Reform, EU integration, and money

Adopting a law fully harmonized with European procurement directives has been a partner requirement for years. It has been the top recommendation in the EU’s Enlargement Report on Ukraine for three consecutive years. It was included as a benchmark in the Ukraine Facility, and the World Bank made it a condition for a USD 3.5 billion loan and for unlocking the next support program.

From an EU integration standpoint, public procurement falls under the first negotiating cluster — Fundamentals. This is, in other words, one of the reforms partners expect from Ukraine first.

The new law introduces a number of sound European practices and partially reorients the approach. Chief among these are new procurement methods — for example, open framework agreements that can cover not only goods but also services and works, innovation partnerships, and joint procurement. European rules are, in many respects, considerably more flexible.

However, the working group made a deliberate effort to preserve the achievements of Ukrainian procurement, since in some areas our practices actually exceed European standards. Notably, while paper-based tenders still exist in the EU, the new law retains Ukraine’s 100% digitalization. For certain provisions, a gradual transition and separate methodologies were built in — detailed guidelines to be developed by the Government. This applies, for example, to non-price criteria, which have been rarely used in Ukrainian procurement practice.

Everyone involved in drafting this document worked hard to ensure it was not merely a translation of European directives into Ukrainian, but a genuine update of the rules — one designed to increase the efficiency of Ukrainian procurement and, in part, to make life easier for those who conduct and participate in it.

Changes contracting authorities (did not) see coming

Over the past four years, procurement professionals have had an eventful and unpredictable working life. The wartime procurement regulation — the Government resolution governing procurement during the state of war — was amended more than 45 times. That means, on average, nearly every month brought new rules that required adjusting processes and workflows. Understandably, yet another round of changes is not something contracting authorities greet with enthusiasm. But the new law is precisely intended to bring stability to the sector.

It preserves the Cabinet of Ministers’ authority to set procurement-specific rules during martial law. However, any exceptions to the competitive tender requirement will now require approval from the relevant Verkhovna Rada committee. This should serve as a meaningful safeguard, ensuring that such exceptions are introduced sparingly and only when genuinely necessary. Broadly speaking, sector regulation should be governed by the Law — and that will deliver the predictability and stability the sector needs.

In many ways, the new law is designed to make life easier for contracting authorities, in large part thanks to the flexibility of European approaches. It raises thresholds and denominates them in euros — meaning that, in practice, more transactions can be made directly. Procurement through Prozorro Market also becomes optional for above-threshold procurements. In recent years, food, medical goods and medicines, and New Ukrainian School supplies could only be procured through the electronic catalogue. Going forward, contracting authorities will be free to choose whichever method works best for them. And for those who do prefer the catalogue, it will now cover services as well. Similarly, the new procedures are not mandates — they are simply additional options. The core toolkit for contracting authorities, and the principles for using it, remain fundamentally unchanged: direct procurement for lower-value transactions, and the option to use the marketplace or open tenders for higher-value contracts. 

Another long-awaited development: contracting authorities will be able to engage outsourced procurement specialists. This is especially significant for small contracting authorities — a village kindergarten, for example, where procurement is typically handled by an accountant with minimal additional pay. The numbers bear this out: as Deputy Director of the Ministry of Economy’s Public Procurement Department Tetiana Mishta noted at last year’s Prozorro Awards, 90% of contracting authorities in Ukraine are small entities. Previously, procurement could only be conducted — and responsibility borne — by an in-house designated officer. That work can now be contracted out to professional procurement specialists. The law also makes it explicitly clear that designated officers bear no responsibility for direct procurement, only for publishing reports on it.

Significant changes for businesses

First and foremost, businesses will now be able to challenge decisions before the Antimonopoly Committee of Ukraine in procurement categories where this was previously unavailable, which in 2025 accounted for nearly every second competitive procurement, covering all those conducted through Prozorro Market.

Companies will also benefit from more favorable conditions for participating in tenders: more time to prepare bids, machine-readable tender documentation, the ability to submit alternative proposals, and more situations in which contracting authorities are permitted to allow corrections to bids compared with the previous Law.

Special attention was given to the construction sector, which accounts for over 20% of the total contract value in Prozorro in 2025–2026. Tender documentation in this sector is now required to be published in cost-estimate software formats, making it easier for businesses to prepare their submissions.

The law also introduces a series of safeguards against contracting authorities imposing excessive requirements on bidders. For fuel procurement, any additional documents beyond those required by national standards are now prohibited. The Law also bars contracting authorities from requiring personal identity documents as part of bids. 

Also, contracting authorities are prohibited from announcing a new procurement identical to a previous one before canceling the original. This protects businesses from situations where a contracting authority simply abandons a procurement in which an unwanted bidder won. 

What comes next?

It is important to understand that adoption of the law is not the finish line. We still need to receive feedback from the European Commission on its compliance with EU requirements — and further amendments will almost certainly be required. Ukraine has committed to full harmonization with European rules by September 2027.

Additionally, the law enters into force in nine months, the window available to develop secondary legislation and implement the necessary technical changes in Prozorro.

A separate priority is communicating the changes. It will be essential for the Ministry of Economy to find the resources to explain to contracting authorities that these are not changes made solely for EU integration — they are changes made for them. Most importantly, contracting authorities need detailed, practical guidance on working under the new rules before they take effect. The same message needs to reach businesses and other stakeholders.

To sum up: a less prominent but no less historic shift in Ukrainian public procurement has begun. It is gratifying that this is yet another example of successful collaboration between the state and civil society. Is this a perfect law? Of course not — there is always room for improvement. But the people who wrote it genuinely did everything in their power to address as many existing problems and pain points as possible, and to truly strengthen public procurement in Ukraine. The recent news pointing to the potential opening of the first negotiating cluster with the EU as early as June suggests we are on the right path. Since procurement falls squarely within that cluster, the timing of this Law could not be better.

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.

Appoint the three missing experts to the accounting chamber selection commission

Six of the eleven positions on the Accounting Chamber are currently vacant. A competition for new members formally launched a year and a half ago but has since stalled entirely: the Verkhovna Rada has not approved the composition of the Advisory Group of Experts (AGE) that is to conduct the process. The group is to comprise six members — three from the Ukrainian side and three from international partners. While the international nominees were selected relatively quickly, parliament has yet to settle on its own representatives. 

This is not Ukraine’s first such commitment. In February 2026, completing the competitive appointment procedure for Accounting Chamber members appeared as a requirement in the memorandum with the IMF — and Ukraine has already missed the declared intention to form the advisory group by the end of April this year. 

The formation of the AGE will now also be a condition of EU macro-financial assistance.

Develop and present a new Public Procurement Strategy for 2027–2030 to the European Commission

The current public procurement reform strategy covers 2024–2026. In practice, however, it has been largely nominal: the Government did not adopt an action plan for its implementation in 2026, and even the steps planned for earlier periods were only partially completed — in part because many of them logically follow the update of the primary legislation, a process that stretched over two years. 

But on May 27, parliament finally adopted the new Public Procurement Law. Over the coming years, Ukraine will need both to implement it in practice — adopting around 40 pieces of secondary legislation and making the necessary technical upgrades to Prozorro — and to complete legislative harmonization. A robust sector development strategy will be essential to planning this work properly and navigating the challenges ahead.

Prepare a concept note on a defense procurement law

This marks what may be the first time the European Commission has set specific timelines for harmonizing defense procurement legislation with European standards. The Ukraine Facility previously covered only the reform of public procurement, public-private partnerships, and concessions — with a deadline in the third quarter of 2027.

Based on the wording of the condition, the concept note is to be developed this year. A separate challenge here — and throughout the broader harmonization of defense procurement legislation — will be establishing which body is responsible: the Ministry of Economy, which sets procurement policy; the Ministry of Defense, which does so for the defense sector; or parliament.

Prepare structural changes at the state audit service

The European Commission is calling on Ukraine to develop proposals for a clear organizational and managerial separation between inspection and audit functions within the State Audit Service.

 

These two activities differ in purpose, procedure, and methodology. Audit is oriented toward helping the entity under review systematically improve its operations — trust and cooperation are essential here, enabling auditors to provide the most useful recommendations possible and ensuring those recommendations are properly implemented. Inspection, by contrast, involves a detailed examination of financial and operational activities for legal violations, with the possibility of liability for those found at fault. This is not a partner trying to help — it is a controller looking for errors. 

Currently, auditors and inspectors work within the same thematic departments — for example, the local budget oversight department or the construction sector oversight department. When an audit uncovers indications of violations, inspectors from the same unit may initiate an inspection of the same entity, even though this practice is inappropriate. It undermines confidence in audits, makes them less effective, and blunts their focus.

The need to separate these two forms of oversight has already been recognized in the Public Financial Management Reform Strategy for 2026–2030, which envisages the separation of audit and inspection functions within the State Audit Service by the end of 2027. Under the further development of the state internal financial control system, the State Audit Service’s audit function is expected to increasingly serve as an independent external assessment of management systems — complementing the internal audit conducted directly within government bodies.

On one level, the macro-financial assistance conditions relating to procurement and financial control may seem relatively modest — particularly compared with what is being asked on the tax side. That impression, however, could be misleading. Ukraine has been unable to appoint the Advisory Group of Experts to finally launch the Accounting Chamber competition for over a year. Initiating the reform of defense procurement legislation is also a substantial undertaking. 

The fact that the European Commission has included these reforms among the conditionality is a signal that they genuinely matter. But for them to become true priorities, they will require awareness of that need — and political will — at multiple levels within the country.

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.

How we calculated

For this study, we took all procurements for 2025 — regardless of the procedure used — but counted only contracts with the status of “active” or “completed.” The sample also includes procurements announced last year for which contracts were signed in early 2026. 

The core of the sample consists of procurements under classification 79340000-9, Advertising and marketing services. We also checked other common categories that PR work may fall under. To avoid missing relevant procurements that contracting authorities may have classified differently, we ran keyword searches — “coverage,” “placement,” and “promotion.”

Separately, we analyzed media mentions tied to these advertising contracts. To do this, we wrote Python scripts using the Claude AI assistant. The scripts collected 2025 materials from online media where the city councils under study had procured coverage of their activities. From these, the scripts filtered out items that contained mentions of the city councils (in various grammatical forms) and their mayors. We also verified the samples manually. We then compared the number of mentions against the KPIs set out in the corresponding 2025 advertising and information service contracts. 

Which city councils order the most advertising 

In 2025, city councils and their subordinate entities contracted nearly UAH 149 million for advertising. That is slightly less than in 2024, when the figure reached UAH 157 million. The top of the ranking has shifted somewhat this time. The largest sums on advertising services were directed in Kryvyi Rih, Kharkiv, Kyiv, and Kamianske. Dnipro, which had spent more on advertising than any other city in the country for years, sharply reduced its spending and dropped down the list. 

Most often, city councils procured:

• social media advertising,
• outdoor advertising (billboards),
• radio and television,
• the design and implementation of comprehensive advertising campaigns.

Below — more detail on how cities spend these funds, who receives the orders, and what content is produced as a result. 

Kryvyi Rih: recurring contractors and the Vilkuls in most publications

In 2025, Kryvyi Rih ranked among the leaders in advertising spending, with UAH 37 million in contracts. More than half of this sum, however, comes from contracts signed in early 2026 — though the procurements themselves were announced in 2025, which affected the overall annual figure. If we count only contracts actually signed during 2025, the city directed UAH 17.3 million to advertising.

The largest sum was contracted by Municipal Enterprise Kryvyi Rih City Development Institute. In February 2025, the enterprise signed a UAH 12 million contract with Media-System TV and Radio Company LLC for coverage of security, infrastructure, social programs, and the work of the authorities. The content aired on the radio stations Radio Piatnytsia, Megapolis, Radio Kryvbas, Perets FM, and Stilnoe, and on the TV channels Pershyi Miskyi and OTV. Media-System TV and Radio Company LLC is reportedly linked to the inner circle of Oleksandr Vilkul — head of the Kryvyi Rih Security Council and a former member of the Verkhovna Rada and the Dnipropetrovsk Regional Council. His father, Yurii Vilkul, has been acting mayor of Kryvyi Rih since 2021. 

In early 2026, the same municipal enterprise signed another, effectively identical, contract worth UAH 13.7 million. This time the contractor was Nova TV and Radio Company LLC (the OTV channel). Its owners, Stanislav Basov and Oksana Nechai, also own Public Television OTV LLC. The same company provided similar services in 2024. 

Separately, Municipal Enterprise Kryvyi Rih City Development Institute procures coverage in newspapers and online media. Last year, UAH 5.2 million was contracted for this purpose, with another UAH 6 million added in early 2026. The order went to Kryvbas Online Information Agency LLC, which had worked with the city before. The company is linked to Yaroslav Hyvel, an MP representing Vilkul’s Ukrainian Perspective party. The funds go toward placing materials on the websites Kryvbas Online, Puls, 1 Pershyi Miskyi.KR, and Informator, as well as in the newspapers Puls, Moia Hazeta Domashnia, Vechir, and Vik. Visnyk Kryvbasu. The list of outlets barely changes from year to year. 

Spending, however, is only part of the story. Content analysis showed that press releases from the Kryvyi Rih City Development Institute are fairly easy to trace in local media — these materials are openly signed with the name of the municipal enterprise, and sometimes appear in dedicated sections. At the same time, more than 90% of such publications, depending on the outlet, consistently mention either Yurii or Oleksandr Vilkul. This shows that a significant share of the city’s official content is built around personalized coverage of local leaders. On top of that, in roughly half of all cases the press release headlines are direct quotes from one of the Vilkuls. For example: “O. Vilkul: We are gradually equipping kindergartens, schools, and gymnasiums with modern energy-efficient technologies — for the comfort of children and educators and to reduce energy costs.”

DOZORRO reached out to the Kryvyi Rih City Council to ask it to explain the high advertising expenses, their objectives, and how their effectiveness is assessed. The city council responded that the main budget spending units determine how funds are used within the approved budget on their own, and that all expenditures are made in accordance with the law.

Kharkiv: more about the city council’s activities

Second place goes to the Kharkiv City Council, with UAH 19.3 million. That is roughly the same as in 2024 (UAH 21 million). In Kharkiv, PR spending is consistent not only in scale but also in approach: city hall continues to work with the same contractors and bets on television, radio, and local online media.

Kharkiv City Council contracted nearly UAH 7 million to place news items and programs on television. The contract with Interkom-invest LLC was signed in late 2025 for services to be delivered in 2026. The city used the same practice the year before.

Another UAH 5.5 million-plus was directed toward placing materials about the city council, the mayor, and the executive committee on radio. One contract was signed in late 2025 for services to be delivered this year. As in 2024, the services are provided by individual entrepreneur Denys Okuniev.

A separate UAH 4.5 million went to coverage of the authorities’ work, infrastructure projects, security measures, and social programs in local outlets: Slobidskyi Krai, Dumka, Status Quo, and Obiektyv. The last of these belongs to city council official Oleksandr Davtian and his children. 

Spending alone, however, does not always show what such communication actually looks like. Content analysis showed that in Kharkiv it is less personalized around the mayor than in Kryvyi Rih. In Slobidskyi krai and Dumka, the city council was mentioned more often than Ihor Terekhov. Some outlets focus more heavily on the mayor himself. This is most evident on the Obiektyv website, where Terekhov was mentioned in nearly 15% of all 2025 news items — roughly twice as often as the city council. That said, a substantial portion of these mentions are quotes from official statements about the shelling of the city. The mayor’s name appears in news headlines far less often than in Kryvyi Rih.

Kyiv: social campaigns

Third place goes to Kyiv. Structures within the Kyiv City Council contracted UAH 18.4 million for information and communication campaigns — slightly less than in 2024 (UAH 20 million).

 

The capital’s main focus is on social projects: distribution of printed materials, promotion on social media, radio, and outdoor advertising. The largest sum was contracted by Municipal Enterprise Communication Center — UAH 7.4 million for more than 20 campaigns. These include:

• Information on Ukraine’s partnership with the EU — UAH 376,000
• Recruitment for the Rubizh National Guard brigade — UAH 389,000
• Vaccination campaigns — UAH 386,000
• Promotion of service in the Territorial Defense Forces of the Armed Forces of Ukraine — UAH 379,000
• The “KMAN — A Space of Opportunities, Development, and Victory” campaign — UAH 350,000 
• The “Report Corruption!” campaign — UAH 315,000
• The “Space for Business in the Capital — Fast, Modern, Lawful!” campaign — UAH 338,000
• The “Metro for Everyone: Convenience, Safety, Operations” campaign — UAH 235,000

Materials and descriptions of these campaigns are available on the Communication Center’s website. To determine where exactly this advertising was placed, we filed a public information request. In response, the Communication Center provided a list of locations and distribution channels — from billboards, citylights, and metro to radio stations and social media.

Another approximately UAH 6 million was spent by the Department of Public Communications of the Kyiv City State Administration. The funds went, among other things, to the following campaigns:

• Information about social benefits via the Defenders’ Portal — UAH 477,000
• Information on protocols of action for families of those who went missing or were captured during the war — UAH 463,000
• Public consultations and explanations regarding the renaming of place names — UAH 390,000
• Information about the MSEC reform and the assessment of people’s functioning — UAH 334,000
• The “Become Part of the Team. Choose Your Sport” campaign — UAH 335,000 

According to the department, these campaigns were placed on billboards, citylights, in the metro, at transit stops, and in other busy locations. Audio versions were broadcast on radio, while video appeared on outdoor screens, in metro cars and on platforms, at Administrative Service Centers, and on social media. More detailed materials and descriptions of these campaigns are available on the department’s website. 

Other Kyiv contracting authorities also spent money on advertising. For example, the Kyiv Zoo allocated UAH 1.8 million to advertising in the metro, while Municipal Enterprise Kyivinform spent UAH 700,000 promoting Vechirnii Kyiv news through Ukr.net.

Kamianske: social advertising and what the mayor did

Kamianske took fourth place with UAH 12.8 million. That is slightly less than in 2024 (UAH 15 million). The largest sum, UAH 3 million, was contracted by the city council’s advertising department. More than half of this sum — UAH 1.7 million — went to individual entrepreneur Dmytro Riabov for producing public service advertising and video stories. He had also worked with the department in 2024. The remaining UAH 1.3 million was directed toward coverage of the executive bodies’ work on the websites Naspravdi.net, Kamenskoe.net, Ukrtime.net, DneprNEWS, and DneprLife.

Separately, the Kamianske City Council itself spent UAH 2.9 million. These funds were allocated as follows:

• UAH 698,000 to S-Kolehiia LLC for online coverage of the city council’s work;
• UAH 600,000 to Sterkh TV and Radio Company for airing segments on television;
• UAH 599,000 to Municipal Enterprise Municipal Information Service for producing and broadcasting materials;
• UAH 596,000 to Skifiia TV and Radio Company for radio broadcasts;
• UAH 277,000 to Pylnyi pohliad! Information Agency LLC for publications on its website;
• UAH 97,600 to 05692 LLC for coverage of the city council’s work on its website.

In Kamianske, nearly all of the analyzed outlets mention Mayor Andrii Bilousov significantly more often than the city council. This is most visible in the municipal outlet MIS, where the mayor’s name appears in nearly a third of all materials for the year. The overall trend shows that the city’s information communication is largely concentrated around the mayor. News headlines frequently use formulations along the lines of “the Mayor of Kamianske did such and such.” The share of such publications varies by outlet, but they appear everywhere. It should be noted, however, that a substantial portion of news items mentioning Bilousov still contain only his quotes, while the content itself describes social services, the work of city departments, and the city council itself

Dnipro: a sharp drop in spending

Next on the list is Dnipro, where PR spending has shrunk considerably. Last year, the city contracted UAH 8.7 million — roughly seven times less than in 2024, when Dnipro led the country with UAH 43 million.

This sharp decline came against the backdrop of a criminal investigation into past PR spending. In October 2024, the SBU and the National Police reported uncovering a scheme involving the embezzlement of at least UAH 34 million on advertising procurements in 2021–2023. In August 2025, the Office of the Prosecutor General announced charges against Andrii Kovalenko, the former director of Municipal Enterprise Organizational and Analytical Service. According to investigators, the money was transferred to individual entrepreneurs under his control, many of whom had no connection to advertising. The funds were then converted into cash. In total, UAH 95 million was allocated for these services in 2022–2023, of which, according to expert analysis, UAH 42 million may have been embezzled.

Even so, the city’s overall approach to communications has not disappeared — only the scale and the structures involved have changed. Following the scandals, the city council liquidated Municipal Enterprise Organizational and Analytical Service, through which most PR spending had previously flowed. In its place, a new Municipal Enterprise, Open Dnipro, was created, which from the outset contracted UAH 886,000 for outdoor advertising. This includes billboards featuring Mayor Borys Filatov, which may bear the hallmarks of political advertising.

Photo: Municipal Enterprise Open Dnipro

Separately, the Department for Public Self-Organization spent UAH 1.1 million on producing and installing address signs.

The largest contracting authority in 2025 was Municipal Enterprise Dnipro City Television Studio (DniproTV). The enterprise signed a UAH 4 million contract with Zolota Seredyna LLC for the placement of 166 publications on the Obozrevatel website. An additional UAH 2 million was directed toward developing a strategy and promoting the municipal TV channel on social media.

Who buys advertising on Prozorro besides city councils

In total, nearly UAH 600 million was contracted for advertising through Prozorro in 2025. That is more than in 2024, when the figure exceeded UAH 520 million. The market’s growth, however, was driven mainly by the commercial sector. The largest advertisers again included PrivatBank, Oschadbank, Naftogaz Ukraine, the Ministry of Internal Affairs, and Ukrposhta. They finance advertising not from the state budget but from their own commercial activities. At the same time, the large contracting authorities also include those spending budget funds — notably, city councils and education sector entities.

Contracts by region

The regional picture broadly resembles that of the previous year. Over half of all advertising contracts are concentrated in Kyiv Region — UAH 346.2 million. However, a significant share of this sum comes from state banks, Ukrposhta, and major commercial companies registered in the capital. Excluding these, the volume of contracts in the region amounts to roughly UAH 73.9 million. Second place goes to Dnipropetrovsk Region, with UAH 75.5 million. The largest share here comes from Kryvyi Rih — UAH 37 million. Kharkiv Region also made the top three, at UAH 34.8 million.

Separately, six procurements worth UAH 2.2 million were not tied to any specific region and were therefore excluded from the regional analysis. These were recruitment campaign services ordered by military units and the Central TV and Radio Studio of the Ministry of Defense of Ukraine as part of the “Defending What Is Ours” information campaign.

Conclusions 

Overall, the analysis shows that despite changes in spending volumes, the communications approach of most city councils has barely changed. Year after year, it is the same contractors, the same outlets, and the same formats — television, radio, online resources, and social media. Dnipro, after the criminal investigation, has become more of an exception: the city has significantly cut its advertising spending, but the communication model itself has not gone anywhere — it has merely shrunk in scale and partially shifted to new structures.

The issue is not only the size of the spending but also the content of such communication. Some information campaigns genuinely serve an important public function: they inform about security, the operation of critical infrastructure, social services, and support for military personnel and veterans. Such communication can be especially necessary during wartime.

In parallel, however, a significant share of the content looks like systematic promotion of local authorities’ work and image-building for officials. This is most evident in Kryvyi Rih and Kamianske, where the media content is largely personalized around the local leaders. Kharkiv looks more restrained, although some outlets there also place noticeable emphasis on the mayor.

As a result, the line between socially important information and political PR funded by the public budget remains blurred in many cases. 

This material was made possible with the support of the MATRA program of the Embassy of the Kingdom of the Netherlands in Ukraine. 

Summary: 

To enter into a framework agreement, participants in both pilots will undergo a qualification selection. To then choose the contractor for a specific procurement contract from among the parties to the agreement, they will be able to use one of two tools: open tenders or a request for proposals. 

Our analysis of the new procedures has identified the following risks and conflicts:

1. No right to appeal to the AMCU in qualification selections and requests for proposals, meaning that an entire procurement may proceed with no possibility of AMCU appeal at all. 
2. Limited coverage of these procurements by State Audit Service monitoring.
3. Too broad a range of contracting authorities participating in the pilot. 
4. Conflict with the Law, with Procurement Specifics No. 1178, with Directive 2014/24/EU, and with other Cabinet of Ministers resolutions — and the Cabinet of Ministers exceeding its powers.
5. Other risks of abuse, including overly short deadlines for submitting proposals, the option to set an unlimited financial-capacity criterion, no requirement to disclose payment terms, and ambiguous rules on the contents of contract conclusion and amendment reports in the Prozorro system.

We call for Resolutions No. 520 and No. 521 to be canceled. If the efficiency of the CPO under the Agency for Restoration needs to be improved, framework agreements for it can be provided for in Procurement Specifics No. 1178 — but only with the right to appeal to the AMCU, with State Audit Service monitoring, and provided the other risks are addressed.

Who will buy what, and how?

Under Resolution No. 520, the contracting authorities will be local self-government bodies, regional state (military) administrations and their divisions, and local-level military administrations. They will procure construction works, technical inspections and engineering surveys, demolition, the development and expert review of design documentation, author and technical supervision, consulting engineer services, and turnkey projects combining design with construction and other works or services as needed. These procurements are intended to restore settlements and facilities damaged by the war. 

Resolution No. 521 will be applied by the CPO under the Agency for Restoration. On top of the works and services listed above, it will procure routine repair services, material resources, the modernization of a range of facilities, works at state border crossing points, road maintenance, and various road works. 

To enter into a framework agreement, participants in both pilots will undergo a qualification selection. This will, in effect, be the first stage of the framework agreement. Businesses will be able to take part in it throughout the term of the agreement by submitting an application and documents in line with the qualification documentation. The scope of requirements at this stage may vary — from purely qualification-based requirements to technical specifications for the subject of procurement. The contracting authority or CPO will include candidates that meet the selection requirements in the framework agreement. At the second stage, to choose the contractor for a specific procurement contract from among the parties to the agreement, one of two tools may be used: open tenders or a request for proposals. 

Conceptually, these approaches would look promising — and the framework agreements would resemble European dynamic procurement systems — were it not for some critically substantial risks. 

Risk No. 1: Qualification selections and requests for proposals cannot be appealed to the AMCU

The qualification selection — the only way to enter the new framework agreement — is not a procurement procedure within the meaning of the Law of Ukraine on Public Procurement (the Law). Its terms, and the decisions, actions, and inaction of the contracting authority or CPO during the qualification selection, therefore cannot be appealed to the AMCU. The same applies at the second stage of the framework agreement, when a request for proposals is announced. As a result, the only part of this whole structure that can be appealed to the AMCU is an open tender at the second stage of the framework agreement — and only if the contracting authority or CPO actually chooses to use one. If, after the qualification selection, the contracting authority or CPO opts for a request for proposals instead, the entire procurement from start to finish will be without recourse to AMCU appeal. In that case, participants will have no way to challenge either the procurement terms (in particular, the terms of the qualification selection and the decisions taken within it, technical requirements, the draft contract, or the contract-price negotiation procedure attached to the request) or groundless rejections — other than through the courts.

In the resolution for local governments and regional state administrations, the Government has stated outright that qualification selections and requests for proposals are appealed through the courts.

In the resolution on the CPO under the Agency for Restoration, by contrast, the Government added that these are “appealed to the review body under the procedure determined by the Cabinet of Ministers of Ukraine.” Yet no such appeal procedure for qualification selections and requests for proposals exists. Even Procurement Specifics No. 1178 sets out an appeal procedure for open tenders only. And the “pilot” resolutions contain no deferred entry into force tied to the adoption of a new AMCU appeal procedure for these special framework agreements. This is to say nothing of the basic untenability of an arrangement in which the Cabinet of Ministers grants itself the power to determine the appeal procedure for specific above-threshold procurement methods. Moreover, the powers of the AMCU as the review body are defined by the Law of Ukraine on the Antimonopoly Committee of Ukraine, which also refers to the Law on Public Procurement. Its powers are therefore set only at the statutory level, and the Cabinet of Ministers has no authority to expand them. 

The resulting situation around appeals against framework agreements under Resolutions No. 520 and No. 521 conflicts with European Directive 89/665/EEC. The directive requires ensuring: 

• that the contracting authority cannot conclude the contract before the review body has issued its decision — yet a procurement cannot be suspended where the appeal is brought before a court; 
• enough time for effective review of contract-award decisions — yet a procurement contract under a request for proposals may be concluded as early as the day the winner is determined, leaving no window for appeal;
• effective enforcement of decisions taken by review bodies — yet enforcing a court decision within the Prozorro system is problematic, since a completed procurement cannot be returned to an earlier stage, the winner re-selected, and so on. 

The lack of an effective appeals mechanism in construction procurement will create extremely high corruption risks. It will make it possible to admit only companies close to the contracting authority to the framework agreement.

Risk No. 2: Unpredictable outcomes and limited State Audit Service monitoring 

As with AMCU appeals, the Law extends the option of monitoring specifically to procurement procedures. Paragraph 23 of Procurement Specifics No. 1178 also brings into scope simplified procurements and those for which a report on a procurement contract concluded without using the electronic procurement system is published in that system.

Unfortunately, neither the qualification selection for the framework agreement under Resolutions No. 520 and No. 521 nor the request for proposals falls into any of these categories.

At present, the State Audit Service can monitor framework agreements concluded under the Law precisely because, under the Law, they are concluded on the basis of open tenders. Open tenders, as a procurement procedure, therefore fall within the scope of monitoring regardless of whether they are used to conclude an ordinary procurement contract or a framework agreement. 

The framework agreements provided for in Resolutions No. 520 and No. 521, by contrast, will be concluded in a way that differs from what the Law prescribes — through a qualification selection, not open tenders. This raises a number of questions: will auditors monitor qualification selections at all? If so, on what legal basis? Our assumption is that if such monitoring activities do appear, their findings will be challenged. That will make the performance of framework agreements and procurement contracts less predictable for all parties.

Risk No. 3: Too broad a range of contracting authorities in the pilot

The pilots will remove a significant portion of procurements from the mandatory application of the procedures set out in the Law and in Procurement Specifics No. 1178. A project framed as a pilot in fact covers far too broad a range of contracting authorities and their procurements.

 According to the public BI Prozorro analytics module, in 2025 alone roughly 2,000 local self-government bodies announced over 61,400 construction procurements and signed contracts worth more than UAH 46 billion. 

At the same time, NACP research finds construction and land relations to be the area with the highest prevalence of corruption — according to the experience of both the public and businesses. Public procurement also appears on the list of areas most affected by corruption.

Stripping anti-corruption safeguards en masse from construction-sector public procurement, and framing this as a pilot, therefore creates a double risk of abuse. 

An experiment of this kind makes sense only in a limited form — for a single contracting authority, SE Infrastructure Projects. This newly established centralized procurement organization for construction genuinely needs new tools, which will otherwise take at least another year to arrive — until the new Law comes into force. The standard framework agreement under the current Law does not allow for procuring works or prequalifying potential contractors on an ongoing basis. So this CPO is precisely where such new instruments can be piloted. 

Risk No. 4: Conflict with the Law, Procurement Specifics No. 1178, and Directive 2014/24/EU — and the Cabinet of Ministers exceeding its powers

The divergence of the pilot rules from the Law and from Procurement Specifics No. 1178 is itself a risk worthy of attention. The framework agreements will differ from those provided for by the Law and the Procurement Specifics in the following ways:

1. Under Resolutions No. 520 and No. 521, a framework agreement is concluded on the basis of a qualification selection. Article 15 of the Law, however, provides that framework agreements are concluded on the basis of open tenders. Even paragraph 7 of Procurement Specifics No. 1178 explicitly states that CPOs organize and conduct procurements under framework agreements on behalf of contracting authorities in accordance with the terms set by the Law — not in some pilot manner devised by the Cabinet of Ministers. What is more, for the CPO under the Agency for Restoration in particular, Procurement Specifics No. 1178 sets out the available procurement methods, framework agreements among them — and only under the Law:

“Pursuant to a decision of the Cabinet of Ministers of Ukraine, a centralized procurement organization that is established during the legal regime of martial law in Ukraine and that falls within the management domain of the Agency for Restoration may conduct procurements of services and/or works on behalf of contracting authorities by way of open tenders under these Specifics and procurements under framework agreements in accordance with the terms set by the Law.”

Resolution No. 521 thus creates a conflict, contradicting not just the Law but other resolutions as well. 

1. The Law does not envisage the use of framework agreements for the procurement of works. And while this option is mentioned in Procurement Specifics No. 1178 for the CPO under the Agency for Restoration, no such exception is available to other contracting authorities. Procurement Specifics No. 1178 permits them to use framework agreements for public procurement of goods and services only. And again — only under the terms set by the Law.
2. The Constitution of Ukraine requires the Cabinet of Ministers to act only on the basis, within the limits of the powers, and in the manner prescribed by the Constitution and the laws of Ukraine. The Law does not give the Cabinet of Ministers any authority to create new procurement procedures or methods for particular categories of contracting authorities and subjects of procurement. And while the Law does grant the Cabinet of Ministers the power to designate CPOs and set the specifics of their operations, it also makes clear that CPOs “organize and conduct tenders and procurements under framework agreements on behalf of contracting authorities in accordance with this Law” — not in a manner determined by the Cabinet of Ministers.

These conflicts breach other provisions as well — for example, Article 3(10) of the Law, which prohibits procuring goods, works, and services before or without conducting the procurement or simplified procurement procedures set by the Law.

The conflict with the Law in turn produces non-compliance with Directive 2014/24/EU, which permits concluding framework agreements only where the procedures set out in Directive 2014/24/EU are applied. Even if the pilot framework agreements are treated as the equivalent of dynamic procurement systems, in the EU these must follow the rules of the restricted procedure. The process described in the resolutions, however, departs from that procedure in terms of the right to appeal to the review body, the deadlines for submitting tender proposals (and proposals), and other elements. 

Adoption of these resolutions therefore takes domestic regulation further away from EU requirements and risks undermining Ukraine’s European integration progress, drawing a negative response from the European Commission and international partners — especially now, when bringing Ukrainian procurement legislation in line with the EU acquis is a central focus of the Ukrainian state’s attention and efforts.

Risk No. 5: Overly short submission deadlines, unlimited financial requirements, undisclosed payment terms, ambiguous reporting rules in the system, and more

Beyond significantly limiting the ability to challenge abuses during procurement, the pilots contain a number of features that could actively encourage such abuses: 

• Overly short minimum deadlines for submitting tender proposals (as little as 7 days in tenders announced by the CPO) and proposals in response to a request (as little as 3 days for all participants in these pilots). TI Ukraine had advocated for — and successfully secured — an increase in the minimum deadline for submitting tender proposals in works procurement to at least 14 days. 
• CPOs and contracting authorities setting up framework agreements will be able to set the financial-capacity criterion on the basis of an “approximately calculated” — and therefore potentially inflated — estimated value. For example, they could require candidates to show UAH 1 billion in income for the previous year while in fact announcing procurements worth only UAH 50 million. This approach risks limiting business access to procurement.

• Neither the qualification selection stage nor the request for proposals requires disclosing information on payment terms.
• While the winner of a request for proposals is given 4 days to submit their documents from the moment they are named, the procurement contract may be concluded as early as the day of that determination. This allows for a situation in which a contract is signed with a party whose absence of a criminal record, corruption offenses, and so on has not yet been confirmed. 
• For local governments and regional state administrations, the resolution effectively introduces alternative (and curtailed) content requirements for the notice of amendments to a procurement contract concluded under a request for proposals. The substance of and grounds for the amendments, along with the prices of material resources, drop out of the report. For the CPO, by contrast, the requirement to disclose price changes did make it into the resolution. Even so, disclosure of information on material resources in machine-readable formats when concluding a contract looks problematic in both resolutions. That is because, instead of referring to the requirements of the Law, Resolutions No. 520 and No. 521 contain their own requirements for reporting on the concluded contract and publishing it — and these contain no separate requirement to disclose prices of material resources in machine-readable format (!). Pilot participants will therefore do this only if they apply the Law’s requirements on disclosing procurement contracts directly. (That said, under the Law these are only contracts concluded as a result of procurement procedures and simplified procurements, whereas contracts under Resolutions No. 520 and No. 521 are not concluded as a result of either.) 

Conclusions and recommendations: how to fix the situation

In sum, the pilot resolutions will remove a substantial share of procurements from the procedures set by the Law, from AMCU appeals, and from State Audit Service monitoring. They conflict with the Law, with EU Directives, and even with other resolutions, and they set overly short submission deadlines and inadequate disclosure requirements. Their implementation will create risks of abuse that cannot be effectively or promptly stopped, and may also harm Ukraine’s European integration progress.

The very fact that the Cabinet of Ministers is introducing — for specific categories of procurement and contracting authorities — a procedure different from the one prescribed by the Law sets a dangerous precedent that destabilizes the legislative framework and cannot be left unaddressed by civil society. Procurement Specifics No. 1178 is expressly provided for in the Final Provisions of the Law. By contrast, allowing the Cabinet of Ministers to set “as a pilot” a procedure different from the statutory one — taking thousands of procurements out of full appeal and monitoring coverage — is not provided for in the Law on Public Procurement, in the sector-specific Law on the Cabinet of Ministers of Ukraine, or, ultimately, in the Constitution of Ukraine. This could become a dangerous precedent that destabilizes the legislative framework and gives rise to a whole series of court disputes.

To fix the situation:

1. We call for the cancellation of Cabinet of Ministers Resolutions No. 520 and No. 521 of April 24, 2026, which approved the procurement procedures under framework agreements in pilot projects for the CPO under the Agency for Restoration, local governments, and regional state administrations. Contracting authorities that want to use dynamic procurement systems should wait for the new Law of Ukraine on Public Procurement (Draft Law No. 11520) to come into force. In that law, such systems will come with appropriate safeguards. 
2. Since there is demand to improve the efficiency of the CPO under the Agency for Restoration, framework agreements for it can be provided for in Procurement Specifics No. 1178 — but only with the right to appeal to the AMCU, with State Audit Service monitoring, and provided the other risks are addressed. 

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. 

Contracted funding

In 2025, around 200 contracts worth about UAH 946 million were signed through Prozorro for the construction and furnishing of veteran hubs. The largest share — UAH 836 million — went to building veteran hubs from scratch. Another UAH 29 million covered the reconstruction of buildings, and UAH 42 million went to capital and current repairs. The remainder was spent on furniture, design documentation, and other related services.

By contract value, 94% of procurements were conducted through open tenders with special features, and only 6% through direct contracts. In practice, there was no competition — only one bidder submitted a bid in each tender.

State funding and unrealistic deadlines

Nearly half of all contracted funds came from the state budget. In summer 2025, the government allocated UAH 446 million in subventions for the development and construction of veteran hubs in seven regions of Ukraine. All these projects must follow a single architectural approach and shared operating principles. Veteran hubs are designed to be inclusive and accessible. The premises include shelters, ramps, facilities for people with disabilities, and assistive technologies. Projects could also be adjusted to local needs.

Funding was granted to Zhytomyr, Zakarpattia, Ivano-Frankivsk, and Kyiv regions, as well as the Kremenchuk, Lutsk, and Kryvyi Rih communities. Each received UAH 63.74 million, with the balance to be covered by local budgets. The subvention came with a number of conditions. Initially, the facilities were to be commissioned by December 1, 2025. As of that date, none had been completed. In most procurements, contracting authorities set unrealistic deadlines from the outset, apparently to formally meet the funding program’s requirements. In practice, these deadlines were impossible to meet, so the parties later signed additional agreements changing the due dates. In addition, on December 9 of last year, the terms of the subvention were also revised, extending the project deadlines to April 30, 2026.

How veteran hubs are being built: regional cases

DOZORRO analysts examined the seven most expensive tenders for veteran hub construction and identified potentially inflated prices for construction materials in six of them. The probable overpayment is UAH 37.3 million. The analysts sent their calculations to the contracting authorities and asked them to bring prices in line with the market.

Bucha

Ukraine’s most expensive veteran hub is being built in Bucha for UAH 140 million. In October last year, the Department of Regional Development of the Kyiv Regional State Administration signed the contract with the Construction Initiatives consortium. The contract price is dynamic. Works were initially to be completed by the end of 2026, but in March the deadline was already extended to the end of January 2027. The consortium was formed in summer 2025 and includes Systemgroup Plus, TK Lazurit, Drivebud, and BK M-Bud. The ultimate beneficiary is Denys Niunko.

The future veteran hub will consist of two blocks. The first will house a gym for physical recovery; the second and main block will house offices for psychological and social support, rooms for individual work, a coworking space, and conference rooms. The design also includes a cafe, a reception, a children’s area, changing rooms, showers, and restrooms.

A retaining wall, a foundation slab, and brick walls of the gym are already in place on the site, along with the foundation slab of the main building. Crews are currently digging the pit for the shelter, installing foundations for the entrance groups of the main building, and leveling the ground around the retaining wall. The department has already paid the consortium UAH 52 million for completed works.

Analysts did not identify significant potential overstatements in the estimate for this project. At the same time, some materials are listed in the documentation without detailed specifications. The analysts asked the procuring entity to clarify these data but received no response. Because of this, it is impossible to definitively assess potential overpayments for individual items. However, for the materials that could be identified, the analysts did not record significant deviations from market prices. The State Audit Service also found no violations during its monitoring of the procurement.

Kremenchuk

In Kremenchuk, the veteran hub is being built at the corner of Flotska and Velyka Naberezhna Streets. The UAH 132.9 million contract was signed in November last year by the executive committee of the Kremenchuk City Council with the private company Ukrekospetsproekt. The company is owned by Stanislav Savichev.

The hub is being built next to a lake, tennis courts, a football field, and a swimming pool — facilities planned to be integrated into the veterans’ physical and medical rehabilitation system. Inside, there will be rooms for seminars, lectures, and group and individual work, as well as a reception, changing rooms, restrooms, and a kitchen area. Adaptive sports will receive particular attention, with outdoor sports grounds also planned.

The initial timeline for construction was optimistic, to say the least. Works were to be completed by November 20 — ten days after the contract was signed. The parties later signed an additional agreement and extended the project to March 2026, and then to April. At what stage the works now stand is unknown, as the procuring entity did not respond to our inquiry. In December, however, it transferred UAH 54 million to Ukrekospetsproekt for the procurement of construction materials.

By the analysts’ estimates, the project’s estimate points to a possible overpayment of UAH 5.2 million. The procuring entity offered no explanation in response to our letter. However, the contract price is fixed, so without an additional agreement, Kremenchuk City Council will not be able to adjust the cost of materials in the work acceptance certificates.

The largest possible overpayments are on concrete, linoleum, and membrane. Questions also arose around the price of RKP-350B roofing ruberoid. It is listed in the estimate at UAH 187.20 per sq.m (all prices here and below include VAT). On the market, the same material sells for five times less. Kromizol, for example, offers it at UAH 35.40 per sq.m, and Cube at UAH 41.10 per sq.m. The Kremenchuk price for ruberoid is also the highest among the regions where veteran hubs are being built. For comparison, in Uzhhorod the contractor plans to supply it at UAH 38.53 per sq. m, and in Zhytomyr at UAH 94.24 per sq.m. 

The analysts also flagged excessive requirements in the tender documentation of the Kremenchuk City Council executive committee. It required numerous permits, declarations, and ISO 9001 certificates, some of which are not mandatory for this type of work. In practice, such conditions can hamper competition.

The State Audit Service also had questions about the procurement. It found that the Kremenchuk City Council executive committee should have rejected Ukrekospetsproekt’s bid but did not. The company’s documents had numerous issues — unconfirmed experience, missing mandatory documents, and violations of the goods localization requirements. The auditors ordered the procuring entity to terminate the contract. It disagreed and is challenging the decision in court.

Kryvyi Rih

In Kryvyi Rih, the veteran hub is being built in Pokrovskyi district, near the 44th quarter. In September, the Capital Construction Department of the Kryvyi Rih City Council executive committee signed a contract with Sapsan-KR LLC, owned by Bohdan Lymanskyi. The works are valued at UAH 132.2 million. The same pattern of deadline extensions driven by state-program funding applies here.

The project provides for offices for a psychologist and a social worker, a conference room, a gym, a children’s area, and a cafe. The contractor has already completed about half of the works: it has built the foundation, brick walls, reinforced concrete beams, and gym columns. Installation of the modular shelter is in its final stages, and engineering networks are being laid. The procuring entity has already paid the contractor UAH 55 million.

DOZORRO analysts reviewed the estimate and identified a potential overpayment of UAH 5.3 million, mostly on paving slabs and tactile paving. The contracting authority responded that the project had passed expert review and received a positive opinion, and that there were no grounds for an additional agreement. But expert organizations do not check prices for individual construction materials; they only assess the overall justification of costs within the project. At the same time, the contract price is dynamic, so it may still be adjusted during execution.

In the tender documentation, the analysts also noticed a potentially discriminatory requirement — the provision of a site inspection report to be signed by the procuring entity itself. Without that signature, a bidder is automatically unable to participate in the tender. Such a requirement makes it easy to screen out unwanted bidders. 

Uzhhorod

Another city building a veteran hub is Uzhhorod. UAH 129.5 million was contracted for its construction in October. The contract price is fixed. The Service for Local Roads and Infrastructure Development in Zakarpattia Region selected Experience M Factory LLC as the contractor. The company is owned by Nataliia Sapiolkina. The veteran hub will be built on Heroiv 128-i Bryhady Street, with a multifunctional stadium next to it for sports and active rehabilitation. Works were initially to be completed by the end of 2026 but were later extended to the end of January 2027.

Our analysis of this procurement points to a probable overpayment of UAH 11.5 million. The largest possible overpayments are on concrete and rebar. Responding to our letter, the Service for Local Roads and Infrastructure Development in Zakarpattia Region stated that the design documentation had passed expert review and received a positive opinion, and that it saw no grounds for reducing prices. DOZORRO filed a letter with the prosecutor’s office regarding a criminal offense, as the contractor has already been paid UAH 45 million for completed works.

In the procuring entity’s tender documentation, the analysts found a potentially discriminatory requirement — a mandatory site inspection report. The same condition as in Kryvyi Rih creates additional barriers to tender participation.

The State Audit Service also reviewed the procurement. Auditors found that the Service for Local Roads and Infrastructure Development in Zakarpattia Region had, without valid grounds, declared Experience M Factory LLC the winner, although its bid did not meet the requirements. The company failed to submit some mandatory documents, used “equivalent” equipment without confirming its specifications, and did not submit documents on the origin of goods. The auditors ordered the procuring entity to terminate the contract, but it refused and is challenging the decision in court.

Experience M Factory LLC has already completed the foundation and the shelter and has moved on to wall construction. Construction of the veteran hub in Uzhhorod. 

Ivano-Frankivsk

In Ivano-Frankivsk, the veteran hub is being built at 57 Bohdana Khmelnytskoho Street. In October, Budinvest, a municipal enterprise of the Ivano-Frankivsk Regional Council, signed a contract with Step-Solar LLC, which valued the works at UAH 111.27 million. The company is owned by Ivan Baranovych. The veteran hub was to be built by the end of 2026, but in February the deadline was already extended to the end of 2027. 

Later, on November 17, the procuring entity signed another contract — for UAH 6.28 million. That procurement was explained by the need to supply an additional scope of works from the same contractor.

The future center will include sports zones for physical rehabilitation and recovery, consultation rooms for psychological, legal, and social assistance, and children’s areas. The walls and columns have already been built, the administrative building’s roof is in place, windows have been installed, and the shelter and the gym’s metal frames have been assembled. Ventilation, heating, and air conditioning installation is being completed, and wall finishing is underway. About 75% of the works have been completed overall. The municipal enterprise has already paid Step-Solar LLC UAH 76 million for these works.

Most of the high-value items are listed in the estimate in general terms — ceramic tiles, linoleum, doors, and so on. Without precise specifications, their actual cost cannot be verified. As a result, the analysts were able to identify only UAH 1 million in probable overpayment in the main contract and about UAH 600,000 more in the additional one. At the same time, the price in both contracts is fixed, so it cannot simply be corrected in the acceptance certificates. We have sent a second letter to the procuring entity and are awaiting a reply. The first time, it extended the review period for our inquiry but never provided a response.

The State Audit Service reviewed this procurement as well. No violations were found during the tender, but problems emerged in the signed contract. The amount of inflation costs did not match the estimate, and the work schedule was not adjusted after the price change. As a result, the auditors ordered the procuring entity to bring the documents into compliance — Budinvest published an updated schedule.

Zhytomyr

Zhytomyr The veteran hub in Zhytomyr is being built at 101-a Chudnivska Street. The UAH 102.4 million contract was signed in September last year by the Department of Regional Development of the Zhytomyr Regional State Administration with Trading and Industrial Company Tsentr Komplekt LLC. The company is owned by Zhanna Opanasiuk.

The facility was initially to be handed over by the end of the year, but in December the deadline was extended — works are now to be completed by April 30, 2026.

The contractor has already installed external electricity, sewer, and water networks. The above-ground part is being completed, and installation of the shelter structures has begun. The contractor has so far been paid UAH 65 million for completed works.

The analysis of the construction tender points to a probable overpayment of UAH 6.4 million, in particular on concrete, rebar, and brick. In its reply to DOZORRO, the procuring entity stated that the design documentation had passed expert review and received a positive opinion. In addition, the contract price is dynamic. 

The State Audit Service did not skip this procurement either. Its monitoring found that the winner had not provided a proper manufacturer’s quality certificate (ISO), as required by the tender documentation. The department failed to notice this non-compliance and did not give the bidder a chance to correct it. The auditors ordered the Department of Regional Development of the Zhytomyr Regional State Administration to hold the responsible officials to disciplinary or financial liability — the procuring entity withheld the authorized person’s bonus for one month.

Lutsk

In October, the Capital Construction Department of the Lutsk City Council contracted the construction of a veteran hub to Volynekobud LLC. The contract value was UAH 81.8 million. The hub is being built on Koniakina Street, not far from the city district court. The contractor undertook to complete the building by November 20. Given the unrealistic timeline, however, the contract was extended to the end of April 2026.

The center will include a sports complex with a gym and a fitness room, rooms for veterans to meet, spaces for psychologists and legal support, and a small cafe. The walls have already been built and the roof structure assembled, the floors have been insulated, and a screed has been poured. Engineering networks are now being laid, and interior and exterior finishing works are underway. The Capital Construction Department has already paid Volynekobud LLC UAH 68 million for completed works. Volynekobud LLC is owned by Mykhailo Shypelyk and Andrii Hrynchuk. 

DOZORRO analysts’ review of the procurement points to a probable overpayment of UAH 7.3 million. At the same time, the contract price is dynamic. The largest overstatements relate to roofing panels, sand, and insulation. The procuring entity did not respond to our letter asking it to bring prices in line with the market.

The tender also contained potentially discriminatory requirements — only a bidder recognized as critical to the economy during a special period could win. Since this status is not established by law as a qualification criterion, such a condition restricts competition.

The State Audit Service reviewed the Lutsk City Council procurement — the contract had been signed with violations. The work schedule did not clearly set out stages or deadlines. As a result, the procuring entity was ordered to amend the contract, and it later published an updated schedule.

Brief conclusions

The analysis of veteran hub procurements points to systemic problems in the construction market. There was no competition in the seven largest tenders — a pattern typical of the industry in general, not only of this segment. In addition, the documentation contained potentially discriminatory requirements that narrowed the pool of potential contractors, as well as unrealistic work deadlines that were essentially impossible to meet. 

A significant share of the estimates also shows signs of inflated prices for construction materials. DOZORRO analysts estimate that, in the reviewed procurements alone, probable overpayments could reach UAH 37.3 million. Such inflated prices are not isolated cases but another recurring problem in construction projects. They stem from the absence of unified approaches to determining construction costs already at the design stage, as well as insufficient state oversight and transparency.

At the same time, individual cases show that procurement at market prices is possible. With realistic estimates and transparent tender procedures, overstatements can be avoided and budget funds spent efficiently.

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. 

In January 2026, the Education, Youth and Sports Department of Devladivka Village Council ordered fruits and vegetables from Ekofudtorg LLC at a contract value of UAH 201,000.

DOZORRO analysts reviewed the contract prices and identified a likely overpayment of UAH 59,000 — almost 30% of the total contract value.

The most glaring discrepancy involved white cabbage priced at UAH 60/kg — five times the market rate. According to Prozorro’s Market Price BI, the price in December stood at UAH 10/kg, rising to UAH 12.50/kg in January. State Statistics Service data confirms the same picture: the average nationwide price for white cabbage in December was UAH 10.07/kg. On this line item alone, the potential overpayment reached UAH 13,000.

Even more prominent was the case of bananas. The village council department planned to purchase them at UAH 200/kg — more than three times the going market rate. By comparison, bananas on Prozorro Market were priced at UAH 70–80/kg during the same period, while State Statistics Service figures for December put the average at UAH 61.61/kg. The potential overpayment on this item alone could have reached UAH 11,000.

In February, we wrote to the contracting authority requesting that prices be brought in line with market rates. That same month, the village council reported that it had conducted a review and contacted the supplier. In March, the parties signed a supplementary agreement reducing the contract amount without changing the delivery volumes. This prevented UAH 60,300 in ineffective spending.

Ekofudtorg LLC was registered in late 2024 in Kryvyi Rih. Its owner and director is Kostiantyn Moskalenko.

Criminal proceedings opened over rehabilitation equipment procurement

One of the most notable cases from March involves the procurement of rehabilitation equipment for the Yampil Territorial Hospital municipal non-commercial enterprise. In September 2025, the hospital signed a UAH 2.1 million contract with Oris Trade LLC, owned by Nataliia Bilokur.

In reviewing the cost estimate, DOZORRO analysts found significant price inflation risks. The total potential overpayment came to UAH 508,000 — approximately 24% of the contract value.

The single largest exposure was on the ZEPU-K2000B hand rehabilitation trainer, with a potential overpayment of UAH 435,000. Oris Trade LLC entered the unit price as UAH 820,050 VAT-inclusive, which included transportation and insurance, yet the same model is available on the market for at least half that amount. Oxydoc sells it for UAH 388,731; Rehamed for UAH 381,900; The Nine for UAH 380,000. Even accounting for additional costs, the gap with market prices is extraordinary.

Since the company had already received payment under the contract, influencing the situation through the contracting authority was not feasible. In March 2026, the DOZORRO team therefore referred the matter to the prosecutor’s office. Law enforcement responded by notifying us of an opened criminal proceeding. The UAH 508,000 figure has been counted as a prevention result in our March summary.

Contract terminated: UAH 4.1 million saved

Another case involves the reconstruction of a veterinary hospital building for use as a dormitory, contracted at UAH 37.6 million. In early 2025, Khotyn City Council’s City Development Agency municipal enterprise awarded the work to Mobile Mechanized Unit-47 LLC.

Analysis of this procurement identified a likely overpayment of UAH 4.1 million, or 11% of the contract value. In February of last year, the DOZORRO project contacted the contracting authority requesting a review of material resource prices. Since the contract price was fixed, this would have required a supplementary agreement. Instead, the City Development Agency responded that our calculations did not reflect market conditions. Notably, this is not the first time we have flagged potential overpayments in this institution’s procurements: back in March 2025, we reported a likely UAH 8.2 million overpayment across three reconstruction projects, including the dormitory conversion.

We returned to this case on multiple occasions — requesting acceptance certificates from the contracting authority and even approaching the prosecutor’s office — but received no response from law enforcement.

Ultimately, in early 2026, Khotyn City Council’s City Development Agency and Mobile Mechanized Unit-47 LLC terminated the contract. No new procurement has been announced to date. The termination prevented UAH 4.1 million in unnecessary expenditure.

Mobile Mechanized Unit-47 LLC was registered in Khotyn in 2020. The company’s owner is Mykhailo Biliaiev. 

Other notable cases from our Q1 2026 monitoring results are available in our February and January reports. 

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.

How much was contracted 

According to BI Prozorro public analytics module, procurements for warning system modernization announced in 2025 had a total estimated value of UAH 1.4 billion, with one additional procurement worth UAH 66 million still active. Actual contracted amounts total UAH 528 million. The gap is explained by the fact that 42% of competitive procurements by estimated value were unsuccessful or canceled, and another 5% are still ongoing. Of the 54% of procedures that resulted in signed contracts, 15% were subsequently terminated — in part following findings by the State Audit Service. Note that this article concerns contracted amounts, not funds actually disbursed.

By contract value, 90% of procurements were conducted through special open tenders; the remaining 10% were direct award contracts. According to BI Prozorro, successful warning system modernization tenders attracted an average of 1.3 bidders — pointing to a near-total absence of market competition.

The largest contracting volume in 2025 was recorded in Kyiv Region at UAH 139 million, followed by Cherkasy Region at UAH 124 million and Mykolaiv Region at UAH 89 million. Vinnytsia Region came in at UAH 51 million and Chernivtsi Region at UAH 45 million. Zakarpattia Region recorded the lowest procurement volume — approximately UAH 98,00

What the top regions have in common

In four of the five largest procurements, the winner of contracts to upgrade territorial automated warning systems was Ukrzaliznychavtomatyka LLC. The company is modernizing warning systems in Kyiv Region for UAH 133 million, in Cherkasy Region for UAH 120 million, in Mykolaiv Region for UAH 86 million, and in Vinnytsia for UAH 49 million. The only exception among the top five is Chernivtsi Region, where a UAH 44 million contract went to Meteor IT LLC. Notably, for both Kyiv and Cherkasy regions, the project documentation for the modernization was developed by Ukrzaliznychavtomatyka itself.

Project timelines vary: Kyiv Region is due to complete works by August 31, 2026; Cherkasy and Chernivtsi regions by end of 2027; Mykolaiv Region by October 31, 2026; and Vinnytsia by August 2027.

Beyond the notable differences in contract values, Kyiv and Cherkasy regions stand apart in another respect: their approach to contract publication. The Kyiv contracting authority did not publish the contract, citing a determination by the Civil Protection and Defense Department of the Kyiv Regional State Administration that the document constitutes restricted-access information whose disclosure could pose a threat to national security. In Cherkasy Region, the contract was initially withheld without any explanation, though it was eventually published as part of a contract amendment. Mykolaiv and Chernivtsi regions, as well as Vinnytsia, published their contracts promptly, finding no grounds for withholding them.

Ukrzaliznychavtomatyka and its likely ties to a fugitive MP

Ukrzaliznychavtomatyka LLC effectively dominates the centralized warning system modernization market. Total contracted value since 2023 stands at UAH 433 million, of which UAH 7.1 million covers project documentation development and revision. In addition to the contracts mentioned above, the company has been modernizing warning systems in the Kamianka and Lutsk communities since 2024. Its market share speaks for itself: in 2025, Ukrzaliznychavtomatyka accounted for 74% of the total value of all contracts for such services.  

The company is registered in Kyiv and serves as a distributor of Polish Digitex warning systems. It is owned by Oil and Gas Technologies LLC, whose ultimate beneficiary is listed as Oleksii Kolesnyk. Although the company was founded in 2010, its procurement success only began in the summer of 2023. Prior to the full-scale invasion, it held just three public contracts totaling approximately UAH 16,500.

The company’s sharp business growth coincided with a specific political moment. In 2023, MP Serhii Shakhov of the Dovira parliamentary group began publicly pushing the warning system modernization agenda. In late March 2023, the NABU announced Shakhov as a wanted person, charging him with submitting false asset declarations concealing over UAH 60 million. 

Around the same time, hromadske journalists published an investigation alleging that Shakhov had lobbied the government — including in letters to Prime Minister Denys Shmyhal — to advance warning system upgrades in order to benefit his own company, which also had Russian ties.  The journalists suggested that Shakhov was promoting Ukrzaliznychavtomatyka through his adviser Mykola Sambozuk, who had previously run a similar business in Russia and, according to their reporting, obtained Russian citizenship in 2007.

DOZORRO analysts flagged the monopolization risk as early as 2023, noting at the time that the company had not yet gained significant traction with contracting authorities. As we can now see, that has changed — and the forecast proved accurate.

Excessive requirements in every tender 

A common thread running through the tenders won by Ukrzaliznychavtomatyka: not one was completed on the first attempt. Auditor interventions forced contracting authorities to cancel or annul procurements and re-announce them. The State Audit Service found irregularities in both tender documentation and bidders’ proposals. Notably, in nearly every announced procurement, potential participants raised questions about discriminatory requirements — with some submissions specifically mentioning Ukrzaliznychavtomatyka. This prompted DOZORRO analysts to examine the tender documentation across these projects.

The analysis revealed a systemic pattern: tender documentation containing conditions that restrict competition. In most cases, Ukrzaliznychavtomatyka was the only bidder — and the winner. 

Contracting authorities applied a set of requirements that created significant barriers to participation, particularly for small and medium-sized businesses. Tenders in Kyiv, Cherkasy, Chernivtsi, and Mykolaiv regions all required a special permit for working with state secrets.

A separate barrier involved strict conditions on equivalent equipment — applied by contracting authorities in Vinnytsia, Kyiv, and Chernivtsi. Bidders offering alternative equipment had to demonstrate full compliance with the project specifications, leaving virtually no margin for error. In practice, a simple comparison table — which contracting authorities did request — should have sufficed. But they additionally required guarantee letters or other supporting documents, making the conditions excessively burdensome. As a result, companies are effectively pushed to offer the exact equipment specified in the project documentation — often tied to a specific manufacturer — to avoid the risk of disqualification. This substantially narrows competition.

Among the excessive requirements was a mandatory package of seven ISO or DSTU certificates, including highly specific standards such as ISO 50001 (energy management) and ISO 41001 (facility management). This requirement was applied by contracting authorities in Vinnytsia, Kyiv, Cherkasy, and Mykolaiv. Several of these standards have no direct relevance to the installation of technical systems and appear to function as an additional filter that screens out participants without substantial resources.

Similar requirements recurred across the tender documentation of multiple regions — Kyiv, Cherkasy, Mykolaiv, and Chernivtsi, suggesting the use of coordinated approaches to documentation preparation. File metadata may point in the same direction: documents from Kyiv, Cherkasy, and Mykolaiv regions list “ThinkPad” as the file owner, which may indicate the use of a common template or preparation of documentation outside the respective regional organizers.

Other potentially discriminatory conditions also appeared. The Chernivtsi procuring entity required a site visit certificate bearing the contracting authority’s signature — without which submitting a bid was effectively impossible. In Vinnytsia, the contracting authority required authorization letters from equipment manufacturer Digitex, making participation contingent on the goodwill of a third party — the manufacturer or its official representative. The same contracting authority also required proof that measuring instruments — a megohmmeter, ground resistance meter, and multifunction electrical measuring device — were in working order and had been verified, supported by calibration certificates from authorized bodies such as the state enterprise Ukrmetrteststandart.  Companies were further required to demonstrate their right to conduct such measurements through a certificate of recognized measurement capabilities with appendices. While such documentation may indeed be necessary at the work execution stage, demanding it at the proposal submission stage is excessive and narrows the pool of potential participants.

 

Requirement	Vinnytsia	Kyiv Region	Mykolaiv Region	Cherkasy Region	Chernivtsi Region
Set of 7 ISO certificates (9001, 14001, 45001, 50001, 8965, 41001, 22301)	YES	YES	YES	YES	NO
Strict Equivalent requirement (comparison table + guarantee letter or other documents)	YES	YES	NO	NO	YES
Authorization letter from manufacturer (Digitex)	YES	NO	NO	NO	NO
Site visit certificate	NO	NO	NO	NO	YES
Winner	Ukrzaliznychavtomatyka LLC	Ukrzaliznychavtomatyka LLC	Ukrzaliznychavtomatyka LLC	Ukrzaliznychavtomatyka LLC	Meteor IT LLC

Last year, Ukrzaliznychavtomatyka also attempted to enter the Zhytomyr Region market — without success. The contracting authority rejected its bid due to inaccuracies in resource documentation. DOZORRO analysts reviewed that tender and found no overt discriminatory requirements, with the exception of the state secrets permit requirement, which potentially narrows the field of participants.

Another large-scale tender is currently underway: the warning system upgrade in Kremenchuk. The Civil Protection and Defense Department of the Kremenchuk City Council plans to sign a UAH 61 million contract with Compass Engineering LLC, even though another participant offered to do the work at a lower price — a bid that was legitimately rejected for failing to meet the technical requirements of the tender documentation. Our analysis of that tender documentation found no discriminatory conditions.

Conclusion

The overall picture is troubling: the warning system modernization market is effectively consolidating around a single company — Ukrzaliznychavtomatyka LLC. Journalists flagged this risk back in 2023, and it now appears to be materializing. 

One contributing factor is the approach to tender documentation. Procuring entities have consistently written in complex and highly specific requirements — from extensive certificate packages to strict limitations on equivalent equipment and additional supporting documents. And crucially, these approaches recur across multiple regions. The result is competition that is largely formal: alternative suppliers have almost no real chance, and the winner is often predictable. The situation is further complicated by the fact that the same company frequently participates in developing the project documentation against which the works are subsequently tendered.

Taken together, this raises an uncomfortable but logical question: are we looking at a market that has organically consolidated around a strong player — or a system in which the conditions are being tailored to a specific company?

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.

Summary

Over 14 months, contracting authorities concluded 257,000 above-threshold direct award contracts totaling UAH 401.7 billion. This represents approximately 6% of the total number of contracts in the system and nearly 28% of their aggregate value. While the number of such procurements is relatively modest, their financial scale is significant.

At the same time, almost half of the total value (43.3%) of above-threshold direct contracts relates to the procurement of natural gas by a contracting authority on which the government has imposed public service obligations. These are reports on the sale of gas within the Naftogaz group, which became mandatory in 2023. Such procurements may distort the statistics and overstate the problem of direct non-competitive awards in Prozorro, including in the eyes of international partners. 

Overall, the situation regarding non-competitive above-threshold procurement would be improved by reinstating the negotiated procedure. Excluding natural gas procurement within the Naftogaz group, approximately 70% of contract value currently consists of procurement conducted on grounds for which the negotiated procedure was previously required. The negotiated procedure provides for consultations with several suppliers where possible, and for a review mechanism, both of which reduce the risk of infringements and inefficient decisions.

Direct awards can be retained as exceptions for circumstances arising specifically from martial law — for example, where a contracting authority is located in an area of active hostilities. At the same time, a number of grounds should be reconsidered altogether — whether they are in fact necessary.

Volumes and dynamics of procurement

From July 30, 2024, to September 30, 2025, contracting authorities concluded 257,000 above-threshold direct award contracts. Their value at the time of the study stood at UAH 401.7 billion — nearly 28% of the aggregate current value of contracts concluded during that period. While their value share is significant, the number of such procurements is moderate, at 5.87% of the total.

Contracting authority activity is largely governed by the budgetary and planning cycle. A gradual increase in the number of lots and total contract value is observed through to January 2025, followed by a steady decline through March. This pattern mirrors the general trend across all procurement methods and may be explained by a combination of seasonal factors, the desire to use up budget appropriations before the year-end, and procurements for the new year. In the seasonality analysis, we excluded reports on natural gas procurement within the Naftogaz group, as they significantly distorted the statistics.

This means that the planning and management of budgetary resources in the direct award segment of procurement require heightened attention during the peak season, in order to prevent inefficient use of funds and potential procurement risks.

Grounds applied by contracting authorities

Over the 14 months under review, 84.4% of the value of above-threshold direct awards fell within the five most common grounds out of nearly three dozen. These were: 

1. Procurement of natural gas by an entity subject to public service obligations — 43.3%. In four such procurements totaling UAH 82.8 billion, the contracting authority indicated an incorrect ground in the electronic field; these were added manually on the basis of the justification document.
2. Absence of competition on technical grounds — 19.1%.
3. Protection of critical infrastructure and energy facilities — 8.1%.
4. Procurement on grounds of urgent need — 7.6%.
5. Open tendering canceled due to absence of tenders — 6.4%.

By number of lots, four grounds account for 78.1% of procurements:

1. Absence of competition on technical grounds — 29.9%.
2. Open tendering canceled due to the absence of tenders — 18.3%.
3. Procurement on grounds of urgent need — 15.7%.
4. Legal services — 14.2%.

Each of these grounds has its own application characteristics and associated risks.

On the ground of absence of competition on technical grounds, contracting authorities may conduct procurement from natural monopolies (where the absence of competition has been formally recognized by the Antimonopoly Committee) or in other circumstances. To roughly estimate the share of procurements conducted specifically from natural monopolies, we used the AMCU’s consolidated register of natural monopolies as of October 31, 2025. They account for 56.1% of procurements on the ground of absence of competition on technical grounds by number of lots, and 51.8% by value.

In other cases, the absence of competition may arise from vendor lock-in, where changing a contractor is disadvantageous or altogether impossible. In IT service procurement, for example, such dependency may arise from the architecture of the IT product, the absence of comprehensive technical documentation, or the use of niche programming languages. The effective monopolization by developers of the right to further develop solutions they have created can lead to rising service costs and reduced motivation for the contractor to innovate or improve quality in the absence of competition. This issue is examined in greater detail in the study on IT procurement in Prozorro. That said, not every restriction of competition is unambiguously negative or the result of bad faith on the part of the contracting authority or supplier. In a number of situations — in particular those relating to national security, defense capability, or the protection of critical infrastructure — the use of proprietary technical solutions, closed architectures, or a limited pool of contractors may be objectively justified and aimed at minimizing risks to the state. The same applies to other procurement subjects.

In direct contracts on grounds of urgent need, there is a risk that the need is not in fact genuinely urgent — or that it became urgent as a result of the contracting authority’s own actions in failing to procure earlier. The number of procurements on this ground increases toward the end of the budgetary year — between September and December, that number rises by approximately 50%. It is therefore most likely that contracting authorities also invoke this ground simply when they need to use up appropriations within the budgetary year. 

When a contracting authority concludes a direct contract because no one submitted a tender, the terms of that direct award must be identical to those of the original tender. However, whether contracting authorities comply with this in practice — for example, whether they require counterparties to provide all the certificates they requested from bidders in the failed competition — is difficult to verify, since only the contract itself is published in the system. There are instances where contracting authorities conclude several contracts instead of one. 

Among direct contracts for legal services, high-volume procurement of small amounts is combined with a number of large strategic contracts. 65% of total procurement value is concentrated among five contracting authorities: Ukrnafta JSC, National Joint Stock Company Naftogaz of Ukraine, Dnipro Metropolitan Municipal Enterprise, and the Eastern and South-Eastern Interregional Centers for the Provision of Free Legal Aid. By number of lots, however, nearly 97% belong to the last two legal aid centers, which systematically procure legal representation services for the provision of secondary free legal aid. We also investigated how other such inter-regional centers procure legal services. It emerged that they too conclude numerous small direct contracts en masse, but do not indicate the ground in the electronic field. In total, the number of such lots from legal aid centers over the period under review was nearly 73,000, totaling UAH 646 million. 

In the case of legal services, the question arises as to whether direct contracts should in fact be permitted at all for such services. Legal advisory and legal representation services, for example, are procured competitively. Similarly, competitive procedures are used to procure a range of other high-expertise services — such as consulting or audit.

What is being procured

Contracting authorities most frequently used above-threshold non-competitive procurement for the purchase of services. Services account for 57.47% of all such procurements — over 147,000 of the 257,000 lots. In monetary terms, however, services represent only 19.7% of the aggregate contract value. This indicates that the majority of service procurements are small in value but large in volume. 

The situation with goods is quite different. Although fewer in number than services — 40.15% of the total, or over 103,000 lots — goods account for nearly two-thirds of the total value of direct contracts, approximately UAH 255 billion.

Works have the smallest share — only 2.38% by number, or approximately 6,000 lots. In value terms, however, they account for 16.88% of all above-threshold non-competitive procurements (nearly UAH 68 billion). 

If one drills down into CPV codes, the value of direct awards is heavily concentrated in three categories, which together account for over 69% of total contract value. Certain categories generate a substantial share of contract value despite a relatively low number of lots.

Gaseous fuels (09120000-6) is the key category by financial volume. Despite its modest share of the total number of lots, gas accounts for the largest share of contract value. One reason is the obligation on Naftogaz Trading LLC, a gas supply company, to report on its procurement of natural gas from its own parent company and other entities within the group. This subsidiary of NAC Naftogaz of Ukraine conducts wholesale sales of natural gas to industrial consumers, budget institutions, and suppliers.

It is also worth noting that nearly 8,700 gas supply contracts were concluded via direct award following unsuccessful competitive tendering. During the period under review, only 8.3% of competitive procurements of this commodity were successfully completed.

Ukraine has committed to ensuring a free market for electricity and gaseous fuels. At the same time, the government has imposed public service obligations on Naftogaz Trading LLC — the company is required to supply natural gas to budget institutions at a preferential tariff. No separate rules have been established for this situation, so contracting authorities are required to launch open tendering, which no one participates in due to the low estimated value, and then conclude a direct contract with the Naftogaz company at a low price. Occasionally — in summer, for example, when the price of the commodity is lower — competitive tendering does succeed. Overall, however, considerable resources are expended on formal procedures.

Construction works (CPV 45000000-7): For the analysis of this sector, we consolidated all procurements by the second digit of the CPV code, since the procurement item here is defined by reference to the object rather than the classifier. Three grounds account for 75.7% of the total value of above-threshold direct awards in this sector, while together representing only 51.3% of the number of lots. These are: protection of critical infrastructure and energy facilities, urgent need, and the procurement of additional works under the main contract (up to 50%). The need to procure additional works indicates potential issues with the quality of project design and the accuracy of cost estimates at the planning stage, including owing to the complexity of such projects. 

Direct contracts on grounds of absence of any tender submission are high in number but account for a relatively small share of value. Insufficient competition in this sector may point to potential barriers to participation — for example, excessive requirements in tender documentation — or to a limited pool of contractors. 

Steam, hot water, and associated products (09320000-8) are characterized by a high share of procedures conducted on the ground of absence of competition on technical grounds. This is consistent with the nature of the market, where supply is often provided by local monopolies and the possibility of choosing an alternative supplier is limited.

Although the categories Electrical energy (09310000-5) and Distribution of electrical energy (65310000-9) belong to the same sector, they exhibit a different structure of grounds for above-threshold direct awards. In electricity procurement as a commodity, one ground dominates by a wide margin (approximately 70%), both by value and by number of procedures — namely the conclusion of a contract with a supplier of last resort or a universal service provider. A significant share (21%) also relates to absence of competition on technical grounds and cancellation of tendering due to absence of tenders. This structure indicates that in this category the use of direct contracts is substantially dependent on the quality of procurement planning and the level of market activity among suppliers.

By contrast, electrical energy distribution services within a given territory are provided by a single distribution system operator, and tariffs are set by the state regulator. In these circumstances, the predominance of the ground “absence of competition on technical grounds” — 95.5% by number and 97.6% by value of contracts — is objective in nature and results from the natural monopoly position of the relevant operators. 

Thus, despite their sectoral proximity, these two categories exhibit different models of non-competitive procurement and require different approaches to risk assessment.

Since some of the grounds for above-threshold non-competitive procurement are tied to the subject matter of the procurement, the presence of certain categories at the top was expected — for example, natural gas or legal services. Overall, the bulk of above-threshold direct contracts relates to the procurement of various energy carriers. 

In each category, a few principal grounds for direct contracts predominate. The choice of which to invoke may, however, be influenced by a variety of circumstances: technical constraints, absence of competitors, or urgent needs.

Contracting authorities do sometimes indicate incorrect grounds. For example, gaseous fuel was purchased under the ground for the procurement of hematopoietic stem cells. At the same time, among contracts for natural gas with suppliers subject to public service obligations, contracts for the supply of gas to schools do appear. However, such instances were not sufficiently widespread to have a material effect on overall statistics by value.

Helicopters, airplanes, spacecraft, and other motor-powered aircraft (34710000-7): Procurements in this category are primarily directed at meeting the urgent needs of the Armed Forces of Ukraine or are accounted for by contracting authorities located in areas of active hostilities.

Since some of the grounds for above-threshold non-competitive procurement are tied to the subject matter of the procurement, the presence of certain categories at the top was expected — for example, natural gas or legal services. Overall, the bulk of above-threshold direct contracts relates to the procurement of various energy carriers. 

In each category, a few principal grounds for direct contracts predominate. The choice of which to invoke may, however, be influenced by a variety of circumstances: technical constraints, absence of competitors, or urgent needs.

Contracting authorities do sometimes indicate incorrect grounds. For example, gaseous fuel was purchased under the ground for the procurement of hematopoietic stem cells. At the same time, among contracts for natural gas with suppliers subject to public service obligations, contracts for the supply of gas to schools do appear. However, such instances were not sufficiently widespread to have a material effect on overall statistics by value.

Monitoring of direct contracts

The State Audit Service covered 1,062 lots — 0.41% of above-threshold direct awards conducted during the period under review — through monitoring. In competitive procurement, monitoring coverage is nearly seven times higher, at 2.73% of the total number of procurements eligible for monitoring. The same trend is observed in value terms: monitoring covers only 2.3% of the aggregate value of above-threshold direct award contracts, compared with 20.9% in the competitive segment. Even excluding the value of natural gas procurement within the Naftogaz group, as well as procurements from natural monopolies, suppliers of last resort, and universal service providers, coverage reaches only 5% of the value of direct contracts. This gap relative to competitive procurement indicates that direct awards remain largely outside the monitoring focus. Yet they too require oversight, since they do not provide for competition or safeguards such as review before the AMCU. 

The largest monitoring volumes relate to the construction sector (CPV 45) and the energy sector (CPV 09), where contract values run into the billions of hryvnias. Overall, monitoring activity is concentrated in sectors with high financial exposure and an elevated risk of inefficient use of funds. Significant attention is also devoted to industrial machinery (CPV 42) and repair and maintenance services (CPV 50).

At the same time, the top three sectors by number of monitoring instances include accommodation, catering, and retail trade services (CPV 55), with a combined value of over UAH 90 million. In 98% of cases, these involve catering services for educational establishments. Such procurements were monitored primarily by the directorates of the Western Office of the State Audit Service, in particular in Khmelnytskyi and Ternopil regions, where they were examined three times more frequently than construction procurements. Violations found under this CPV related predominantly to the failure to publish, or untimely publication of, the justification for the procurement ground. Accordingly, most monitoring instances resulted in auditors requiring explanatory work and training of authorized persons to be carried out.

Overall, violations in above-threshold direct awards were identified by auditors during monitoring in 67.8% of cases. This figure is slightly higher than in competitive procurement, where it stands at 61.3%. While a gap of 6 percentage points is not critically large, it may indicate that direct non-competitive procurement carries elevated risks of non-compliance with legislation. It is important, however, to understand what types of violations auditors are actually identifying. Doing so comprehensively is difficult, since in the electronic field on Prozorro, the State Audit Service almost invariably classifies the type of violation as “Other violations of procurement legislation,” and details must be sought manually in the text of the audit finding. It would therefore be worthwhile to update the violation categories in the system and apply them consistently, so as to enable analysis of the problems arising in direct procurement.

In summary, above-threshold direct awards warrant greater monitoring coverage. The State Audit Service generally selects sectors for monitoring well — concentrating on construction, energy, and related sectors, where procurement volumes are largest and corruption risks are highest. The Western Office’s excessive focus on catering service procurements for educational establishments is questionable. Such procurements are not particularly widespread, are comparatively small in value, and the violations associated with them largely concern failure to publish or untimely publication of information. The Office would therefore benefit from refining its methodology for selecting above-threshold direct awards for monitoring.

Contract modifications

Modifications were made to contracts in 36,700 lots, representing over 14% of the total number of above-threshold direct award procurements. The aggregate value of modified contracts reached UAH 140 billion, or nearly 35% of the total value of all contracts in this segment. By comparison, in competitive procurement, modifications occurred more frequently: they affected 21.8% of lots and 44.7% of the total value of contracts over the corresponding period. The data indicate that while contract modifications in above-threshold direct awards are recorded less frequently than in competitive procurement, their financial scale remains significant. The majority of modified contracts relate to cases where the ground for using direct awards was absence of competition on technical grounds (41.81% of all modified contracts) or absence of tenders in open tendering (32.53% of all modified contracts). Their shares are high because these are overall the most common grounds for above-threshold direct awards. If one looks at what share of contracts were modified within each direct award ground, the leaders are as follows:

• Procurement of natural gas by an entity subject to public service obligations — modifications in 38.34% of contracts (41.2% for Naftogaz group procurements specifically)
• Procurement of additional works or services from the same economic operator, up to 50% of the price of the previous/existing contract — 28.11% of contracts
• No tender submitted — 25.38%.

In order to assess the justification for these modifications and the potential risk of abuse, it is necessary to conduct further in-depth analysis of their substance.

Comparison with the negotiated procedure 

The negotiated procedure was abandoned in the first year of the full-scale invasion in favor of an even more flexible mechanism. Under Resolution No. 1178, the grounds for the negotiated procedure became the grounds for direct awards. In the early period, such changes may have been justified to meet the needs of contracting authorities, in particular for defense, energy, and critical infrastructure. However, this expansion of contracting authority discretion creates risks of manipulation and circumvention of competitive procedures, whereby a portion of procurements are concluded as direct contracts without adequate scrutiny of the grounds invoked.

Over the comparable period from July 30, 2020, to September 30, 2021 — the years immediately preceding the full-scale invasion — contracting authorities conducted 100,600 negotiated procedures, under which contracts totaling UAH 101.7 billion were concluded. This amounts to an average of 7,200 contracts per month valued at UAH 7.3 billion. This is considerably lower than the current figure — during the period under review, an average of 18,400 above-threshold direct award contracts per month were concluded, valued at UAH 28.7 billion. In other words, the number of such lots has more than doubled overall, and the contract volume has increased nearly fourfold. Two factors should of course be taken into account:

• High inflation over recent years, and
• The increase in the number of grounds for above-threshold direct awards.

In both the negotiated procedure and the direct awards conducted under the wartime special rules, absence of competition on technical grounds remains the leading ground by number and by value of expenditure. Under the negotiated procedure, this ground accounts for nearly 52% of lots and over 50% of contract value. The same ground also ranks first in direct awards under the special rules — nearly 30% of contracts and 19% of total contract value. The list of the most common grounds under the negotiated procedure, which together account for 95.7% of contract value, is as follows: 

1. Absence of competition on technical grounds — UAH 51.8 billion (50.9%) by contract value and 52% by number of lots.
2. No tender submitted — UAH 21.4 billion (21%) and 30% of lots.
3. Need to carry out additional construction works — UAH 15.6 billion (15.3%) and 2.5% of lots.
4. Urgent need (across all sub-paragraphs of this ground in the Law) — UAH 6 billion (5.9%) and 3.9% of lots. 
5. Need to protect intellectual property rights — UAH 2.6 billion (2.6%) and 2.2% of lots.

By type of procurement subject, the distribution in negotiated procedures is similar to that in direct contracts. The only material difference was in the value of goods and services. Previously they accounted for 37% and 48% of contract value respectively, whereas now goods take a larger share — 63% versus 20%. 

The largest expenditure under the negotiated procedure was also concentrated in energy resources and construction. At that time, however, natural gas did not dominate contract values to nearly the same extent. Reporting on natural gas procurement within the Naftogaz group did not yet exist, and procurements from the supplier of last resort were also significantly smaller in volume.

Excluding gas procurement within the Naftogaz group, grounds on which contracting authorities previously conducted the negotiated procedure currently account for 70.2% of the value of above-threshold direct awards. This means that a substantial share of the direct procurement market could potentially have been channeled through a more controlled procedure that ensures transparency and competitiveness.

The application of the negotiated procedure offers significant institutional advantages: it allows for consultations with several potential suppliers prior to contract conclusion and provides a mechanism for the review of decisions. Even where review is rare — occurring in fewer than 1% of cases — the very existence of this instrument has a deterrent effect and reduces the risk of non-competitive procurement, including procurement justified by an alleged absence of competition.

Reinstating the negotiated procedure can thus serve as an effective mechanism for enhancing transparency and minimizing risks in the direct award segment, where oversight and competition are currently limited.

Conclusions

From July 30, 2024 to September 30, 2025, contracting authorities concluded 257,000 above-threshold direct award contracts totaling UAH 401.7 billion. This represents approximately 6% of the total number of contracts in the system and nearly 28% of their aggregate value. While the number of such procurements is relatively modest, their financial scale is significant.

Nearly half of the total value (43.3%) of above-threshold direct awards relates to natural gas procurement by a contracting authority on which the government has imposed public service obligations — that is, to reports on the sale of this commodity within the Naftogaz group. This raises the question of whether such reports on Prozorro are necessary at all: prior to 2023, they were not published.

A large volume of gas procurement — 8,700 contracts — is also concluded as direct awards following unsuccessful tendering. Contracting authorities succeeded in completing only 8.3% of such competitive procurements. A solution must be developed with the involvement of both the Ministry of Economy and the Ministry of Energy, since a quasi-free gas market has now taken shape in public procurement: contracting authorities nominally have the option of purchasing from any supplier, but are in practice compelled to conduct fruitless tendering.

Overall, the situation regarding non-competitive above-threshold procurement would be improved by reinstating the negotiated procedure. Excluding natural gas procurement within the Naftogaz group, approximately 70% of contract value currently consists of procurement conducted on grounds for which the negotiated procedure was previously required. The negotiated procedure provides for consultations with several suppliers where possible, and for a review mechanism, both of which reduce the risk of infringements and inefficient decisions.

Particular attention should also be paid to procurement on grounds of urgent need — the use of this ground increases by approximately 50% toward the end of the budgetary year. It is therefore likely that a portion of such procurements are conducted not so much because of genuinely urgent circumstances as because of budgetary management challenges. This, however, requires further investigation.

In addition, it would be advisable to technically link, within Prozorro, unsuccessful open tendering to the subsequent non-competitive procurement conducted as a result of its cancellation. This would enhance the transparency of such procurement and improve oversight of contracting authorities’ compliance with the terms of the original tender in the context of direct awards.

Direct awards can be retained as exceptions for circumstances arising specifically from martial law — for example, where a contracting authority is located in an area of active hostilities. At the same time, a number of grounds should be reconsidered altogether — whether they are in fact necessary. Some grounds have been indicated in the system in only a handful or a few dozen procurements. It would also be appropriate to explore alternative procurement methods for the purchase of free legal aid services — for example, framework agreements. 

For both the negotiated procedure and direct contracts to function effectively, it is important to train contracting authorities — in particular on how best to determine the value of such contracts and select a supplier.

Finally, above-threshold direct awards are currently subject to monitoring at a rate seven times lower than competitive procurement — only 2.26% of value compared with 20.9%. They require greater oversight, with a focus on higher-value procurements and material violations. 

This research 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 research 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.

This research was developed by

Team lead: 

Ivan Lakhtionov, Deputy Executive Director of TI Ukraine for Innovative Projects

Authors of the research:

Pavlo Dehtiariov, researcher of DOZORRO TI Ukraine project

Kateryna Rusina, Project Manager at DOZORRO

SUMMARY

More than half (55%) of the hard coal procurements checked contained unlawful requirements to provide additional documents and set extremely short deadlines for their submission — conditions that are potentially discriminatory. 

Draft contracts frequently also included provisions under which failure to submit documents within the short deadline was automatically treated as a written refusal to conclude a contract, resulting in the rejection of the tender and disqualification of the participant.

In the representative sample, winning tenders in procurements with unlawful requirements and disqualifications were on average nearly 40% more expensive than the lowest-priced tenders that contracting authorities had rejected.

This practice demonstrates that the simplified RFP procedure sometimes fails to function as intended and partially undermines the logic of the electronic catalog as a fast and accessible procurement tool. To enhance transparency in Prozorro Market procurement, the DOZORRO TI Ukraine project recommends the following:

1. Closing the hard coal category in Prozorro Market.
2. Introducing a mechanism for challenging procurement requirements, which would give businesses a means of protecting their interests and could significantly reduce the risk of abuse. 
3. Enabling monitoring of RFPs by the State Audit Service, to bring this procurement under oversight.
4. Granting the Ministry of Economy the authority to approve standard contracts for specific commodity categories, thereby simplifying their preparation and ensuring legislative compliance, and converting them into electronic contracts.
5. As electronic contracting develops, introducing automated pre-screening of draft contracts in the electronic catalog that, upon detecting potentially unlawful language, would generate alerts for supervisory authorities.
6. Developing guidance notes for authorized persons at contracting authorities, with recommendations on preparing and conducting procurement through the e-catalog.

Together, these measures can make Prozorro Market procurement more transparent, predictable, and user-friendly for both contracting authorities and market participants.

What makes Prozorro Market procurement distinctive

The specifics of procurement through the e-catalog (Prozorro Market) are governed by a separate Procedure for the Formation and Use of the Electronic Catalog (the Procedure), approved by Cabinet of Ministers Resolution No. 822 of September 14, 2020. The core idea behind this method is to simplify and expedite procurement. Qualification — that is, the verification of supplier documents — is handled by the catalog administrator. RFPs are not subject to auditor monitoring, and participants have no right to challenge either the terms or the decisions of contracting authorities. 

An RFP is generated by completing electronic forms in which the contracting authority specifies a limited set of details: the name of the procurement item, estimated value, quantity, delivery period and location, payment terms, and the deadline for submitting price proposals. 

When publishing an RFP, a contracting authority may only specify information on the specifications of the goods and their permissible values within the item specification set by the catalog administrator. The government recently amended the Procedure (Cabinet of Ministers Resolution No. 33 of 14 January 2026), further specifying the list of details that may be indicated. It was clarified that, in addition to the information already mentioned, a contracting authority may specify the delivery terms, the amount, type, period, and conditions for providing and returning contract performance security (where it requires such security to be provided), as well as a requirement that the country of origin may not be the Russian Federation, the Republic of Belarus, or the Islamic Republic of Iran.

The draft contract, which forms part of the RFP, must not conflict with the information the contracting authority has entered in the electronic fields, and may contain other conditions that are provided for by law in respect of such a contract and that the contracting authority considers necessary for the performance of the contract during its term. It is prohibited to include in an RFP requirements directed at the procurement participant or the selected winner, or to demand any additional documents not provided for by the Procedure. This is a prerequisite for the transparency of such procurement and allows potential suppliers to properly assess its terms and make an informed decision on whether to participate.

Hard coal procurement through RFPs

This study focuses on CPV class “Solid fuels” (code 09110000-3), with an additional targeted sample specifically of hard coal procurements conducted through RFPs on Prozorro Market. For the analysis, we selected procurements announced between September 1, 2024, and September 30, 2025. 

The total number of lots included in the analysis is 858.

For coal procurement, contracting authorities opt for the RFP method twice as often as for open tendering — Prozorro Market accounts for about 64% of such lots. The estimated value of RFP-based procurements is also twice as high, representing 62% of the value of competitive coal orders. Significantly more participants come forward for Prozorro Market procurements — an average of 6.58, compared with 2.04 in open tendering. However, the number of disqualifications is also much higher. 

Where contracting authorities reject 16.5% of tenders in open tendering, the corresponding figure in RFPs is approximately 55%. It is important to note in this context that in open tendering, approximately 22% of lots are accompanied by complaints, which underscores the significance of the review mechanism as an instrument for overseeing the transparency and openness of procurement.

All profiles in the coal category on Prozorro Market now require goods to comply with the DSTU 7146:2010 standard (the Standard). Under the Standard: 

• When concluding a coal supply contract for household needs, a certificate of genetic, technological, and quality characteristics must be presented (clause 7.10). In practice, however, the application of this provision of the Standard creates a conflict in law enforcement, since the Procedure expressly prohibits the demand for any additional documents under the RFP. 
• A coal consignment is considered accepted for dispatch once a composite commercial sample has been taken from it in accordance with DSTU 4096 and a quality certificate has been issued (clause 7.3). Accordingly, this certificate may be requested at the time of delivery.

The requirement to provide these additional documents occasionally appears in lot notes — in 6% of procurements. These are optional fields in which contracting authorities may include supplementary information about the procurement — for example, drawing potential suppliers’ attention to terms of particular importance to them. However, in addition to established documents, contracting authorities in 1.4% of lots also required additional documents not covered by the Standard. Notes carry no legal force, but this already reveals at this stage that some contracting authorities conducting coal procurement tend to impose excessive requirements on potential bidders that are not provided for by law.

 

Additional requirements in draft contracts 

For the detailed analysis, we randomly selected 270 lots from the full dataset of 858. The sample was calculated using a 95% confidence interval and a 5% margin of error. The sample is therefore representative and reflects the overall picture of coal procurement through Prozorro Market.

Under the legislation in force at the time of the procurements under review, an RFP must not contain requirements directed at the supplier or any documents not provided for by the Procedure. In the draft contract, as elsewhere, a contracting authority may specify only information on the characteristics of the goods and their permissible values within the item specification set by the administrator.

The Standard does not require any documents to be provided in respect of coal other than the certificate of genetic, technological, and quality characteristics at contract signing, and the quality certificate for the coal consignment at delivery. Accordingly, only the certificate of genetic, technological, and quality characteristics and contract performance security in the form of a bank guarantee may lawfully be required at the contract conclusion stage (Article 27(1) of the Law on Public Procurement). The right to require a bank guarantee is now also expressly provided for in the amended Procedure — the contracting authority may specify in the draft contract the amount, type, period, and conditions for providing and returning such security. Any other documents demanded from participants or the selected winner that are not provided for by law are unlawful.

The findings, however, point to systematic non-compliance with these requirements. The documents most frequently demanded by contracting authorities in draft coal supply contracts were as follows.

Overall, 55% of draft contracts (148) in the sample contained requirements to provide additional documents not provided for by either the Procedure or the Standard. In isolated cases, these were manifestly excessive and included documents with no functional connection to the subject matter of the procurement — for example, a certificate of proficiency in the state language, copies of the coal producer’s financial statements for prior years, or an expert market assessment. In the majority of procurements, however, the violations consisted in requirements to provide documents that formally relate to the supplier’s operations but do not affect the physical or quality characteristics of the goods and are not provided for by law, in particular, quality management system certificates, proof of experience in performing similar contracts, or extraction permits. This points to a systemic and uncontrolled expansion of supplier requirements. A full list of documents whose provision was recorded in the study is available via the table at the link.

In practice, contracting authorities are using the draft contract as a tool for introducing additional barriers to participation — contrary to the simplified nature of the RFP procedure and creating disproportionate and discriminatory conditions for suppliers. This eliminates competition, impedes access for bona fide participants, and undermines the logic of the e-catalog as a fast and transparent procurement tool.

 

When additional documents must be submitted

The review of draft contract terms also revealed that in 52% (141) of procurements, contracting authorities set extremely short deadlines — between 1 and 48 hours — for submitting an additional, sometimes excessive, list of documents required for contract conclusion.

Such tight timeframes place suppliers on an unequal footing, functioning as a barrier and a covert mechanism for selecting a predetermined winner while screening out those objectively unable to meet the requirements in time.

In this context, it is important to determine from what moment the clock actually starts running. The analysis shows that contracting authorities use one of two reference points: 

• the opening of proposals, which virtually coincides with the submission deadline;
• the determination of the selected winner (receipt of an automated system notification).

When publishing an RFP, a contracting authority may set the proposal submission deadline at its own discretion, subject to the minimum requirements of clause 57 of the Procedure — the deadline may not be less than two working days from the date of publication. Formally, this requirement may be satisfied even where the deadline falls on late evening, midnight, or a weekend. 

Particular concern is raised by the combination of nighttime proposal openings and extremely short deadlines. In 25% of lots with short deadlines, suppliers are given between 1 and 4 hours to provide additional documents after the opening of proposals or the determination of the winner. In half of those cases, the proposal submission deadline and automatic opening fall between 11:00 p.m. and 01:00 a.m. compelling suppliers to submit documents during nighttime hours when most responsible personnel are unavailable. 

As regards the moment of determining the selected winner, under clauses 61–62 of the Procedure the winner is determined automatically upon expiry of the submission deadline and evaluation by the electronic system. In practice, however, this long remained in a gray area, with two competing interpretations: immediately upon opening of proposals, or upon the contracting authority’s confirmation. This has now been resolved. Under the amended clause 62, the contracting authority determines the winner and records its intention to conclude a contract in a protocol that is automatically generated and published in the system. Notification of intent is sent automatically within one day of publication. The start of the compliance period is therefore now more transparent and clear to all suppliers.

Even so, where contracting authorities indicated that the winner would be determined “upon receipt of a system notification,” the combination of short deadlines and uncertainty about when that notification would arrive created additional pressure. Winners were compelled to await confirmation without being able to predict the precise start of the compliance period, making timely preparation of documents more difficult. In any case, requirements to provide excessive or unlawfully demanded documents remained unlawful regardless of how that moment was defined. 

Imposing additional requirements through the draft contract not only constitutes a procedural violation but also contradicts the fundamental principles of contract law and public procurement. Contract terms apply only to the parties that have actually concluded the contract. 

Equally legally incorrect is the widespread practice of including provisions such as: “In the event that the Contracting Authority is not provided with such documents (as defined in the draft contract), the Contracting Authority shall treat this as a written refusal by the participant to sign the contract, and shall accordingly reject such participant’s proposal pursuant to subclause 2 of clause 64 of Cabinet of Ministers Resolution No. 822 of September 14, 2020.”

Subclause 3 of clause 64 of the Procedure provides as a ground for rejection only the selected winner’s written refusal to sign the contract. Under Article 207 of the Civil Code, a legal transaction is considered to have been effected in writing if its content is recorded in document(s) exchanged by the parties, including through information and communication systems. A refusal to conclude a contract has legal force only if made in writing by a person with authority to sign it — the selected winner, not merely a procurement participant — and communicated to the other party. The failure of a participant or winner to take certain actions or submit documents, even if such actions are provided for in the draft contract, cannot therefore be treated as a written refusal to sign.

Such conditions create fertile ground for abuse. Formal procedural compliance combined with additional barriers at the contract conclusion stage creates the appearance of competitive tendering while in practice restricting participation to a narrow pool of suppliers who, in certain cases, may be connected, resulting in procurement at inflated prices and inefficient use of public funds.

For example, in February 2025, a gymnasium in Kirovohrad Region procured three types of coal. The draft contract required participants to submit over a dozen documents — including an underground mining permit and financial statements — within 24 hours of the opening of proposals. The contracting authority rejected 8 out of 9 proposals and concluded a contract at the highest price of UAH 299,700, while the lowest offer was UAH 182,000. In another case, the Vanchykivtsi Village Council’s coal procurement required a set of documents within 24 hours of the winner being determined. According to suppliers, proposals were rejected even where the documents were submitted. The contracting authority rejected 8 out of 9 proposals and concluded a contract for nearly UAH 2.6 million, against a lowest tender of UAH 1.5 million. 

Overall, in the analyzed sample, the gap between the lowest and winning tenders in procurements with unlawful requirements or short deadlines amounted to UAH 28.5 million — contracts ended up costing nearly 40% more than they could have.

Such violations have already drawn the attention of law enforcement and courts. A number of criminal proceedings have been opened for misappropriation of public funds in RFP procedures (case numbers 42024222140000071, 12025082210000241, 12025160000000217). A court judgment has also been handed down (No. 573/1300/25) finding that the contracting authority’s actions — in particular, setting a 1-hour deadline for an excessive list of documents — resulted in the rejection of the majority of economically advantageous proposals, contract conclusion at an inflated price, and inefficient use of public funds.

As part of the study, we spoke with suppliers about their direct experience practice of applying additional requirements and barriers at different stages of procurement. Some noted that in most procurements with additional requirements, contracting authorities either tailor conditions to a specific supplier or mechanically copy draft contracts from other RFPs. They also noted that contracting authorities sometimes justify excessive requirements by the desire to minimize their own risk in connection with potential post-delivery inspections. One supplier reported instances of pressure from competitors filing complaints with law enforcement, after which contracting authorities are required to justify the price-to-quality ratio of the coal delivered. 

We also approached individual contracting authorities for their perspective. Most said the primary purpose of such measures is to “play it safe” against the risk of receiving low-quality coal mid-heating-season or dealing with unreliable suppliers or fraudsters. They noted that even where contractual penalties exist, they often lack the resources for lengthy court proceedings. Regrettably, some contracting authorities, when their attention was drawn to potential violations, responded dismissively or claimed not to recall the details. It is also worth noting that some contracting authorities interpret certain legislative provisions at their own discretion — for example, taking the view that requiring documents and contract signature within 24 hours does not conflict with the statutory five-calendar-day deadline for concluding a contract.

Conclusions

55% of RFPs for coal procurement contain requirements to provide documents not provided for by law, and 52% set short submission deadlines.In the representative sample, winning tenders in procurements with unlawful requirements and disqualifications were on average nearly 40% more expensive than the rejected lowest-priced tenders.

These statistics relate exclusively to coal category procurements, not to all RFPs on Prozorro Market. The situation may vary by commodity, and there may be categories where this problem is not systemic. The study does, however, identify specific vulnerabilities in the RFP process and illustrates the potential scale of problems in certain categories.

• The most effective remedy would be a review mechanism in Prozorro Market, currently being developed under the draft new Law on Public Procurement. However, that process is lengthy and the new mechanism will not cover all RFP-based procurements. 
• The situation of unlawful rejections on grounds of alleged refusal to sign would improve with e-contracting, which is also yet to come. But these need not be the only solutions. 

It is therefore worth introducing a range of additional instruments to reduce abuse risks, enhance legal certainty, and strengthen contracting authority capacity.

• Enable monitoring of RFPs by the State Audit Service.

The State Audit Service does not currently monitor RFPs. Whether it has the legal authority to do so is disputed due to ambiguous wording in the procurement rules. It would therefore be advisable either to confirm formally that monitoring is permitted or to amend the legislation accordingly. Even selective monitoring and sanctioning of individual violators can deter future violations.

• Develop and introduce standard contracts.

The e-catalog currently has no mandatory contract templates for commodity categories, and the Ministry of Economy lacks the authority to approve them. The Ministry should be granted that authority and standard contracts approved that set out the permissible terms for coal procurement, leaving contracting authorities to fill in only the key parameters — delivery and payment terms and quantity. This would unify procurement terms, ensure legislative compliance, and simplify preparation without restricting contracting authorities from reflecting their specific needs. These should subsequently be introduced as e-contracts.

• Close the hard coal category in Prozorro Market.

Given that over 50% of procurements in this category contained unlawful requirements, coal procurement through RFPs should be restricted. Procurement would then take place through a method under which businesses may challenge discriminatory requirements and auditors may carry out monitoring. 

• Develop and introduce universal guidance notes for procurement through the electronic catalog.

Such notes will help authorized persons conduct RFPs correctly, apply legislative provisions accurately, and avoid excessive or discriminatory conditions — contributing to more transparent, predictable, and high-quality catalog procurement.

• As electronic contracting develops, introduce automated pre-screening of draft contracts in the e-catalog as a risk indicator for supervisory authorities.
  The algorithm could detect keywords and language conflicting with legislation and the Procedure — such as “certificate,” “declaration,” “permit,” “within X hours of the opening of tenders.” Where such indicators are found, the system could generate risk signals or reports for supervisory authorities. This will become technically feasible only once electronic contracting is in place, as the system currently cannot automatically read and analyze file contents.

These recommendations will help eliminate one method of circumventing the rules in coal procurement and more broadly improve the efficiency and transparency of RFP-based procurement. Efforts must also continue to find approaches that allow contracting authorities to minimize the risk of receiving substandard goods, while protecting bona fide participants from artificially created obstacles and bad-faith practices.

This research was made possible with the support of the MATRA program of the Embassy of the Kingdom of the Netherlands in Ukraine. Responsibility for the content lies with the author and does not necessarily reflect the official position of the Embassy.

This research was developed by

Team lead: 

Ivan Lakhtionov, Deputy Executive Director of TI Ukraine for Innovative Projects

Authors of the research:

Viktoriia Hermasheva, Projects Assistant, TI Ukraine

Kateryna Rusina, Project Manager at DOZORRO

Seven buildings from scratch

In 2024–2025, seven tenders for the construction of new apartment buildings in Borodianka were announced through the Prozorro system. They are to be built on the sites of residential buildings destroyed by the Russians and completed by the end of 2026. The contracting authorities for these projects are the Recovery and Infrastructure Development Service in Kyiv Region and the Department of Regional Development of the Kyiv Regional State Administration.

Of the seven sites, two are nine-story buildings located at 359 and 353 Tsentralna Street. Another, at 427-A Tsentralna Street, is eight stories high. Three seven-story buildings are being constructed at 371, 326, and 324 Tsentralna Street. The building with the fewest floors is a six-story one at 340 Tsentralna Street.

Together, these buildings are expected to provide housing for 421 families. The largest one, at 359 Tsentralna Street, is designed for 105 apartments, while the smallest, at 340 Tsentralna Street, will contain only 20 apartments.

The apartments are to be handed over to residents with basic finishing. Tile will be laid on the floors and walls in kitchens, hallways, and bathrooms, while living rooms will have laminate flooring and wallpaper. In addition, kitchens will be equipped with stoves and sinks, and bathrooms with toilets, washbasins, and bathtubs. All buildings will also include shelters.

Six of the seven projects include non-residential premises for public utilities and commercial facilities. For example, according to Suspilne, 869 square meters in the eight-story building at 427-A Tsentralna Street will be allocated, at the request of the Borodianka Settlement Council, for a social assistance center and two shops.

Cost per square meter

Why simple division does not work

At first, we planned to calculate the cost per square meter using the approach we normally apply: subtract the cost of the shelter and other project-specific components from the total construction cost, then divide the result by the total apartment area. This is the same methodology we previously used when analyzing the construction of social housing for internally displaced persons in Zhytomyr.

However, we ran into problems almost immediately. The design documentation did not include separate cost estimates for shelter construction. In addition, for one of the buildings—at 427-A Tsentralna Street—the total construction cost also included demolition work. As a result, we could not simply “subtract the extras” and apply that methodology.

To sort out the details, we began sending requests to the contracting authorities. We asked them to explain exactly how much shelter construction cost for each building and, in one case, to provide the demolition costs separately. This process turned out to be lengthy and, frankly, exhausting. Some of the responses were general in nature: the contracting authorities explained that the shelter was part of the building and that its cost had not been itemized separately in the estimate. In other cases, they provided a notional amount calculated as a certain percentage of the total project cost. However, our analysis was based on the actual prices in the signed contracts. That means the cost of shelters could have changed during the procurement process. Because there was no uniform approach in the documentation, we were ultimately unable to obtain equally precise data for all sites.

As a result, it became clear that calculating the cost per square meter using the methodology applied in the Zhytomyr case was simply impossible here. Despite all efforts to clarify figures and match the answers, received data remained too inconsistent.

In addition, almost all the buildings include substantial non-residential space, which directly affects the overall construction cost even though it is not housing. Because of this, the simple ratio of “total cost / residential area” inevitably distorts the real cost per square meter.

Address	Contract, UAH million	Adjusted contract, UAH million	Additional agreement, UAH million	Additional agreement, UAH million	Total construction cost, UAH million
359 Tseltralna	285.7				285.7
353 Tseltralna	258.5				258.5
427-A Tsentralna	396.9	315.5	122.4		437.9
371 Tseltralna	280.1	277.5	23.4		300.9
326 Tseltralna	123.2	122.7	30.4		153.1
324 Tseltralna	125.2		61.9		187.1
340 Tseltralna	81.9	16.8	11.9	77.2	105.9

 

A different formula, different results

That is why, for this analysis, we applied a different formula. It is not perfect, but it allows us to reduce these projects to a common denominator and at least approximately compare them with one another and with market indicators. To do this, we included not only the contracts for the direct construction of the buildings, but also other related agreements from Prozorro—for design, author’s supervision, technical supervision, and connection to utility networks. We combined all of these into one total project cost. We then compared that total with the apartment area to determine what share of the funds effectively went toward housing. After that, we divided the resulting figure by the total apartment area and thus calculated a notional cost per square meter.

Project cost * apartment area / Total area = Apartment cost

Address	Total project cost, UAH million	Floors	Apartments	Non-residential area, m²	Total area, m²	Apartment area, m²	Apartment cost, UAH million	Notional apartment cost per sq.m, UAH thousand
359 Tseltralna	290.8	9	105	1331	9777	6700	199	30
353 Tseltralna	264	9	103	1478	10567	6591	165	25
427-A Tsentralna	411.7	8	58	3872	9607	4402	189	43
371 Tseltralna	306.2	9	58	1670	7694	4243	169	40
326 Tseltralna	157	7	35	36	3807	2662	110	41
324 Tseltralna	193.5	7	42	0	3757	2816	145	51
340 Tseltralna	107.8	6	20	149	1914	1345	76	56

The table analysis shows a clear pattern: the fewer floors and apartments a building has, the more expensive each square meter of housing becomes. The lowest cost per square meter is found in the nine-story buildings. In the building at 353 Tsentralna Street, for example, a square meter costs UAH 25.03 thousand, while at 359 Tsentralna Street it costs UAH 29.77 thousand.

The reasons are purely economic. The costs of design, foundations, utility networks, and site improvement are spread across a much larger residential area. As a result, in buildings with more apartments, the cost of one square meter decreases.

The smallest building, by contrast—the six-story building at 340 Tsentralna Street—shows the opposite pattern. Because it includes only 20 apartments, the notional cost per square meter there is the highest, at UAH 56.38 thousand.

What do the estimates show? 

DOZORRO analysts reviewed the cost estimates under the contracts for the construction of seven new buildings. In the case of the apartment building at 353 Tsentralna Street, they identified a likely overpayment of UAH 13.7 million. The biggest concern was the price of 12 mm A-III rebar. The contractor, Ukrainian Construction Company LLC, plans to supply it at UAH 42,026.40 per ton. By contrast, Metinvest sells it at UAH 33,300 per ton, and Metal-Holding at UAH 34,005 per ton. This means the likely overpayment on rebar alone could reach UAH 3.9 million. It is also worth considering that construction materials for large projects are usually procured in bulk, so their price should be even lower than in retail outlets.

Another item with a noticeable markup is Knauf MP-75 plaster. In the estimate, it is priced at UAH 16.51 per kilogram. For comparison, Leroy Merlin Ukraine sells this plaster at UAH 11.96 per kilogram, while Interbudservice offers it at UAH 10.36 per kilogram. This item alone could involve another UAH 1.9 million in overpayment. At the same time, it should be borne in mind that contract prices are dynamic and may be adjusted during contract performance.

DOZORRO analysts also identified a likely overstatement of almost UAH 15 million for the project at 427-A Tsentralna Street. For example, the contractor, Ukrbudengineering, included 200 mm insulation in the estimate at UAH 947.63 per square meter—almost twice the market price. Novatorbud sells this material at UAH 498.36 per square meter, and Cube at UAH 325 per square meter. This line item alone could involve nearly UAH 1 million in overpayment. Later, however, the contracting authority amended the contract price and the list of materials, but never published the updated estimate in the system. It is also worth remembering that the contract price for this project is dynamic. We therefore plan to wait for the completion certificates in order to verify the actual prices of materials.

In two other cases—at 326 and 324 Tsentralna Street—the analysts were unable to objectively assess possible overpricing. The contracting authority also amended the contract prices in those cases, but again failed to publish the updated estimates in the system. In the other buildings, analysts either found no overpricing at all or only minor discrepancies relative to the overall cost of construction materials.

What is the price on the commercial market?

To understand how the cost-per-square-meter figures we obtained compare with the market, it is worth looking at commercial housing prices. According to dom.ria, in December 2025, the average price per square meter in the Kyiv region, excluding Kyiv, stood at $891 (nearly UAH 38,000). It is important to note that the new buildings in Borodianka are designed to be handed over with basic cosmetic finishing already completed.

Since there were no listings for newly built housing in Borodianka at the time of the analysis, we used the secondary market for comparison. This makes it possible to see the full price range depending on the condition of the property—from apartments requiring renovation to fully furnished units.

For example, a two-room apartment at 318 Tsentralna Street is listed at UAH 44,122 per square meter. It has a modern European-style renovation and comes fully furnished with appliances. Another two-room apartment on the same street, also furnished and equipped with appliances, is listed at UAH 48,928 per square meter.

Lower prices are seen in apartments without renovation. At 304 Tsentralna Street, for instance, a four-room apartment is listed at UAH 27,985 per square meter, and a two-room apartment at UAH 26,115 per square meter. Both units are in need of renovation or have no renovation at all, and the building itself is scheduled for repair.

Conclusions

Our analysis shows a direct correlation between a building’s height and the cost per square meter: the taller the building, the lower the average cost per square meter. The nine-story projects appear to be the most economically efficient, as fixed costs—design, foundations, utility networks, and site improvement—are spread across a larger residential area. Overall, the price level in these projects appears market-appropriate and does not indicate systematic overpricing. However, the sites have not yet been completed, so we will only be able to assess their final cost once they are commissioned and we can see all actual expenditures in the completion certificates.

Even where cost indicators appear market-appropriate, the efficiency of such projects depends heavily on how transparently they are implemented. Public access to documentation, the timely publication of updated cost estimates, and proper oversight of construction material prices remain essential conditions for maintaining trust in the reconstruction process and ensuring the rational use of budget funds.

At the same time, the debate over the feasibility of alternative compensation mechanisms, including housing certificates, does not eliminate the problem of destroyed development. Even if such tools may be more beneficial for the state in some cases, destroyed buildings do not simply disappear—they still need to be either restored or demolished and rebuilt. In practice, then, there is currently no real alternative to reconstruction: compensation alone does not solve the problem of destroyed infrastructure.

In this context, Borodianka demonstrates a compromise model of reconstruction, balancing cost savings, social function, and the political need to show results. That is why the key question here is not only how much a square meter costs, but also how consistently, reasonably, and openly the state spends money on recovery.

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.

Summary

Accurately estimating the economic impact of these changes is virtually impossible at this stage. We are unlikely to see the real picture until at least the end of 2026, once the new rules have been in force for six months.

Presumably, the changes will further increase the share of procurements won by VAT-paying participants, who already account for wins in 68.16% of competitive lots by number and 92.14% by value. Cooperation conditions for small businesses are likely to worsen.

The largest impact will be on competitive procurements where VAT-paying participants compete directly with non-VAT-paying participants, approximately 21% of lots by number and less than 10% by value.

However, it is very difficult to forecast whether contracting authorities will actually pay more. The change in evaluation methodology alone is likely to have a limited economic effect. If VAT-exclusive bid evaluation had already been in place during the analyzed period (one year and five months), and participant strategies had remained unchanged, contracting authorities would have paid an additional UAH 250 million, which is less than 0.1% of total contract value.

By contrast, changes in expenditure planning and in setting estimated procurement value may have a more serious effect. Under a worst-case scenario—if all non-VAT-paying contracting authorities add 20% to estimated value as a safeguard—budget pressure could increase to more than UAH 60 billion. Even in that scenario, however, competition could still push actual spending downward. 

On top of this, we must account for likely changes in bidder behavior, which are even harder to predict.

Evaluating bids without VAT may also increase price transparency.

In practice, the most difficult adjustment, especially at the beginning, will be for contracting authorities, which will need to adapt mid-budget year. We expect the Ministry of Economy to issue clear guidance with practical instructions on how to calculate estimated value, launch procurement procedures, and conclude contracts under the new rules. 

That said, the most significant impact on the sector will likely come not from procurement-rule changes, but from tax reform—specifically, the draft law abolishing the separate upper VAT-liability threshold for individual entrepreneurs under the simplified taxation system. The current threshold is over UAH 9.3 million and may be reduced to UAH 1–4 million, in line with the rules applied to other entrepreneurs. 

How the new approach to setting estimated value will work

For now, the contracting authority determines how to announce a procurement—whether the estimated value is stated inclusive of VAT or exclusive of VAT. Bids are evaluated based on their total final price, which includes 20% VAT (or another applicable rate) if the bidder is a VAT payer.

If the changes take effect, the contracting authority will indicate the value inclusive of VAT in the procurement plan, but exclusive of VAT in the procurement notice itself. Bids will also be reviewed exclusive of VAT. If a VAT payer wins, the VAT amount will be added to the bid price at the contract-signing stage. In this way, the final contract value will increase, but it will not exceed the procurement value stated in the plan. 

Why exclude only VAT, given that it is not the only tax that differs across businesses? Most likely because VAT is an indirect tax—effectively paid (financed) by the buyer, while the business only administers and remits it to the budget. By contrast, most other taxes—including the single tax for individual entrepreneurs and corporate income tax—are direct taxes borne by the business itself.  

Do the proposals align with EU rules?

In the explanatory note to the draft government resolution, the government stated that the changes are consistent with the European approach to estimated-value setting and bid evaluation.

This claim cannot be fully endorsed. Directive 2014/24/EU, which regulates public procurement in the EU, states that contracting authorities must calculate estimated procurement value exclusive of VAT. At the same time, the directive does not regulate VAT treatment at the bid-evaluation stage. 

VAT payers among contracting authorities and participants

According to BI Prozorro and the YouControl analytical system, non-VAT payers predominate among contracting authorities, accounting for 78.47%. This is expected, since most of them are budget-funded institutions. The remaining 21.53% of contracting authorities are VAT payers—for example, state-owned enterprises. 

If we look at all market participants (in both direct and competitive procurement), the overall status split is similar:

• non-VAT payers — 74.76%
• VAT payers — 25.24%

Note: In further calculations, we excluded CPV 3300 Medical equipment, pharmaceuticals, and personal care products, because some medicines and medical devices are taxed at a 7% rate. Procurements in preferential categories were not excluded from calculations, since separating them requires manual processing.

In competitive procurement, 88.03% of procedures were announced inclusive of VAT. These procedures accounted for 79.56% of the total value.

In competitive lots, the share of VAT-paying participants rises to 50.56%. This can be explained by the fact that competitive procurements are higher in value, while companies and individual entrepreneurs become VAT payers once they reach a certain annual income threshold. VAT payers also win more often. Over the nearly one-and-a-half-year period we analyzed, they won 68.16% of competitive lots. By value, they accounted for 92.14% of contracts.

How competition may change

In previous years, VAT payers argued that they were at a disadvantage compared with non-VAT payers because they had to add VAT to their bid price. However, as noted above, in competitive procurement they already receive roughly two-thirds of contracts by number and 92% by value. Once the changes take effect, VAT payers will likely win more often, but a substantial increase in their contract share is unlikely. Much will also depend on their interest in smaller lots. 

The shift to VAT-exclusive bid evaluation will primarily affect tenders where non-VAT participants compete directly against VAT payers. During the study period, the distribution was as follows:

• • only non-VAT participants — 21.66%
  •  only VAT-paying participants — 57.01%
  • both participant types — 21.1%

It is also important to note that, when bids are evaluated exclusive of VAT, the balance may tilt in the opposite direction, with VAT payers gaining the advantage—because they may claim input VAT recovery on procurements they previously made with VAT included. As a result, even where the nominal price of goods is the same, VAT payers’ effective costs may be lower.  Under such conditions, there is a risk of small businesses being crowded out of public procurement.

Will non-VAT contracting authorities have to pay more?

This is a difficult question to answer. On the one hand, it is possible to estimate, at least approximately, the economic effect of harmonizing bid-evaluation methodology itself. On the other hand, potential changes in how contracting authorities plan expenditures and set estimated procurement value also need to be considered. Of course, bidder behavior will matter as well, and that behavior may also change. However, in the case of bidders, probable scenarios are significantly harder to forecast.

1. Contracting authorities evaluate bids exclusive of VAT: economic effect

Perhaps the main concern procurement practitioners raise about evaluating all bids exclusive of VAT is that, in the end, contracting authorities may overpay. 

Example. A contracting authority allocates UAH 120,000 in its annual plan for a procurement and announces the procedure exclusive of VAT—i.e., with an estimated value of UAH 100,000. Two bidders participate: a VAT payer with a bid of UAH 95,000 and a non-VAT payer with a bid of UAH 97,000. Under VAT-exclusive evaluation, the VAT payer wins. At the contract stage, 20% VAT is then added. As a result, the final contract value is UAH 114,000—which is UAH 17,000 more than it would have been if the authority had signed with the non-VAT payer.

For VAT-paying contracting authorities, this rule change is unlikely to have a material effect. It is already more advantageous for them to announce procurements exclusive of VAT, and they can do so under current rules. If a VAT payer wins, the additional VAT amount included in the contract can later be recovered through input tax credit. By contrast, the changes will affect non-VAT-paying contracting authorities (about four-fifths of all authorities): they cannot recover paid VAT, and the bid that appeared cheapest exclusive of VAT may become more expensive than others once 20% VAT is added.

We analyzed whether winner selection in past procurements would have changed if bids had been evaluated exclusive of VAT, and by how much contract totals would have increased. 

For procurements where VAT payers and non-VAT payers competed against each other, we converted bids to net amounts (exclusive of VAT), identified winners based on those net amounts, and added 20% tax if the winner was a VAT payer. We then calculated differences between the final bids of the simulated winners and the actual winners.

If, during the study period, non-VAT-paying contracting authorities had evaluated all bids exclusive of VAT, total contract value would have been UAH 250 million higher than it actually was.

At the national level, over nearly one and a half years, this is a relatively small amount—0.06% of the total value of contracts awarded by non-VAT-paying contracting authorities. This is because these two bidder types meet in tenders infrequently, in only about one-fifth of cases, and differences between their bids were usually minimal, sometimes even less than one hryvnia. Potentially, this gap in final bid value could widen if the new rules are introduced, because non-VAT participants would need to cut prices more aggressively to win tenders. 

2. To hedge risk, contracting authorities may plan estimated value and expenditures 20% higher

Because contracting authorities are concerned that they may have to pay more after the reform, they may plan for higher expected expenditures. Some may simply budget amounts 20% higher than before to remain on the safe side and ensure they can procure the required quantity.

The worst-case scenario is that all non-VAT-paying contracting authorities do this in all cases. In that event, demand for local and state budget expenditures could increase by UAH 61.78 billion per year. In practice, the scale will likely be smaller, and this pressure may be one-off: after the first year of VAT-exclusive bid evaluation, there will be actual data showing what costs what in Prozorro and how the reform has functioned. Even so, this underscores the need to support contracting authorities in setting estimated value—and not only to account for VAT correctly.

We will see higher-quality price statistics on Prozorro

Now, if a contracting authority announces a procurement inclusive of VAT, a non-VAT payer may submit a bid within the full estimated value. As a result, that bidder may receive funds that were originally set aside in case VAT had to be paid.

Example. A contracting authority announces a procurement with an estimated value of UAH 120,000 inclusive of VAT. Accordingly, UAH 20,000 of that estimated value is VAT, which would need to be included in the contract and paid if a VAT payer wins. Two bids are submitted: a VAT payer at UAH 119,000 and a non-VAT payer at UAH 118,000. The authority signs a contract without VAT at UAH 118,000. That is already UAH 18,000 higher than the estimated value of the procurement item exclusive of VAT.

In practice, because non-VAT-paying contracting authorities are generally indifferent as to which status of supplier they contract with, they usually have no reason to analyze item value exclusive of VAT. Their priority is to obtain the most economically advantageous bid. Therefore, they may mark the estimated value as “inclusive of VAT” simply to preserve the option of contracting with a VAT payer later.

We examined competitive VAT-inclusive procurements in which contracts were awarded to non-VAT payers. Specifically, we calculated estimated value exclusive of VAT and the gap between that figure and the signed contract amount.

In 70.75% of cases (93,500 lots out of 132,100), the contract value with a non-VAT payer exceeded estimated value exclusive of VAT. The total excess amounted to UAH 3.98 billion, or 7.95% of the initial total value of those agreements. 

Two interpretations are possible:

• either prices are higher than they could be, because non-VAT payers can submit bids up to the full estimated value in procurements where VAT is included;
• or estimated procurement value is understated, and the additional 20% set aside for VAT effectively brings it closer to market level.

We also identified a number of State Audit Service monitoring findings in which violations were recorded when a winning non-VAT bid exceeded the estimated procurement value net of VAT. For example, this occurred in a overhaul procurement for Kyiv City Clinical Hospital No. 1, where the contract was signed without VAT at UAH 59.1 million against an estimated value of UAH 61.1 million inclusive of VAT, and in a procurement for green-space maintenance in Vynohradiv, where the contract was UAH 1.67 million without VAT against an estimated value of UAH 1.69 million inclusive of VAT.

This practice is not widespread, and there are also monitoring cases in which auditors did not identify violations in similar circumstances.

In this context, VAT-exclusive bid evaluation may be beneficial: at a minimum, it can improve how market value is reflected in procurement pricing. At the same time, there is a possibility that the changes will also incentivize non-VAT participants to reduce prices.

Will these changes increase tax revenues?

A significant fiscal effect from procurement-rule changes alone should not be expected. Public procurement participants account for only 1.6% of all active business entities. Of course, part of the overall business-entity count consists of individual entrepreneurs who in practice operate under employment-like arrangements. But even if we compare procurement participants only with legal entities, their share is still below 5%. In addition, VAT payers already win 68% of contracts in competitive lots, which account for 92% of the total contract value in competitive procurement. 

In some cases, communities will indirectly finance the state budget, except where VAT is recoverable. This refers to situations in which a VAT payer’s final winning bid (after VAT is added) exceeds a non-VAT payer’s bid. As the calculations above show, however, these amounts are small.

What will change for VAT-paying contracting authorities?

For these organizers, it is more advantageous to announce procurement exclusive of VAT, because even if a VAT payer wins and VAT must be included in the contract value, the tax can later be recovered through input tax credit. In general, they can already announce procurement this way—but the data show this is done in only 13.38% of cases.

In 2024 and the first five months of 2025, VAT-paying contracting authorities signed UAH 25.7 billion in agreements with non-VAT participants. If they had evaluated bids exclusive of VAT, non-VAT participants would have won less often, and the total value of winning bids would have been UAH 600 million lower (accounting for input tax credit). Why this occurs requires additional research.

Contracting authorities can already announce procurement exclusive of VAT, but State Audit Service monitoring conclusions sometimes treat it as a violation when the final contract amount inclusive of VAT exceeds the estimated value stated exclusive of VAT.

For example, in January 2023, state enterprise Dobropilliavuhillia-Vydobutok ran a procurement for pipes. In the procurement plan, it stated an estimated value inclusive of VAT at UAH 7.8 million, but announced the tender itself exclusive of VAT at UAH 6.5 million. A VAT payer won with a bid of UAH 6.48 million exclusive of VAT; VAT was then added in the contract, bringing the final amount to UAH 7.78 million. Therefore, the contracting authority followed the steps the government now proposes to make mandatory. Nevertheless, the Chernivtsi Regional Office of the Western Office of the State Audit Service identified this as a violation, stating that the authority “did not reject the bidder’s tender proposal as one whose price exceeds the estimated procurement value determined by the contracting authority in the open-tender notice.” 

However, this is not a consistent agency practice, and opposite decisions also exist. For example, the Odesa branch of Ukrainian Sea Ports Authority, in its annual plan for territory-maintenance procurement, set the estimated value at UAH 7.8 million inclusive of VAT, while announcing the tender exclusive of VAT at UAH 6.5 million. A VAT payer won, and the contract value inclusive of VAT was UAH 6.54 million. During monitoring, the Eastern Office of the State Audit Service asked about the estimated-value overrun, but after the contracting authority’s explanations, found no violation on this point.

Conclusions

In summary, accurately estimating the economic impact of these changes is practically impossible at this point. We are unlikely to see the real picture until at least the end of 2026, once the new rules have been in force for six months.

What can be stated clearly is that the reform is unlikely to produce a major fiscal effect—it affects a very small share of businesses at the national level.

Presumably, the changes will further increase the share of procurements won by VAT-paying participants, who already account for wins in 68.16% of competitive lots by number and 92.14% by value. Cooperation conditions for small businesses are likely to worsen.

The largest impact will be on competitive procurements where VAT-paying participants compete directly with non-VAT-paying participants, approximately 21% of lots by number and less than 10% by value.

However, it is very difficult to forecast whether contracting authorities will actually pay more. The change in evaluation methodology alone is likely to have a limited economic effect. If VAT-exclusive bid evaluation had already been in place during the analyzed period (one year and five months), and participant strategies had remained unchanged, contracting authorities would have paid an additional UAH 250 million, which is less than 0.1% of total contract value.

By contrast, changes in expenditure planning and in setting estimated procurement value may have a more serious effect. Under a worst-case scenario—if all non-VAT-paying contracting authorities add 20% to estimated value as a safeguard—budget pressure could increase to more than UAH 60 billion. Even in that scenario, however, competition could still push actual spending downward. 

On top of this, we must account for likely changes in bidder behavior, which are even harder to predict.

Evaluating bids exclusive of VAT may also improve price transparency, because it allows comparison of the net cost of goods and services without the indirect-tax component. It may also help reduce prices offered by non-VAT participants.

In practice, the most difficult adjustment, especially at the beginning, will be for contracting authorities, which will need to adapt mid-budget year. We expect the Ministry of Economy to issue clear guidance with practical instructions on how to calculate estimated value, launch procurement procedures, and conclude contracts under the new rules. 

Ultimately, however, there is another major variable: the draft law abolishing the separate upper VAT-liability threshold for individual entrepreneurs under the simplified taxation system. The current threshold is over UAH 9.3 million and may be reduced to UAH 1–4 million, in line with the rules applied to other entrepreneurs. Tax changes may affect the sector more strongly than procurement-rule changes themselves. The number of non-VAT participants would naturally decline, as they would have to register as VAT payers. And VAT administration is fairly burdensome for entrepreneurs; unless it is simplified, this may affect both the number of businesses and the prices of their goods and services.

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. 

Research team

Project Lead:
Ivan Lakhtionov, Deputy Executive Director of Transparency International Ukraine for Innovative Projects

Author:
Kateryna Rusina, Senior Project Manager at Transparency International Ukraine

Co-authors:
Ivan Lakhtionov, Olha Nos, Liliia Lakhtionova, Anna Yuldashova