to disrupt the negative perception of tenders in the society. The world of a procurement official is grim, and positive feedback from an NGO is quite rare. Thus, the EconLab award positively motivates specialists in this field.

How is the rating done?

The heart of Zindex is of course the rating methodology itself — it is publicly available. In general, EconLab aims at measuring buyer’s compliance with best practice recommendations, particularly transparency, efficiency, and decreasing corruption risks in public procurement.  The think tank measures these using available data by calculating the following indicators:

1. Public procurement as a share of total procurement transactions. Here, accounting data and procurement information are compared. What share of the procurement is actually published?
2. Competitive contracting. What share of tenders goes through competitive procedures?
3. Consistent conduct. How often a buyer cancels tenders or makes changes to them?
4. Winner concentration. How often the same company gets awarded by the buyer?
5. Level of competition at the bidding. What is the actual competition in tenders, and how many entrepreneurs take part in them?
6. Pro-competitive tools. How often the buyer applies e-auction, design contest, etc.?
7. Legal misconduct. Are there any cases of violations detected by the Office for the Protection of Competition?
8. Buyer’s journal data quality. How clearly and timely does the buyer publish information about their tenders, their prices, and winners in the central register?
9. Buyer profile data quality. Does the buyer provide additional information on their profile? How does the buyer publish their small tenders whose amount is below national thresholds?

As simple as some indicators may seem, in practice they are quite difficult to calculate. To get a credible ranking, the think tank needs to accommodate legal changes, specifics of multi-lot tenders, framework agreements, fix publication errors, and do thousands of other minor adjustments — everything for the sake of solid and fair results.

EconLab specialists helped implement a similar initiative in Slovakia. Back then they had to change about 25% of the ranking to adapt it to the legislation, data sources, and practices of another country. The volume of work turned out to be less than analysts expected, so, now they are thinking about further promotion of the tool among countries.

 

This publication was prepared based on the article of Jiří Skuhrovec, chairman of EconLab, within the project “Tackling corruption in public procurement in Ukraine and V4 countries with new approaches.”

The project is co-financed by the Governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from International Visegrad Fund. The mission of the Fund is to advance ideas for sustainable regional cooperation in Central Europe.