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.

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

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.

An ambitious project with slow implementation

Since Zhytomyr became one of six cities in Ukraine where social housing for internally displaced persons is being built with support from the European Union, one such large-scale initiative involves the construction of an entire residential complex for IDPs. The project is coordinated by NEFCO — an international partner helping Ukraine implement numerous projects funded through grants and concessional loans. Zhytomyr had previously cooperated with NEFCO before the full-scale war: with their support, the city modernized its heating networks and insulated kindergartens and schools. Now Western partners are financing the construction of housing for displaced persons.

On Chervonyi Lane, four apartment buildings with 116 flats are being constructed, designed to accommodate over 400 people. The project’s estimated cost is around half a billion hryvnias, and the procuring entity is the Major Construction Department. The design includes one- and two-room apartments, with all ground-floor units adapted for people with disabilities. The complex is intended to be energy-efficient, with solar panels installed on the roofs and a solid-fuel boiler providing heating. The territory will include playgrounds, green areas, and parking for 48 cars. A shelter for residents is also planned within the complex.

The contracts were signed last spring, and construction was initially expected to be completed by the end of September 2025 (the deadline was indicative). However, as of September 25, only 53% of the work had been completed. 

In a comment to local journalists, the head of the department, Viacheslav Hlazunov, admitted that it would not be possible to finish construction by the end of September. They will strive to complete it by the end of the year so that new residents can move in early next year.

Who is building the housing?

The main contractor for this project is ArtHaus LLC, a company owned by the well-known local construction family Boblo. In March 2024, two contracts worth nearly UAH 310 million were signed with the company. Under these agreements, it is to build the residential blocks, carry out partial apartment repairs, and provide minimal furnishing. The costs of design, expert review, supervision, and additional works are not included — they are financed separately by donors. This year, the total value of the contracts was reduced by UAH 18.5 million. The official reason was the cancellation of certain works, though the municipal department did not specify which ones when responding to an information request.

A full account of this family’s business record and projects would take considerable time, so let us highlight only the key points. The core company of Petro and Nataliia Boblo’s family used to be Zodchestvo LTD, which could easily be called the favorite of the city’s Major Construction Department — the firm regularly secured its contracts. The city administration also had a good relationship with the entrepreneurs themselves. In 2018, Zhytomyr Mayor Serhii Sukhomlyn awarded Petro Boblo a medal For Merits to the City. The award was explained as recognition of his active role in the city’s development, though, notably, it was his wife Nataliia who accepted it on his behalf. 

One of Zodchestvo LTD’s most significant projects was the Transparent Office, for the reconstruction of which tens of millions of hryvnias were allocated. However, over time, the project became the subject of criminal proceedings due to suspected abuse of office. The firm disappeared from the public radar, and ArtHaus took its place. This practice is quite common in Ukrainian business: once a company becomes implicated in a criminal case and risks losing contracts due to reputational issues, it is easier to abandon it and set up another — owned by the same people.

Formally, these two companies are different entities, but in essence, they belong to the same informal construction group. They even share the same legal address and have common projects in their portfolios. Another piece of evidence is found in the asset declaration of Petro Boblo’s son, Andrii, who in 2017 worked at the Zhytomyr Regional State Administration’s Department of Architecture and the State Architectural and Construction Inspectorate. In his declaration, he reported income from both companies as well as his father’s income from leasing construction equipment to them.

At the beginning of this year, following Petro Boblo’s death, control over the company fully passed to his wife, Nataliia, while Serhii Diachenko became the director.

How the contractor was selected

Since the project is partly funded by international partners, the tender was conducted under the procurement rules of the international organization. However, the contractors were not chosen directly by the donors — the right to make the final decision was delegated to the Zhytomyr City Council, while NEFCO was responsible for checking the company’s integrity and approving the signing of the contract.

Five companies took part in the tender. ArtHaus offered the lowest bid, slightly undercutting ElitBud-1, the only other firm whose proposal fit within the budget. Journalists had previously reported links between these companies — for example, one of them had rented construction equipment to the other. The remaining participants offered higher prices and were not considered further. 

Interestingly, there were several tenders for this project. Although the construction of social housing for IDPs in Zhytomyr is funded by Western partners, part of the expenses is still covered by the city budget. The local budget finances finishing works, the construction of the shelter and surrounding area, and the connection of external utilities. In December 2023, the department held a separate tender for these works, which resulted in a 61-million-hryvnia contract — again signed with ArtHaus LLC. 

Even at the announcement stage, it was clear that the tender conditions favored a “friendly” company. One of the requirements was to provide an inspection report confirming that the bidder had visited the construction site, signed by representatives of the procuring entity. This requirement is potentially discriminatory: the department can decide at its own discretion whom to sign such a report for and whom to refuse. Even if a company visited the site, the procuring entity could simply deny the signature, which would become a formal reason for rejecting its bid. Such conditions limit competition and create an advantage for “insiders,” effectively violating the principles of openness and equal access to public procurement. The Antimonopoly Committee of Ukraine has repeatedly recognized this requirement as a violation.

Nevertheless, the Major Construction Department insists that it acted within its powers and followed all legal procedures, assuring that there were no prior arrangements with the contractor.

“There were no discussions that the company ArtHaus LLC should receive the contract,” — the department stated in its response.

However, by awarding ArtHaus the December 2023 tender, the officials effectively opened the door for the same company to win the subsequent international tender. It would have been illogical for multiple contractors to work simultaneously on the same construction site. Thus, by “properly” drafting the tender requirements once, the city

Prices under scrutiny

Before examining the issue of markups in this project, it is worth briefly summarizing what is already known. A major project funded by both international partners and the city budget was awarded to a favored construction group. It was done rather boldly — one of the tender’s documentation sets was clearly written to exclude unwanted competitors. Meanwhile, the winning company has been slow to justify the trust placed in it, as the construction progress leaves much to be desired. It is already evident that residents will not move into the new buildings this year — they will have to wait longer.

If this were the only issue, it might have been overlooked. But there is another — perhaps the most important — question: the efficiency of fund use. Out of the total budget, the contractor has already received almost UAH 120 million (and note: since the construction is financed by grant funds, it is exempt from VAT). A review of the cost estimate revealed that the company supplies certain materials at inflated prices. It is important to note that the final resource statements (actual expenses) list material costs without VAT, yet even so, they exceed retail prices in construction stores, which already include VAT. 

Let’s start with mineral wool slabs. The city department paid UAH 683 per square meter, while the market price averages between 525 and 562.50 hryvnias. This means that for this single item alone — depending on how one accounts for VAT — the overpayment may range from UAH 230,000 to UAH 380,000. 

Concrete blocks are among the most essential building materials. ArtHaus supplied them at UAH 2,895 per unit, whereas Kovalska sells the same blocks for 2,235, and Alex Group for as little as 1,807. Thus, the overpayment may have reached from UAH 364,000 (with VAT) to UAH 570,000 (without VAT). Typically, wholesale purchases bring lower prices — but here, the opposite is true: materials cost more than in retail.

And windows are no exception. They were purchased at UAH 6,377 per square meter, while the local manufacturer Ocean offered them for 5,055, and STEKO for 4,271. That is another UAH 360,000 to UAH 575,000 in potential overpayment, depending on VAT calculations.

On just these three positions, nearly one million hryvnias could have been saved. In total, we estimated about five million hryvnias in potential overpayments. It should be noted, however, that part of this difference may be explained by the fact that the contractor did not list warehouse or storage costs separately, which might have been included in the materials’ issue prices.

Official explanations vs. the real situation

The municipal department insists that the contractor independently analyses the market and sets prices based on its internal database. We reached out to ArtHaus director Serhii Diachenko for comment but received no response. NEFCO, on the other hand, explained that the contractor’s proposal had passed the state examination and was therefore deemed justified.

“As we understand it, the state examination evaluates the price list based on the quantities and volumes of materials specified in the project documentation and verifies the accuracy of the applied pricing methodology. Since the proposal received a positive conclusion from the state examination, the prices were also positively confirmed. The contractor was responsible for assessing its offer in terms of delivery costs and the required quality of materials. NEFCO set specific requirements for the quality of insulation materials,” — NEFCO commented.

In other words, Western partners relied on the local authorities and delegated responsibility for price verification to the Ukrainian side and its expert bodies. However, according to Dozorro’s research, the state expert organization does not verify prices for individual construction materials — it merely assesses the general reasonableness of expenditures. As a result, no one involved in the process — neither the donor nor the procuring entity, which was supposed to do so — actually analyzed the prices. This creates a gap in the control system.

The city budget also suffers

A similar situation applies to the works financed from the city budget. ArtHaus has already received more than UAH 36 million (including VAT). Yet, here too, the cost estimates show inflated material prices — with potential overpayments exceeding one million hryvnias. Since these are budget funds, they are subject to taxation, and because the final resource statements list prices without VAT, we added 20% for a fair comparison.

For instance, B15 (M200) grade concrete was supplied at UAH 3,621 (with VAT) per cubic meter, including storage costs. In Zhytomyr, the same concrete can be purchased from Trading House Beton for UAH 2,550, or from Buddelux for 2,400. This amounts to around UAH 164,000 in excess costs — funds that could have been used for other essential needs.

The same pattern appears with cast-iron manholes (D400), purchased at UAH 10,032 each. Their actual market price is much lower: Teploarmatura sells them for UAH 7,488, while Impex-Group offers them for as little as UAH 5,925. The likely overpayment here is about UAH 325,000.

Price per square meter — too much?

There is yet another aspect that rivals both contractor integrity and potential markups in importance: economic feasibility. What is the actual cost per square meter in the upcoming complex? Let’s calculate. In response to our inquiry, the Major Construction Department reported that the total project value is UAH 485 million. 

This amount includes building construction, partial finishing, furnishing, landscaping, utilities, design, and inflation risks — covering both municipal and donor contributions. Since this figure also includes the cost of constructing shelters, installing individual heating units, and mounting solar panels — all relatively unique and costly features — we subtracted them from the calculation. The adjusted total came to UAH 463 million. Dividing this by the total apartment area (6,800 m²) yields UAH 68,000 per square meter.

That’s roughly the same price one would currently pay for a fully renovated apartment in Kyiv’s most prestigious Pechersk district. Yet here we’re talking about social housing in the center of Zhytomyr. For comparison, in Zhytomyr’s Grand City Dombrovskyi comfort-class complex, a one-bedroom apartment with designer renovation, modern appliances, air conditioning, and a walk-in closet costs UAH 65,000 per square meter. In nearby Vinnytsia, a ready-to-move-in two-room furnished apartment in the Residence comfort-class complex sells for UAH 53,000 per square meter. In Odesa, for the same price as a square meter in Zhytomyr’s IDP housing project, one can buy a business-class apartment in Kadorr City — a one-bedroom unit with full furnishing and designer renovation costs about UAH 69,000 per square meter, while a two-room apartment in the neighboring Perlyna business-class complex costs UAH 70,000 per square meter. 

Even in Lviv, where housing prices are among the highest in Ukraine, a one-bedroom comfort-class apartment with a terrace in R2 Residence sells for UAH 72,000 per square meter.

According to Nataliia Melai, head of the Zhytomyr regional branch of the Ukrainian Real Estate Specialists Association, the current average market price for new housing with renovation in Zhytomyr is UAH 57,000 per square meter. In her view, the main factors shaping local housing prices today are location convenience, relative safety, and interior finishing quality. 

This means that the cost per square meter of social housing for IDPs in Zhytomyr exceeds the market price of fully renovated and furnished apartments even in some of Ukraine’s more expensive cities. Paradoxically, for the same amount spent on one square meter in this municipal project, one could buy a comfortable apartment in a private development — not only in Zhytomyr but also in Lviv, Odesa, or Vinnytsia.

Last year, Dozorro analyzed state procurement transactions for rebuilding multi-story buildings destroyed by Russian shelling and concluded that it is more cost-effective for the state to buy ready housing on the market than to build it from scratch.

Conclusion

This was supposed to be a story about help — about how the state, in partnership with international donors, cares for people who lost their homes to war. Instead, it has turned into a very different narrative. The main contractor was a company with long-standing ties to the local administration and evident advantages. One of the tenders even contained a clause that effectively restricted competition, allowing the authorities to decide who could participate. Such practices are not only unfair but also limit opportunities for other companies that could have offered better terms. Construction is proceeding slowly, and there are currently no guarantees that the facilities will be completed on time. The department head has already publicly admitted that work may only be finished by the end of the year — meaning that hundreds of displaced families will once again have to wait.

The most serious issue, however, is the lack of effective oversight over expenditures. Despite being funded by EU grants and municipal resources, neither the donors nor the procuring entity actually verify whether the prices for building materials are justified. As a result, the contractor purchases materials at inflated prices, leading to multi-million-hryvnia overpayments. These funds could have been used more efficiently — for the benefit of society, not private interests.

Zhytomyr’s example shows that even well-intentioned initiatives without proper control carry serious risks. Perhaps the state should reconsider its approach to large-scale housing construction. A more effective solution could be channeling funds into flexible and transparent forms of IDP support, such as housing purchase certificates on the open market. This would give people real choice and ensure transparent use of public money. 

Update

After the article was published, Zhytomyr Mayor Serhii Sukhomlyn, who a year ago became head of the State Agency for Restoration and Infrastructure Development of Ukraine, contacted Glavcom to comment. For balance and comprehensive coverage, we summarize his key points, as he disagrees with the author’s conclusions.

• The cost per square meter of low-rise housing — and in this case, a four-story complex — is higher than that of high-rise construction. Building low structures is an EU donor requirement.
• The cost also includes the construction of shelters, which are mandatory under the project and influence the total price.
• The project provides fully renovated apartments equipped with household appliances, making price comparisons with other complexes in Kyiv or Odesa less accurate.

This article was produced under the “School of Investigative Journalism” program by the Kyiv Media School educational initiative.

Summary

The Ministry for Development proposes a new procurement method for reconstruction — special framework agreements. Although the project is labelled “experimental,” the new rules would apply to a broad range of procuring entities and an unlimited list of potential procurement items.

The initiative’s key risks together create wide opportunities for corruption. Most importantly, businesses would have almost no means to defend their rights within such procurements. Appeals to the Antimonopoly Committee would be unavailable for the qualification stage and for two of the three options at the second stage. At the same time, the Draft provides a low level of legal certainty and a high degree of discretion for procuring entities — opening the door to artificially restricted competition and corrupt arrangements. Particularly risky is the “competitive selection,” which would rely on non-price criteria and withhold part of the bids from public disclosure.

Beyond this, the initiative contradicts the principles of European directives on public procurement, potentially harming Ukraine’s progress toward European integration.

Transparency International Ukraine therefore calls on the Ministry for Development of Communities and Territories of Ukraine to abandon further advancement of this Draft.

Who will buy what under the Draft: first, imagine the scale

Participants in the experiment will not be limited to the Agency for Restoration and its subordinate enterprises, but will also include other central executive authorities, regional and military administrations, the Kyiv City State Administration, and — with consent — local self-government bodies and business entities. Under these conditions, practically any local council, as well as state and municipal enterprises and monopolists, would be able to conduct procurement under the Draft. By the most conservative estimates, more than 7,000 procuring entities could potentially “experiment” under this framework.

The range of what they could buy through this experimental mechanism is equally vast. Primarily, it covers construction works, the development of project documentation and its expert review, and supervision services. But it also extends to the procurement of “goods and other procurement items related to recovery.” The Draft provides no clear criteria for linking a good or service to “recovery.” It only broadly defines that “recovery of a settlement is”:

“…a set of interconnected and coordinated measures, including those related to the construction of real estate objects, aimed at restoring in the settlement social, engineering transport, and energy infrastructure, as well as residential and other buildings and structures, to a state ensuring the creation of a full living environment.”

As is evident, this definition can, at the discretion of the procuring entity, cover virtually any consequence of hostile attacks — for instance, replacing destroyed buses or replanting damaged flowerbeds. Thus, all the risks discussed below will apply to a wide range of procurement transactions.

Without proper appeals and outside the law

Under the Draft, the procuring entity must first announce a qualification selection of candidates for the framework agreement. It publishes an announcement and “tender documentation,” sets qualification and other requirements, and then reviews applications to decide whether to reject a candidate or include them in the framework. Once the agreement is created, the procuring entity may procure only from participants admitted into the framework.

This approach departs from the provisions of the Law of Ukraine on Public Procurement (hereinafter referred to as the Law), under which framework agreements are concluded through open bidding, not a qualification selection.

Under the Draft, candidates would not be able to appeal to the AMCU against discriminatory and/or non-transparent qualification requirements, decisions rejecting them, or decisions admitting competitors into the framework. This is because such a selection would not count as a procurement procedure. Even the deadlines for submitting complaints under Article 18 of the Law are calculated from the deadlines for submitting tender proposals, not applications. Therefore, candidates would have no effective remedy other than going to court.

At the second stage, there are three options for conducting procurement: special open bidding, a request for proposals, or a competitive selection. Of these, only the first option includes a mechanism for appeal to the AMCU. If the procuring entity chooses, for example, a request for proposals, the entire process will take place with no possibility of appeal. In such cases, candidates and participants would be deprived of the key effective means of protecting their rights.

“Turnkey projects”: over 60% non-price criteria and hidden documents

If it is impossible to define all essential terms of a future procurement contract in a framework agreement, the Draft allows the procuring entity to conclude the agreement as is, and at the second stage select a contractor through competitive selection. This method is intended for implementing “turnkey” projects, when the procuring entity plans to procure a package of design and construction services.

Competitive selection is among the riskiest aspects of the Draft. At least 60% of bid evaluation would be based on specific (non-price) criteria. This directly contradicts the Law, which requires that price must account for at least 70% of the evaluation weight — not 40% or less.

The choice of non-price criteria would be left to the procuring entity. The Draft merely provides an indicative list of possible “advantages” to consider when assessing the technical component. This list includes numerous evaluative notions such as “aesthetic appeal,” “originality of architectural solutions,” and “visual representation of the future object.” Building requirements around such subjective features and deciding which projects best comply can easily be done in arbitrary and discriminatory ways. Some provisions of the Draft even suggest splitting the technical component into parts, with the procuring entity setting its own criteria and weighing each.

At the same time, procurement of “turnkey projects” would lack transparency. The information described as the “procurement decision description” would be disclosed only to the procuring entity. Participants and the public would not be able to review — let alone challenge — this description in order to verify the rationale behind the decisions. The Draft also does not clearly define the relationship between the “decision description” and the “technical component.” Thus, it remains unknown what will be included in the “decision description” and therefore hidden from access.

Moreover, the deadline for submitting bids for turnkey projects would not exceed 30 days (and may, therefore, be shorter).

Taken together, such regulation would create favorable conditions for awarding victory to any participant at the discretion of the procuring entity. The procuring entity would be able to embed a subjective approach in the evaluation methodology and implement it under conditions where participants’ proposals are partly concealed, and appeals are impossible.

Even without “turnkey projects” — still risky

Beyond competitive selection, procurement under framework agreements could also be conducted through special open bidding or through a request for proposals. Yet these options are not free of shortcomings.

Most importantly, the Draft carries risks of insufficient transparency and discrimination at the qualification stage and during subsequent requests for proposals. For example, the indicative number and/or volume, place, and indicative timing and/or schedules of delivery or performance are to be stated in the qualification documentation only “if necessary.” In our view, procuring entities should be obliged to provide exact information wherever it is available.

Similarly, when creating a framework agreement, the estimated value of the procurement is calculated only “approximately and indicatively.” This approach allows virtually any estimated value to be stated. It could become a tool for excluding outside participants, since eligibility requirements for turnover — and for turnkey projects, potentially up to 100% of the estimated contract value — are tied to the estimated value. In addition to qualification criteria, the procuring entity would also have the right to set other requirements.

It is doubtful whether sufficient information and time would be available for preparing applications and bids in works procurement. Candidates would have 10 working days to submit applications for inclusion in the framework — potentially including a technical component, if required by the procuring entity. Later, if a request for proposals is announced, bidders would have no more than 3 working days from its publication in the Prozorro system to submit proposals. It is unrealistic to rely on the supposed simplicity of preparing a proposal for a request, since this requires fully calculating the contract price. Furthermore, the Draft is written in such a way that participants might only learn the quantity, place, timing, and estimated value at the request stage, unless the procuring entity provided this earlier. The Draft does not require disclosure of the data needed to calculate contract prices in formats of specialized cost-estimation software, which may also complicate preparation.

The Draft also does not explicitly require the procuring entity to publish a draft contract at the framework qualification stage, though it regulates what to do if essential terms cannot be determined in the framework itself. Without clear rules, there is a risk that candidates will not be properly informed about the terms of future contracts. Moreover, the Draft treats the framework agreement as a procurement method rather than as a legal instrument with specific terms.

In a request for proposals, the procuring entity may establish, if necessary, procedures for agreeing on the contract price. In practice, requirements in Prozorro Market requests are often abused, with additional conditions inserted and non-compliance treated as a refusal to conclude a contract. The Draft provides no safeguards against such practices.

There are also procedural risks. To announce a procurement, applications submitted before the original deadline must first be reviewed. While the Draft commendably allows applications to be submitted after this deadline, it does not prohibit announcing tenders without considering later applications. This creates a risk that procuring entities will launch procurement transactions despite the existence of unreviewed applications submitted during the validity of the framework, thereby ignoring them.

Overall, the Draft offers a low level of legal certainty and grants a high degree of discretion to procuring entities on matters crucial to preparing applications and bids. This approach creates risks of limiting business access to procurement and encouraging the spread of corrupt practices.

What about the limits of authority, compliance with the Law, and EU requirements?

When analysing the Draft, it is important to take a broader view: what place will it hold within the procurement legislation system, and how will it affect that system?

We caution that the Draft, though positioned as experimental, in fact covers an overly wide circle of procuring entities and an unlimited range of procurement items. In such conditions, a significant share of procuring entities, as defined under the Law, would be able to conduct procurement in a manner that deviates from the procedure prescribed by law, for an unlimited scope of items. Such an approach does not reflect the characteristics of an experiment, introduces legal uncertainty into the procurement sector, and will complicate the assessment of procuring entities’ actions by oversight bodies.

As is well known, the authorized body in the field of procurement is the Ministry of Economy. It is the Ministry of Economy that develops and approves legal regulations and implements state policy in the sector. The development of a Procedure that would serve as a source of law for more than a quarter of all procuring entities exceeds the competence of the Ministry for Development, contradicts the Law, and would complicate the regulation of the industry. If each ministry were to develop and submit for Cabinet approval its own procurement procedures for its respective segment, this would threaten the stability of regulation across the field.

Finally, the Draft contradicts the principles of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC. Such steps could harm Ukraine’s European integration progress, provoking a negative response from the European Commission and international partners. This is particularly critical at a time when aligning Ukrainian procurement legislation with the EU acquis is a core focus of the Ukrainian state’s efforts.

If the mechanisms of the Draft were applied to procurements financed under the Ukraine Facility, this could alter previous agreements on the use of certain procedures and mechanisms, and could even jeopardize the disbursement of subsequent tranches under that financing instrument.

What should be done?

To prevent rising corruption risks and regressive steps in the procurement field, Transparency International Ukraine calls on the Ministry for Development of Communities and Territories of Ukraine to abandon further advancement of the Draft.

If existing procurement procedures are indeed insufficient for reconstruction or for addressing other objectives of the Draft, then it is necessary to:

•     identify the shortcomings of current procedures
•     determine any additional objectives of the Draft, if they exist
•   establish a working group to prepare a Procedure that complies with the Law and with EU integration commitments, with the involvement of relevant experts.

This material is funded by the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

A lost year for the pilot

Problems arose at the very start of the pilot project. It lacked formal requirements and criteria for selecting restoration sites. In addition, the object lists had to be coordinated through regional military administrations, which dragged the process out until autumn 2023. 

Already at the first stage, Moshchun dropped out of the pilot — the list of restoration sites there was never approved. 

As a result, the project proceeded with only five localities and nearly 300 sites. More than 250 of them were concentrated in just two villages — Posad-Pokrovske and Yahidne. In contrast, in Tsyrkuny, Kharkiv region, only four sites made it into the approved list, raising questions about the rationale for retaining the locality in the pilot. 

The lengthy selection process directly impacted the project’s funding. Regional Restoration Services were able to start procurement only in mid-September, after budget procedures were completed. As a result, only UAH 559 million — 17% of the planned UAH 3.35 billion — was spent in 2023.

In 2024, the key obstacle for the pilot was delayed funding. The funds were allocated only at the end of the year — likely due to instability in the leadership of the pilot’s key stakeholders, namely the Ministry of Infrastructure and the Agency for Restoration. As a result, procuring entities were unable not only to plan new procurement transactions but even to pay for completed work under previous contracts. Some projects were halted altogether, and in several cases, contracts were terminated. 

As a consequence, there was no significant progress in implementing the pilot during its first year. Only one site was successfully restored — a section of road running through Posad-Pokrovske that connects Mykolaiv and Kherson. As of mid-June 2024, construction or repair work was underway on 211 sites (69% of the total). 

Procurement remained almost the only positive aspect of the first year of implementation. In the final three months of the fiscal year, restoration services conducted at least 237 procurement transactions for design documentation, construction, and technical supervision. The level of competition in the tenders was twice the average on Prozorro. As a result, the average conditional savings (the difference between the estimated value and the contract amount) stood at 21%. 

Procurement analysis also showed that, overall, the prices contractors included in their estimates were largely market-based, and deviations were mostly random rather than systemic.

New stage, old problems

Funding for the pilot project was restored only in November 2024, when the Restoration Services regained the ability to make payments for completed works. But just like in 2023, there was very little time left — the fiscal year was once again drawing to a close. 

As a result, only UAH 503 million out of the allocated UAH 2.2 billion was used in 2024. Thus, in less than two years of the project’s implementation, the procuring entities were able to fund restoration work and services for just six months in total.

During the second year of the pilot project’s implementation, the government revised the list of restoration sites twice. As of March 2025, the number of sites had grown to 739 — more than double the original number. This increase was due to a significant expansion of the residential infrastructure planned for restoration in Posad-Pokrovske and Borodianka.

As a result, the total estimated value of the restoration under the pilot project also rose, reaching UAH 11.6 billion, which is UAH 1.63 billion more than in 2023.

In the final year of the project’s implementation, the funding amount increased significantly. In 2025, the state budget allocated UAH 5.2 billion — more than double the amount allocated the previous year, and nearly as much as in the two previous years combined. On paper, the state has financed the comprehensive restoration of the selected localities in the amount of UAH 10.82 billion — 93% of the estimated value. However, this figure differs drastically from the actual expenditures on the implementation of the experiment.

As of May 2025, only UAH 2.23 billion had actually been disbursed for the implementation of the pilot project — approximately 20% of the total estimated value of the comprehensive restoration initiative. Most of this amount — UAH 1.19 billion — was used in 2025, when funds for the project were allocated in a timely manner at the end of March. 

Delays in funding during the first two years of the project’s implementation directly impacted the pace and overall condition of the restoration of the selected localities.

As of early June 2025, according to the Restoration Services, project documentation had been developed for 492 sites (67% of the total), and construction or repair work was underway at 472 sites (64%). Over the past year, works were completed at 57 sites in the village of Yahidne in the Chernihiv region, bringing the total number of fully restored sites to 58 across two years of the pilot project in five localities. 

Notably, procurement performance worsened during the second year. Although the level of competition still exceeded the average for construction tenders on Prozorro, it fell short of the first year’s figure. As a result, the average “savings” rate dropped significantly from 21% to 7.5%. At the same time, the material prices included in contractors’ estimates mostly remained in line with market rates.

Borodianka

In August 2024, the list of restoration sites in Borodianka, Kyiv region, was more than doubled — reaching 77. In particular, 32 apartment buildings, 2 protective structures, a new children’s art school, a dormitory, and the reconstruction of utility networks were added to the project. As a result, the estimated cost of restoring the locality increased by UAH 674 million.

Over the past year, construction and repair works began at 66 sites in Borodianka (85% of the total). According to the Agency for Restoration, major housing repairs are expected to be completed by the end of 2025, while the construction of new buildings is scheduled for 2026.

Trostianets

The list of comprehensive restoration sites in Trostianets, Sumy region, includes several major infrastructure projects, such as the reconstruction of the railway station, the station square, the 40th Army Square (which encompasses over 20 smaller facilities), and the repair of three sections of the Sumy–Poltava road. In total, from 2023 to 2025, the government allocated UAH 1.09 billion for the pilot restoration of the city, of which only UAH 224.6 million was actually spent. 

As of early June 2025, repair work in Trostianets was ongoing at all sites. The Restoration Service in Sumy region expected the major repairs on the Sumy–Poltava road to be completed by the end of June, while reconstruction of the railway station and other projects would likely extend into the following year.

Yahidne

Yahidne in the Chernihiv region is arguably the only locality to show tangible progress within the pilot project.

According to the Restoration Service in the Chernihiv region, as of the end of April 2025, 56 houses and the village’s street-road network had been restored. In addition, repair works were ongoing at 23 other sites. Overall, major housing repairs in Yahidne are expected to be completed by the end of summer, with new construction projects scheduled for completion by the end of 2025.

At the same time, the restoration of some residential buildings in Yahidne remains blocked due to the fact that not all owners have transferred the rights of the construction customer to the Restoration Service.

Tsyrkuny

Tsyrkuny is one of the most heavily affected villages in Kharkiv region and, at the same time, the most problematic locality within the pilot restoration project. The village is located 25 kilometers from the Russian border and remains under constant enemy shelling. 

Notably, Tsyrkuny became the only locality for which a full restoration concept was developed at the request of the Restoration Service. However, whether it will be implemented remains unclear, as in January 2025, the head of the Kharkiv Regional Restoration Service announced that, due to the security situation, the implementation of the pilot project in Tsyrkuny had been put on hold.

Posad-Pokrovske

Posad-Pokrovske in Kherson region became the first locality where repair work under the pilot project was completed on one of the sites. However, it was not a residential building but a road passing through the village that connects Mykolaiv and Kherson.

In 2025, a substantial amount — over UAH 2.2 billion — was allocated for the restoration of the village (only Borodianka received more). As a result, construction and repair work resumed and is ongoing at 364 sites. Still, given the scale of comprehensive restoration in Posad-Pokrovske, completing it by the end of the pilot project does not appear realistic.

Conclusions

After two years of implementation, the pilot project for comprehensive restoration has fallen short of the expected scale: only around 8% of the planned sites have been restored. For most sites (64%), work either started or gained momentum only at the end of the previous year.

The government allocated UAH 10.82 billion for the restoration of the selected localities — 93% of the project’s estimated value. However, due to significant delays in disbursement, the project is unlikely to be completed on time. As of May 2025, only UAH 2.23 billion, about 20%, had been spent.

Due to gaps in the project’s design, the restoration of the village of Moshchun was excluded entirely, and later, the restoration of Tsyrkuny was put on hold.

Under the original terms, 2025 was supposed to be the final year of the pilot project. However, according to the Restoration Services, restoration works in at least two localities — Trostianets and Borodianka — are not expected to be completed before 2026. The question remains whether the government will allow the Agency for Restoration and its regional offices to see the pilot through. 

The doubling of funding and the number of restoration sites planned for the previous year suggests that this scenario remains possible. The final outcome of the pilot may be determined by a government-initiated assessment of the project launched in April. According to the head of the Agency for Restoration, international experts will also be involved, and their findings are expected in the fall.

It is now crucial to learn from past mistakes — to avoid repeating them not only in the context of comprehensive restoration, which will be essential for the large-scale post-war recovery, but also in future pilot projects aimed at testing new approaches to reconstruction.

Summary

Over the two years of implementation, the experimental comprehensive recovery project has failed to reach the expected scale: only about 8% of the planned facilities have been restored. For the majority (64%), work either began or gained momentum only at the end of last year.

The state allocated ₴10.82 billion for the recovery of the selected settlements — 93% of the project’s expected cost. However, due to significant delays in disbursing the funds, the project is unlikely to be completed on time. As of May 2025, only ₴2.23 billion — roughly 20% — had been spent.

Due to gaps in the experiment’s conditions, the reconstruction of the village of Moschun was essentially excluded, and later, the rebuilding of Tsyrkuny was put on hold.

According to the conditions, 2025 was supposed to be the final year of the experiment’s implementation. However, according to the Recovery Services, in at least two settlements — Trostianets and Borodianka — work will not be completed before 2026. Will the government give the Recovery Agency and its regional services the opportunity to see the experiment through?

The more than twofold increase in funding and the list of facilities planned for restoration over the past year suggests such a scenario is possible. The final fate of the experiment, however, may be determined by the project review initiated by the government in April of this year. According to the head of the Recovery Agency, international experts will also be involved, and their findings are expected to be made public in the fall.

It is now crucial to take into account the mistakes made in order to avoid repeating them in the future — both during comprehensive recovery, which will be essential for large-scale postwar reconstruction, and during the implementation of other experimental projects designed to test new approaches to rebuilding.

New projects, old problems

At the start of the project, it included 295 restoration sites, distributed as follows:

• 268 – housing
• 10 – social infrastructure
• 8 – administrative buildings
• 7 – road infrastructure
• 2 – utilities.

Over the past year, the government revised this list twice. As of March 2025, the number of sites had grown to 739 — more than double the original number. This substantial increase was driven by the addition of housing infrastructure to be restored in two localities — Posad-Pokrovske and Borodianka.

The expansion of the list of restoration sites created the need for additional funding. As of 2025, the total expected cost of restoration under the pilot project had risen to UAH 11.6 billion — UAH 1.63 billion more than in 2023.

In the final year of the project’s implementation, the funding amount increased significantly. In 2025, the state budget allocated UAH 5.2 billion — more than double the amount allocated the previous year, and nearly as much as in the two previous years combined. On paper, the state has financed the comprehensive restoration of the selected localities in the amount of UAH 10.82 billion — 93% of the estimated value. However, this figure differs drastically from the actual expenditures on the implementation of the experiment.

Over the course of the project’s implementation, 83% of the funds used (UAH 1.85 billion) were directed toward the restoration of Borodianka and Posad-Pokrovske. Yahidne in the Chernihiv region fared the best — over a third (37%) of its restoration funding needs were met. The fewest funds were spent on restoring Tsyrkuny in the Kharkiv region — just over 1% of the expected need.

Overall, according to the contracting authorities (the Kyiv Regional Military Administration and regional Restoration and Infrastructure Development Services), as of May 2025, only UAH 2.23 billion had actually been spent on implementing the experiment. This represents approximately 20% of the total expected cost of the comprehensive restoration project. 

In 2023, of the more than UAH 3.35 billion allocated for the comprehensive restoration of selected localities, only UAH 559 million was used. The effective use of funds was hampered by a lengthy project selection process and delays in financing. As a result, regional restoration services were only able to start announcing tenders five months after the official launch of the pilot project — and just three months before the end of the fiscal year. Later, the lack of funding led contractors to suspend their work.

In 2024, the situation with comprehensive restoration deteriorated further. Due to political instability and continued dismissals of leadership at the Ministry of Infrastructure and the Recovery Agency, project funding was halted, and most of the work came to a standstill. 

The project resumed only in November 2024, when restoration services regained the ability to make payments for completed work. However, funding ceased again at the start of 2025 due to the end of the fiscal year. As a result, restoration services were able to use only UAH 503 million out of the allocated UAH 2.2 billion. Thus, in less than two years of the project’s implementation, the procuring entities were able to fund restoration work and services for just six months in total.

Only in 2025 were funds for the implementation of the pilot project allocated in a timely manner — budget appropriations were opened at the end of March. According to the Recovery Agency, as of May, procuring entities had managed to use UAH 1.19 billion out of nearly UAH 3.5 billion.

No money — no results

Delays in funding during the first two years of the project’s implementation directly impacted the pace and overall condition of the comprehensive restoration of the selected localities.

According to the Restoration Services, as of mid-June 2024, project documentation had been developed for 260 restoration sites, representing 88% of their total number (prior to its subsequent revision). Construction and repair work was ongoing at 211 sites (72%), and only one site was fully restored in the first year of the pilot project — a section of roadway passing through the village of Posad-Pokrovske.

However, during the second year of implementation, the project still did not reach the expected level of progress. In addition to the previously mentioned funding issues, another obstacle was the inclusion of nearly 450 new restoration sites. While the number of sites increased, the project implementation timeline was not extended. 

As of early June 2025, according to the Restoration Services, project documentation had been developed for 492 sites (67% of the total), and construction or repair work was underway at 472 sites (64%). Over the past year, works were completed at 57 sites in the village of Yahidne in the Chernihiv region, bringing the total number of fully restored sites to 58 across two years of the pilot project in five localities.

Procurement transactions

According to data from the BI Prozorro public analytics module, from June 2024 to June 2025, contracting authorities announced 373 procurement transactions related to the pilot restoration project. For comparison, 237 tenders were announced during the first year of the project.

During the analyzed period, the vast majority of the estimated value — 97% — came from procurement transactions conducted through special open bidding, amounting to nearly UAH 8.11 billion. These procedures primarily resulted in contracts for the construction of new sites or major repairs of existing infrastructure.

Meanwhile, 3% of the estimated value came from direct contracts, which mostly involved the procurement of project documentation development, as well as technical or author supervision. Although there were more of these transactions in number — 254 compared to 119 — they involved relatively small amounts. 

In the first year of the pilot project, the distribution by procurement method was approximately the same: UAH 3.1 billion (over 97.5%) went to special open bidding, and the remaining 2.5% to direct contracts. 

Among the leaders in terms of the number of procurement transactions is the Kyiv Regional Military Administration, which announced 154 tenders and awarded contracts worth over UAH 2.85 billion. In second place is the Restoration Service in the Kherson region — 93 procurement transactions totaling nearly UAH 2 billion. Rounding out the top three is the Restoration Service in the Kyiv region, which carried out 77 procurement transactions with a total contract value of UAH 1.1 billion.

The lion’s share of all awarded contracts — 98% of the total value — related to new construction and major repairs of damaged infrastructure. These contracts amounted to approximately UAH 5.9 billion. Another 2% (over UAH 86 million) were for the development of design documentation and related services. Contracts for technical and author supervision services totaled UAH 33 million, accounting for 1% of all contracts by value.

The largest share of all contracted funds — UAH 2.83 billion, or 47% of the total amount — was allocated to the restoration of apartment buildings. Nearly all of this sum was spent in a single locality — Borodianka in the Kyiv region. Another UAH 1.3 billion (21.5%) went toward the repair and reconstruction of private housing, primarily in Posad-Pokrovske.

Almost the same amount — UAH 1.2 billion — was spent on restoring utilities and road infrastructure, including national highways. The smallest portion — UAH 605 million, or just 10% of the total — was allocated to the restoration of social infrastructure facilities.

On average, 2.25 bidders participated in open tenders — nearly twice the average level of competition in construction tenders on Prozorro. However, this is lower than during the same period in the first year of the pilot project (3.6 bidders). The highest competition was recorded in procurements run by the Kyiv regional service — over 3 bidders per lot on average. 

Just like the level of competition, the “savings” rate — how much lower the awarded contract price was compared to the estimated value — also dropped significantly. On average, procuring entities saved 7.5% on competitive lots, compared to 21% in the first year. The Restoration Service in the Sumy region reported the highest “savings” rate, at 22.6% — three times higher than the project average. The Kyiv regional service also demonstrated strong results with over 17% in estimated “savings.” For other authorities, the savings rate remained within the 3–5% range.

An analysis of material prices in cost estimates showed that, overall, contractors used market-level pricing. However, some deviations were observed, mostly incidental rather than systematic. 

For example, in the construction of a multi-apartment residential building at 353 Tsentralna Street in Borodianka, an overpayment of more than UAH 11 million could result from inflated reinforcement steel prices. The cost estimate includes a price of UAH 35,000 per tonne, while the market price ranges from UAH 26,000 to 28,000 per tonne. It’s worth noting that this price is dynamic, meaning the contract value may change during project implementation. 

Another case involves the construction of private houses on Pryozerna and Sadova streets in Posad-Pokrovske, where an overpayment of over UAH 16.3 million may occur due to the inclusion of aerated concrete blocks in the estimate at a price 20% higher than that of market suppliers. Furthermore, the contract uses a fixed-price model, meaning the contracting authority cannot simply adjust the price of materials in the work acceptance certificates.

It is worth noting that during the analyzed period, the State Audit Service monitored 21 procurement procedures, representing 9% of the total number of announced lots. Violations were identified in 19 of them, including issues in tender documentation, disclosure of procurement information, the procedure for reviewing bids, and the terms of procurement contracts. 

Borodianka

In August 2024, the list of restoration sites in Borodianka, Kyiv region, was more than doubled — reaching 77. In particular, 32 apartment buildings, 2 protective structures, a new children’s art school, a dormitory, and the reconstruction of utility networks were added to the project. As a result, the estimated cost of restoring the locality increased by UAH 674 million.

In October, the Kyiv Regional State Administration became the procuring entity for the restoration of 58 sites in Borodianka. Together with the regional Restoration Service, they spent UAH 1.06 billion on implementing the pilot project in Borodianka — only 20% of the locality’s total comprehensive restoration needs. Most of these funds (nearly UAH 800 million) were used in 2025 alone. 

As a result, construction and repair works began over the past year at 66 restoration sites in Borodianka (85% of the total), including major repairs of damaged multi-story buildings and the construction of six new buildings to replace those that were destroyed. 

However, none of the sites within the pilot project have been fully completed so far. According to the Restoration Agency, major housing repairs are expected to be completed by the end of 2025, while the construction of new buildings is scheduled for 2026.

Trostianets

Since 2024, the list of comprehensive restoration sites in Trostianets, Sumy region, has remained unchanged. As before, it includes several major infrastructure projects, such as the reconstruction of the railway station, the station square, the 40th Army Square (which includes over 20 smaller facilities), and the repair of three sections of the Sumy–Poltava road, two of which are located between Trostianets and the neighboring village of Klymentove.

Back in 2023, UAH 663 million was allocated for the city’s comprehensive restoration. This amount was expected to cover the costs of all the listed projects. However, due to the end of the fiscal year, only UAH 80.6 million — or 12% of the allocated budget — was actually spent. 

In 2024, budget complications repeated themselves: out of the allocated UAH 278 million, the regional Restoration Service managed to utilize just under half (UAH 133 million) within two months. By 2025, the estimated value of Trostianets’s comprehensive restoration had increased to over UAH 1 billion, but the state allocated significantly less — only UAH 151 million. In total, from 2023 to 2025, the government allocated UAH 1.09 billion for the pilot restoration of the city, of which only UAH 224.6 million was actually spent.

As of early June 2025, repair work in Trostianets was ongoing at all sites. The Restoration Service in Sumy region expected the major repairs on the Sumy–Poltava road to be completed by the end of June, while reconstruction of the railway station and other projects would likely extend into the following year.

Yahidne

Yahidne in the Chernihiv region is arguably the only locality to show tangible progress within the pilot project.

The village’s comprehensive restoration plan includes nearly 120 sites, yet its estimated value by 2025 was among the lowest (UAH 402 million). This is due to the fact that 96% of the restoration sites are residential properties, and the cost of major repairs for housing is lower compared to other types of infrastructure. Also, the project envisioned the repair of street infrastructure, the village club-library, the construction of a new artesian well, and the creation of a memorial complex.

Over three years, the state allocated a total of UAH 528 million for all these efforts, but due to the same persistent issues with funding delays, only UAH 147 million (28%) had been spent as of May 2025.

According to the Restoration Service in the Chernihiv region, as of the end of April 2025, 56 houses and the village’s street-road network had been restored. In addition, repair works were ongoing at 23 other sites. Overall, major housing repairs in Yahidne are expected to be completed by the end of summer, with new construction projects scheduled for completion by the end of 2025.

However, the implementation of the project in Yahidne was hindered by the specific ownership status of the targeted properties. Under the terms of the pilot, owners of private properties were required to transfer the role of contracting authority to the Restoration Services. In practice, however, private owners ignored this obligation for an extended period or openly opposed it. As a result, the restoration of 21 residential buildings in Yahidne remains blocked due to untransferred procuring entity.

Tsyrkuny

Tsyrkuny is one of the most heavily affected villages in Kharkiv region and, at the same time, the most problematic locality within the pilot restoration project. The village is located 25 kilometers from the Russian border and remains under constant enemy shelling. Under such circumstances, concerns have been raised not only about safety but also about the economic feasibility of restoring infrastructure there.

At the start of the pilot project, only four sites were planned for restoration in Tsyrkuny:

• the village council building (intended to house an Administrative Services Center)
• the local clinic
• a kindergarten
• a lyceum.

The Restoration Service announced tenders for emergency recovery works on the lyceum and clinic. However, only a contract for the reconstruction of the lyceum was signed — and it was later terminated due to lack of funding. In August 2024, both of these sites were removed from the restoration list.

As for the remaining two sites — the village council building and the preschool — project documentation had been developed as of May 2025. Also, Tsyrkuny became the only locality for which a full restoration concept was developed at the request of the Restoration Service. A total of UAH 5.97 million was spent on this work. 

Whether these projects will be implemented remains uncertain. Back in 2023, discussions began about replacing Tsyrkuny with another locality in the region under the government project. However, the idea met resistance from local residents, for whom the pilot was the only hope for restoring the village. As a result, the proposal was soon dropped. Ultimately, in January 2025, the head of the Kharkiv Region Restoration Service announced that due to the security situation, the pilot project in Tsyrkuny had been put on hold.

Posad-Pokrovske

In 2025, Posad-Pokrovske in Kherson region retained its status as the locality with the highest number of approved restoration projects. Since 2024, their number has increased more than fourfold — primarily due to the addition of 388 housing infrastructure sites. As a result, the total cost of restoring the village rose by more than 40%.

Between 2023 and 2025, the government allocated over UAH 3.7 billion for the comprehensive restoration of Posad-Pokrovske — the highest amount among all pilot localities. At the same time, the Restoration Service in Kherson region managed to use UAH 789 million — just 21% of the allocated funding. 

The first 120 sites in Posad-Pokrovske were scheduled for restoration by April 2024. However, due to problems with transferring procuring entity from private owners and delays in funding disbursement, progress was slow and work on several sites was halted altogether. Nevertheless, the village became the first locality where restoration works were completed under the pilot — though not on a residential building, but on a road that runs through the village and connects Mykolaiv and Kherson. 

As of May 2025, the issues with private owners had been resolved, and a substantial budget — over UAH 2.2 billion — was allocated for the village’s restoration (only Borodianka received more funding that year). As a result, construction and repair works resumed and were underway at 364 sites, with one (the road) already fully restored. However, given the scale of comprehensive restoration in Posad-Pokrovske, completing all works by the end of the pilot project does not appear realistic.

Висновки

Over the two years of implementing the pilot project on comprehensive restoration, construction and repair works were fully completed at only 58 sites, approximately 8% of the total. For the vast majority of other sites (64%), work began or resumed only at the end of the previous year.

Between 2023 and 2025, the state financed the comprehensive restoration of selected localities in the amount of UAH 10.82 billion — 93% of the estimated value. However, problems with the actual disbursement of these funds to the procuring entities over two consecutive years effectively nullified the possibility of timely and efficient implementation. As of May 2025, only UAH 2.23 billion had been disbursed — approximately 20% of the total estimated value of the entire comprehensive restoration project.

According to the terms of the pilot, 2025 is supposed to be the final year of implementation. However, according to the estimates of the Restoration Services, in at least two localities — Trostianets and Borodianka — the completion of construction and repair works is not expected before 2026. An analysis of the progress in other localities suggests that this timeline may be realistic for them as well, given the slow pace of work and the fact that many sites have not even entered the active construction phase. 

Will the government allow the Restoration Agency and its regional services to complete the pilot? The doubling of funding and the number of restoration sites planned for the previous year suggests that this scenario remains possible. Still, the final decision may depend on the outcome of the project review launched by the Cabinet of Ministers in April this year. According to the head of the Restoration Agency, international experts will be involved in the review process and are expected to deliver their conclusions by autumn.

Research team

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

Author:
Andrii Shvadchak, Legal Counsel at Transparency International Ukraine

Half a billion: where the money goes

Over the past year and a half, Izium’s municipal departments and utilities signed 3,600 contracts totaling UAH 509 million, according to data from the BI Prozorro public analytics module. It is important to note that the text refers to signed contracts, not the funds that have actually been paid out.

Last year, procuring entities committed UAH 403 million; this year, they have already contracted UAH 106 million.

The largest portion — nearly UAH 261 million — was allocated to construction and routine repair work. In second place were fuel, electricity, and lubricants, accounting for another UAH 133 million. A further UAH 35 million went toward utility services, including electricity distribution and centralized water supply.

The estimated value of successful procurement transactions amounts to UAH 544 million. Nearly 48% of these were conducted through special open bidding. Another 40% were concluded through direct contracts. In 12% of cases, the procuring entities used the request for price quotations.

However, not all tenders were successful on the first attempt — some never took place at all. Due to a lack of bids, 23 tenders worth UAH 48 million failed. A likely reason is contractors’ reluctance to work in a frontline city that remains under constant shelling.

On average, three companies compete in tenders announced by Izium’s departments and municipal enterprises, according to BI Prozorro analytical data. 

Who are the most active procurers

The largest amounts were contracted by: – the Department of Housing and Utility Services of the Izium City Council — UAH 164 million; the Central City Hospital of the Pishchanska Mother of God — UAH 91 million; the Izium Municipal Water and Sewerage Utility — UAH 74 million.

The Izium City Military Administration signed the fewest contracts — only UAH 182,000.

Last year’s procurement volume exceeded pre-war levels. In 2021, the city signed contracts worth UAH 214 million; in 2022 — just UAH 60 million, amid active hostilities. In 2023, the total value of contracts rose to UAH 635 million, with the lion’s share (UAH 370 million) allocated to rebuilding destroyed houses, restoring street lighting, bus stops, the water supply system, and repairing roads.

Overall, the increase in spending is entirely expected: following de-occupation, the city urgently needs large-scale restoration of residential buildings and basic infrastructure.

Maintaining public spaces

Alongside housing reconstruction, the Housing and Utility Department is also contracting services to maintain the city’s public spaces, including street cleaning, landscaping, waste removal, and general urban upkeep.

For example, the department contracted Municipal Enterprise “City Improvement of Izium” for UAH 4.9 million in 2024 and UAH 4.5 million this year for street cleaning and sweeping. In 2023, UAH 2.7 million was contracted for landscaping, plant maintenance, and mowing; this year, the amount is slightly lower — UAH 2.3 million. An additional UAH 1.9 million in contracts was signed for removing hazardous trees and pruning branches.

Even in a frontline city, flowers bloom. Last year, City Improvement of Izium procured flower seedlings worth UAH 598,000 — petunias, salvias, and cinerarias decorated the city’s flowerbeds. This year, UAH 500,000 was contracted for flowerbed landscaping.

Supporting the Armed Forces

City Improvement of Izium, which is responsible for the city’s public amenities, also supports the Armed Forces of Ukraine. One area of support is the procurement of drones. In 2024, the utility contracted UAH 6.8 million for 325 Type-7 FPV drones. Also, it purchased an AVG ARDAL ground drone for UAH 314,000 and 30 Vartovyi SA6 drone detectors for UAH 570,000.

Another notable procurement was the purchase of three ATVs for military use, at a total cost of UAH 1.2 million.

Key contractors

The largest contracts were awarded to six private companies and one municipal enterprise. Together, their contracts account for more than half of the total procurement volume in the city.

Slobozhanska Construction Company Sarhon

The leading contractor by total value is Slobozhanska Construction Company Sarhon LLC, a Kharkiv-based firm that signed contracts worth UAH 109 million — 21% of all procurement in Izium. All contracts were for repair works. The company is owned by Ihor Kuprovskyi.

Journalists have repeatedly caught the company inflating prices for construction materials. In August 2023, the Kharkiv Anti-Corruption Center reported overpricing in Sarhon’s cost estimates for rebuilding a lyceum in Staryi Saltiv (Chuhuiv district), where the contract totalled UAH 186 million. DOZORRO also identified a UAH 3.7 million overpayment on the repair of an apartment building in Izium, contracted by the Capital Construction Department of the Kharkiv Regional State Administration.

TernopilEnergoTrade

In second place is TernopilEnergoTrade LLC, with contracts totaling UAH 41 million, 8% of the city’s total. All contracts related to electricity supply. The company was registered in August 2022 and is owned by Tetiana Hryshko. 

ME “City Improvement of Izium”

In third place is the municipal enterprise City Improvement of Izium, with UAH 39 million in contracts. The company is headed by Yurii Bryl and primarily carries out routine road repairs, street cleaning, waste removal, and tree pruning.

Kharkivoblenergo

Kharkivoblenergo PJSC ranks fourth, with contracts totaling UAH 37 million. All funds were contracted for electricity distribution and commercial metering services.

Trust Zhytlobud-1

Fifth on the list is Trust Zhytlobud-1 JSC, with UAH 33 million contracted for the restoration of damaged buildings. The company is owned by Oleksandr Kharchenko, a member of the Kharkiv City Council executive committee.

Atlant Bud Partner

Contracts worth UAH 24 million were signed with Atlant Bud Partner for repairs to the city hospital. The firm is owned by Vasyl Kolisnyk and Oleh Yanchukov.

SK Panteon

SK Panteon LLC received contracts totaling UAH 22 million, also for repairs to the city hospital. The Kharkiv-based company is owned by Oleksii Buriak. Interestingly, until 2023, the firm had few public contracts; since then, its volume has surged to UAH 431 million.

The Kharkiv Anti-Corruption Center reported that the company submitted questionable documents in tenders for reconstruction projects in the Kharkiv region. In 2023, DOZORRO identified a potential overpricing of UAH 13 million in a tender for major repairs at the Regional Clinical Hospital in Kharkiv. This year, the company is suspected of overpricing by UAH 5.5 million on the construction of a protective structure for the Malynivka Lyceum No. 1 in the Kharkiv region.

General trends

The procurement data clearly show that reconstruction is currently the top priority for the de-occupied city. Nearly half of all contracts on Prozorro relate to rebuilding.

We have observed potentially inflated prices for some construction materials. Still, we believe it’s important not to jump to conclusions. Based on our experience monitoring public procurement, we know that such prices often conceal additional costs and risks that cannot be factored into project budgets in any other way. Therefore, each case of suspected overpricing must be examined individually — along with the respective procuring entity. Moreover, contractors should not be immediately blamed. Estimated material costs are often embedded at the stage of project documentation — long before the tender is held. 

Even the city’s largest procuring entity — the Department of Housing and Utility Services — names poor-quality design and estimate documentation as one of the biggest challenges, alongside security risks. According to the department, the lack of complete and accurate design estimates often leads to numerous revisions, including changes in funding.

At the same time, despite its proximity to the frontline, Izium is trying to preserve elements of peaceful life. Even under these conditions, part of the funding is directed toward supporting the military — for drones, ATVs, and detection systems.

In contrast, procurement unrelated to reconstruction does not show significant deviations from market prices. This further confirms that the issue with construction tenders requires a comprehensive national-level solution. In other sectors, even in a frontline city, Izium manages to achieve fair prices. 

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.

Gaps in the experiment conditions

The first stage in the project implementation was the selection of settlements for comprehensive restoration. The government-approved list includes:

• Borodianka and Moshchun villages in the Kyiv region;
• Trostianets city in the Sumy region;
• Posad-Pokrovske village, located on the border of the Kherson and Mykolaiv regions;
• Tsyrkuny village in the Kharkiv region;
• Yahidne village, Chernihiv region.

All for different reasons. Yahidne and Tsyrkuny were included in the list on the initiative of the regional military administrations, while Trostianets was included on the initiative of the Office of the President. Probably, for the same reason, Moshchun and Posad-Pokrovske were included in the list—the president visited them shortly before the start of the experiment.

The level of destruction should have been the determining criterion for selection, but it differed significantly among the settlements. More than 70% of all buildings were destroyed in Moshchun, while in Borodianka and Tsyrkuny, this figure only reached 15%, and in Trostianets—only 4%.

This demonstrates the lack of a unified approach to selection because in some cases, preference was given to settlements with a significantly lower level of destruction, and an order from above contributed to the inclusion of some in the list. Given that the number of destroyed settlements in Ukraine is growing and probably not all will be rebuilt, it is impossible to do without the development of criteria and procedure for determining those settlements that will be subject to comprehensive restoration.

The next stage after the approval of the list of settlements was the selection of objects for restoration, which lasted more than three months.

The lists of objects were formed according to a complex scheme. Local self-government bodies (LSGBs) submitted their proposals to the regional military administrations (RMAs). They were processed and submitted to the Agency for Restoration for approval. Some RMAs repeatedly submitted updated lists, and some lists were returned for revision. That is, RMAs had to contact the local authorities for clarification. All this took extra time.

The selection procedure was also negatively affected by the lack of requirements and criteria for restoration objects. The Kyiv RMA submitted a list of objects, which included 108 private residential buildings, for approval by the Agency for Restoration. But, according to the head of the Agency, the prime minister did not see the point in the reconstruction of housing within the experiment because this could be done through the compensation program. For Moshchun, no such project was ever approved. In Posad-Pokrovske and Yahidne, more than a hundred private residential buildings were approved for restoration.

The absence of legislatively established criteria for the selection of objects to be restored and the mediation of the RMA slowed down this process and shifted the actual launch of the project to autumn 2023. In addition, the lack of a unified approach to the selection of restoration projects led to the fact that the reconstruction of Moshchun was almost completely excluded from the experiment.

In the end, the approved list included 306 objects for restoration. However, the screening of part of the objects by RMAs and the Agency resulted in a disparity in their number depending on the settlement. Thus, in Posad-Pokrovske and Yahidne, the approved list included 128 and 122 objects, respectively, while in Tsyrkuny, the number of objects amounted to only 4.

All because the Kharkiv RMA prioritized the restoration of the social and administrative infrastructure of the village. Can the reconstruction of four infrastructure objects be considered a comprehensive restoration of the settlement? Hardly. In this case, it would be reasonable to replace the settlement. This idea was even voiced by the head of the Kharkiv RMA; however, this was due to constant shelling of the village. But the matter of replacing Tsyrkuny did not go beyond a discussion at the level of the regional administration.

Funding delays

The lengthy process of selecting projects for restoration directly affected the financing of the experiment because the funds for its implementation in 2023 were allocated simultaneously with the approval of the list of these projects—on August 4.

Trostianets was the only settlement in which restoration projects were planned to be fully funded in 2023. Instead, only 7% of the expected cost of the projects was allocated for the restoration of Tsyrkuny last year. The costliest was the restoration of Borodianka (UAH 4.7 billion), and the least funds were planned for Yahidne (UAH 404 million).

However, the regional restoration services were able to start procurement only in mid-September, after the approval of the budget program passport. As a result, by the end of 2023, the costs of the experimental project for comprehensive restoration—advance payments and payment under the service acceptance certificates—amounted to only UAH 559 million out of the planned UAH 3 billion.

Three months before the end of the budget year, the restoration services conducted at least 237 procurement transactions for the development of project and estimate documentation, construction, and technical supervision. The level of approximate savings (the difference between the expected cost and the amount under the concluded contract) for procurement averaged 21%.

In 2023, the amount under contracts reached slightly more than 11% under the contracts concluded. Therefore, with the end of the fiscal year, there was a need for additional funding to pay for what was done in 2024. In March, the government reallocated the rest of the resources from the Remediation Fund for 2023 but did not agree on the allocation of funds for comprehensive recovery. Therefore, due to the lack of funding, contractors of most projects suspended works, and in some cases, they even terminated contracts.

Government procedures and political instability

According to the latest report of the Agency for Restoration, the institution sent a request for the allocation of the remaining unused funds in the amount of UAH 2.8 billion to continue the reconstruction works in February 234.

As of June, the draft order on financing was under consideration in the Cabinet Secretariat. It had not been considered for more than a month because the relevant government committee on reconstruction, headed by the former Vice Prime Minister for Reconstruction of Ukraine, did not hold meetings. However, the dismissal of Kubrakov should not have caused a collapse in the work of the committee because according to the existing distribution of powers, he should have been replaced by another deputy prime minister—Fedorov. However, the sensitivity of the issue of budget allocation for the experimental project is likely to hold back the approval of the relevant decision until the appointment of the next Minister for Communities, Territories and Infrastructure Development.

But while there has been no appointment, time is lost; it could have been used to restore the social infrastructure and housing of those who, because of participation in the experiment, refused compensation or other reconstruction mechanisms. Therefore, the government should reconsider its position on the effective suspension of project financing or offer an alternative that would meet the interests of its participants.

This publication was prepared as part of the Digital Transformation Activity, funded by USAID and UK Dev.

Read the research “Experiment on Comprehensive Restoration of Settlements: Achievements in a Year”

Selection of projects for recovery

The process of selection and approval of projects for the recovery of settlements took more than 3 months and was completed in August, when the government approved the relevant list.

It contained 32 projects, which, according to the Agency for Restoration, included 306 objects to be restored.

Approved objects to be restored by category:

• 268—housing;
• 10—social infrastructure;
• 17—logistics infrastructure;
• 7—administrative buildings;
• 4—housing and municipal services objects.

In accordance with the conditions of the experiment, the lists of objects for recovery were to be formed and approved based on the priority of meeting the primary needs of the population. However, it is not known whether the Agency for Restoration used prioritization with the objects to be restored and what its criteria were because it did not respond to the relevant inquiry. It should be noted that, for the most part, the approved objects were subject to the requirements defined by the conditions of the experiment. But there are also those whose priority seems rather doubtful.

One of them is the project to restore the 40^th Army Square in Trostianets with the expected cost of UAH 260 million. As part of the project, according to the RMA, 21 privately owned commercial real estate objects (shops) were covered by the reconstruction at the expense of budgetary funds. The project was included at the suggestion of the city council, but it was probably more facilitated by the mention in the letter of the head of the Presidential Office instructing the Prime Minister to work on the restoration of the destroyed station and station square;

Not without road repairs. In total, the list includes 4 projects for the “recovery” of roads of national importance: three sections of the highway H-12 Sumy-Poltava for the comprehensive restoration of Trostianets, as well as two sections of the M-14 Odesa-Melitopol-Novoazovsk highway for the restoration of Posad-Pokrovske. Major repairs of two sections of the H-12 Sumy-Poltava highway, which are located between Trostianets and Klymentove, were planned before the beginning of the full-scale invasion within the framework of the Great Construction presidential program. In February 2021, a corresponding procurement transaction was even carried out, but in June 2023, the contract was terminated due to the inability of the contractor to perform the works. As for the restoration of Posad-Pokrovske, the list included the construction of a new bypass section of the road on the north-eastern side of the village, with an estimated cost of UAH 1.46 billion. In general, almost UAH 2 billion was planned to be spent on the construction and repair of roads as part of the comprehensive restoration of settlements.

Objects approved for recovery were mostly based on proposals received by regional administrations from affected communities. In certain cases, some objects were screened out at the stage of forming the list. In particular, the Kharkiv RMA prioritized the restoration of the social and administrative infrastructure of the Tsyrkuny village over the residential one. Another part of the objects got excluded from the list when it was approved with the Agency for Restoration. For example, an extracurricular educational institution, the department of social protection, and the branch of Oschadbank in Borodianka; the community center and a lyceum in Posad-Pokrovske were not included in the list for reconstruction. However, the final number of objects to be restored in Posad-Pokrovske (128) increased in comparison with the number of objects submitted (75), mainly at the expense of housing.

The result of the screening of some objects by the RMA and the Agency was the imbalance in their number in relation to the settlement. In Posad-Pokrovske and Yahidne, the approved list included 128 and 122 objects, respectively, more than 90% of which were residential buildings. In Borodianka, three times fewer objects were chosen for restoration—37. The smallest number of objects was approved for Tsyrkuny—only 4.

As for Tsyrkuny, the Kharkiv RMA submitted a list that included only social and administrative infrastructure: the village council, a hospital, a lyceum, and a kindergarten. The administration planned to restore the rest of the objects at the expense of the Remediation Fund too, but through object-by-object reconstruction. On the one hand, such a solution involves the use of several mechanisms for the restoration of a settlement at once, which allows for avoiding the risk of suspending the implementation of one of them (spoiler alert: that’s what happened to the comprehensive restoration). Can the reconstruction of four infrastructure objects be considered a comprehensive restoration of the settlement? Hardly. In this case, it seemed appropriate to replace the settlement with one in which a significant percentage of infrastructure was affected and the restoration of which was not planned under other mechanisms. The corresponding idea was even voiced by the head of the Kharkiv RMA; however, this was due to constant shelling of the village. But the issue of replacing Tsyrkuny did not go beyond the discussion at the level of the regional administration.

Even more “dramatic” was the situation with the restoration of Moshchun. First, the Kyiv RMA submitted a list of objects, which included 108 private residential buildings, for approval by the Agency for Restoration. But, according to the head of the Agency, the prime minister did not see the point in rebuilding housing as part of the experiment, given the possibility of restoration through the eRecovery program. The Agency supported such an idea.

Subsequently, the Kyiv RMA reported that the restoration of the village is hampered by outdated urban planning documentation, and its updating is impossible since the village military administration lacks appropriate powers. So, in the end, in the final list, which the RMA submitted for approval, there were no restoration objects in Moshchun. Thus, the settlement “fell out” of the recovery program while formally remaining its “participant.”

The situation with Moshchun clearly demonstrated the lack of a unified approach to the selection of projects for restoration within the framework of the experiment. While more than a hundred private residential buildings were approved for restoration in Posad-Pokrovske and Yahidne each, no such project was approved for Moshchun. This is an additional confirmation of the need to formulate clear criteria and requirements for the application of the comprehensive recovery mechanism in the future. 

Financing

The main and, currently, the only source of funding for the project was the Remediation Fund. On August 4, the Cabinet of Ministers of Ukraine allocated UAH 3.350 billion for the budget program to restore settlements in 2023.

In accordance with the conditions of the experiment, information on the expected cost of works was to be added by the RMA to each object included in the list and subject to restoration. However, in practice, only two out of five regional administrations, those of Kharkiv and Sumy, provided information on the expected cost of restoration works. Other RMAs ignored the need to determine the expected cost of works and, citing the lack of such information in the proposals from LSGBs, provided an approximate cost of works. In the end, the total amount of necessary funding for the implementation of works under approved projects was determined based on these amounts, which reached UAH 9.6 billion. 

Trostianets was the only settlement in which restoration projects were planned to be fully funded in 2023. Instead, only 7% of the expected cost of projects was allocated for the restoration of Tsyrkuny last year. The costliest was the restoration of Borodianka (UAH 4.7 billion), and the fewest funds were planned for Yahidne (UAH 404 million).

According to the distribution contained in the government resolution, the amount allocated in 2023 should have been sufficient to fully cover the costs of design and construction works for at least 129 objects and to finance the commencement of works in regard to the rest.

However, the regional recovery services were able to start procurement procedures only after the approval of the budget program passport on September 14. As a result, by the end of 2023, the costs of the experimental project for comprehensive restoration—advance payments and payment under the service acceptance certificates—amounted to only UAH 559 million out of the planned UAH 3.350 billion.

In 2024, the funding situation worsened. According to the Agency for Restoration, in early February, it sent a request for the allocation of the remaining unused funds in the amount of UAH 2.8 billion to continue the reconstruction works. In March, the government reallocated the rest of the resources from the Remediation Fund for 2023, but did not agree on the allocation of funds for comprehensive recovery. As of July 22, the project remains without funding.

Procurement

To implement the experimental project, the functions of the procuring entity of construction works were entrusted to the regional services for restoration and development of infrastructure. The relevant powers were granted to the services in the Kyiv, Chernihiv, Sumy, Kharkiv, and Kherson regions. According to BI Prozorro, as of June 2024, 237 procurement transactions were announced as part of the experimental project for the restoration of settlements.

150 lots (63% of the total) constituted non-competitive procedures. The item of the contract, for the most part, was the development of project documentation and services for technical/author’s supervision over construction. In value terms, non-competitive procedures accounted for 2.5% of the total expected cost of procurement.

87 lots (37%) were held at open bidding with features—the main procurement procedure for the period of martial law. These lots account for 97.5% of the total expected cost.

Of the total number of lots, 5% were unsuccessful (automatically canceled due to lack of bids, rejection of all bids, or canceled by the procuring entity).

The highest number of procurement transactions was announced by the restoration service in Kyiv Oblast—8 (the expected cost is UAH 1 billion); the restoration service in Chernihiv Oblast came in second—69 (the expected cost is UAH 195 million); and the restoration service in Kherson Oblast came third—52 (the expected cost is UAH 889 million).

On average, 3.6 participants submitted bids to open bidding with features, which is twice as high as the average level of competition on Prozorro. The maximum number of participants that submitted bids to the procurement transaction is 9. All of them competed for a contract in the tender for major repairs of the road network in Posad-Pokrovske.

The most serious competition was observed in the procurement transaction of the Kyiv restoration service, the lots of which, on average, were attended by 4 participants. In some cases, competition was twice as high as the average:

• 8 participants—major repairs of an apartment building on 4 Velyka Street in Borodianka.
• 7 participants—major repairs of the Borodianka archive building.

The lowest level of competition was observed at the bidding of the Sumy Restoration Service, whose procurement was attended by an average of 2 participants. On average, 3–3.5 participants attended the tenders of the other services.

Due to high competition, the level of “nominal savings” (the difference between the expected cost and the amount of the concluded contract) averaged 21%. The highest percentage of “savings” was observed with the Kyiv service, whose tenders provide for the highest competition level.

More than 70% of all contracts concluded were for the restoration of two settlements—Borodianka (UAH 709 million) and Posad-Pokrovske (UAH 769 million). The smallest amount of expenses falls on Tsyrkuny—UAH 6 million. For this settlement, five tenders were held for a total amount of UAH 180 million. A procurement transaction for major repairs of the Tsyrkuny district hospital, with an expected cost of UAH 33 million, was unsuccessful due to the rejection of all bids. According to the results of the tender for the reconstruction of the Tsyrkuny Lyceum, an agreement was concluded for UAH 114 million, which was subsequently terminated due to lack of funding.

According to the Unified Portal for the Use of Public Funds, the amount of payments under contracts reached slightly more than 11% of the amount under concluded contracts. Over the past year, works and services were paid for as part of the Borodianka project in the amount of UAH 120 million, Trostianets—UAH 80 million, Posad-Pokrovske—UAH 345 million, and Yahidne—UAH 10 million.

Distribution of costs by types of works/services

New construction and major repairs account for 87% of all concluded contracts (UAH 1.8 billion), another 12% are the costs for developing project documentation and related works / services (UAH 225 million), and 1% are technical and designer supervision services.

Distribution of costs by types of objects

The largest part of the contracted amounts out of UAH 809 million (39% of the total amount) falls on the restoration of engineering and road (including roads of national importance) networks. Posad-Pokrovske accounts for half of all expenses in this category.

28% (UAH 602 million) of expenses fall on the restoration of apartment buildings. The project provides for the reconstruction of 29 apartment buildings in Borodianka and another 17 in Yahidne.

The restoration of private houses accounts for UAH 404 million, which is almost 20% of the total amount of contracts. The project provided for the reconstruction of 101 private houses in Yahidne and 120 houses in Posad-Pokrovske.

Another UAH 268 million (13%) accounts for the reconstruction of social infrastructure facilities (educational, medical institutions, administrative buildings).

Analysis of the prices for materials in the estimates showed that, in general, the prices set by the contractors in the estimate were market prices. But there were also deviations that were rather random, not systemic. In particular, for two procurement transactions (1, 2) for the reconstruction of private houses in Posad-Pokrovske, the selling price for reinforcements was set at the level of UAH 39,500 per ton (after accruing the value added tax, the final price for the procuring entity will be UAH 47,000 per ton, while in the market, such reinforcements can be purchased from a warehouse at a price of UAH 34,100 per ton, including VAT), which exceeded the average price in Ukraine by a third. As a result, the potential overpayment following the procurement of reinforcements alone could amount to more than UAH 527,000. However, the type of contractual price in these procurement transactions is firm, so the procuring entity will not be able to simply adjust the cost of materials in the service acceptance certificates.

Notably, the State Audit Service monitored 23 procurement procedures (27% of the total number of open tenders) conducted as part of the experimental project. Of these, in 9 cases, the financial control body found violations, which mainly concerned the non-rejection of tender proposals that were subject to rejection or the non-compliance of the tender documentation with the requirements of the law.

Construction

Last year, the Agency for Restoration started working only five months after the adoption of the resolution on the implementation of the experimental project. The reasons for the delay were the lengthy process of selection and approval of recovery projects, as well as the approval of funding on the part of the government. At the same time, according to the agency, at the end of 2023, works were launched at 186 objects, and the average level of readiness of all objects was 24%.

But as of mid-June 2024, there has been no dramatic progress in the implementation of the experimental project. According to the restoration services:

–       project documentation was developed for 260 objects (85%);

–       construction works are ongoing at 211 objects (69%);

–       construction works have been completed at 1 object (0.3%).

Borodianka

The list approved by the government included 37 objects for the restoration of Borodianka. 29 of them are multi-apartment residential buildings that are subject to major repairs, reconstruction, or new construction. The restoration list also includes:

–       Borodianka Professional Agrarian Lyceum;

–       the city post office;

–       the community center;

–       the building of the village council, its archive, and an employment center;

–       a dormitory on Naberezhna Street;

–       a road network on Tsentralna Street.

These projects are only a small part of the destroyed and damaged infrastructure of the village. The Kyiv RMA reported that more than 600 such objects were subject to restoration. The administration proposed that the Agency also include the building of the military commissariat, Oschadbank, and the Borodianka Center for Children and Youth’s Creativity in the first phase of the comprehensive restoration, but the objects were not approved.

In 2023, more than UAH 1.7 billion was allocated from the Remediation Fund to finance the comprehensive restoration of Borodianka. At the expense of these funds, it was planned to fully cover the costs of restoring the buildings of the village council, its archive, and almost 40% of residential buildings, as well as to finance the commencement of works on the remaining objects.

Borodianka Village Council acted as the procuring entity of the development of the object restoration concept. In particular, it carried out the procurement of services for the development of a preliminary design for the restoration of Tsentralna Street. In August, the executive committee of the local council approved the pre-design works, which contained unified stylistic solutions for finishing the facades during the reconstruction of objects.

According to the Restoration Service of the Kyiv region and the Kyiv RMA, as of June:

–       procurement of services for the development of project documentation was announced for 34 objects;

–       project documentation was developed and a comprehensive examination was carried out in regard to 24 objects;

–       procurement of construction works has been announced in regard to 23 objects;

–       works at the 10-15% level have been completed in regard to 16 objects.

Thus, the construction works were completed in regard to none of the objects in Borodianka.

Trostianets

During the Russian occupation, the city hospital, residential buildings, railway station, and station square were significantly destroyed in Trostianets. A decision was made to restore the medical institution and housing through the mechanism of object-by-object reconstruction. The station and the square were included in the list of projects for comprehensive restoration. This list also includes major repairs of three sections of the H-12 Sumy-Poltava road, two of which are located between Trostianets and the neighboring village of Klymentove.

Foreign and Kyiv-based architects responded to the idea of developing a concept for the restoration of the area with railway and bus stations in Trostianets. Local media even reported on public discussions of the reconstruction project. However, it is unknown whether any of the options was finally approved: there is no information about it in open sources.

In total, UAH 663 million was allocated to finance the “comprehensive restoration” of the city in 2023. These funds should have been sufficient to cover the costs of restoring all these objects. However, last year, only UAH 80.6 million was spent—12% of the allocated budget.

According to the restoration service of the Sumy region, as of June, services for the development of project and estimate documentation (PED) and construction were purchased in regard to 3 projects (reconstruction of the station and repair of the road). The exception was the project for the reconstruction of the station square. First, problems arose with the transfer of the rights to the construction procuring entity regarding the shops located on the square and privately owned. In the end, the functions of the procuring entities were transferred to the restoration zervice, but another problem arose—the lack of funding.

The Sumy RMA reported that the level of project implementation in June was only 7.2%. Due to the lack of funds in 2024, works on the objects were suspended, as was the development of project documentation for the station area.

Yahidne

The smallest in terms of total funding was to be the restoration of Yahidne in the Chernihiv region. The settlement is the second in terms of the number of approved reconstruction objects—there are 122 of them in total. But 96% of them are projects for major repairs of residential buildings, the costs of which are the lowest among other restoration projects.

As part of the experiment, the following objects were subject to restoration in Yahidne:

–       a club library;

–       a school;

–       a road network;

–       a pump room;

–       multi-apartment (17) and private (101) residential buildings.

The local authorities thoroughly approached the issue of restoring the settlement. In particular for this purpose, a plan for the comprehensive restoration of the village was developed, which was approved based on the results of public hearings.

The estimated cost of the restoration of Yahidne was determined at the level of UAH 404 million. In 2023, UAH 188 million was provided for the costs associated with the reconstruction of the village infrastructure. But only UAH 10.6 million was spent that year—6% of the planned amount.

As of June, the restoration services in the Chernihiv region:

–       announced procurement of services for the development of project documentation in regard to 15 objects;

–       developed and examined  project documentation in regard to 11 objects;

–       announced procurement of construction works in regard to 10 objects.

Construction of 9 objects continued in June, but none of the objects were rebuilt. In addition, the restoration of another 20 objects is effectively blocked due to the non-transferred rights to the construction procuring entity from private owners regarding residential buildings and apartments.

Tsyrkuny

Tsyrkuny is one of the most affected villages in the Kharkiv region and, at the same time, the most problematic settlement within the experimental reconstruction project. The village is located 25 km from the border with Russia, and immediately after the launch of the experiment, the intensity of community shelling increased. In such circumstances, there is not only the question of security, but also that of the economic feasibility of restoring the destroyed objects.

In early summer last year, the RMA started talking about the possibility of replacing Tsyrkuny with another settlement of the region for reconstruction within the framework of the government project. However, locals opposed such an idea; for them, the experiment was the only hope for the restoration of the village, so soon, the replacement issue was removed from the agenda.

Only four objects were planned to be rebuilt in Tsyrkuny:

–       the building of the village council (in place of which an administrative services center was to appear);

–       the district hospital;

–       a kindergarten;

–       a lyceum.

Notably, Tsyrkuny was the only settlement in which the concept of recovery was developed at the request of the restoration service. At the same time, the procurement of the service took place without the use of the Prozorro system, and the source of funding was the funds (maintenance costs) of the Kharkiv Restoration Service. According to it, the developed concept was approved by the decision of the local council.

UAH 76.4 million was planned to be allocated for the reconstruction of Tsyrkuny in 2023—the smallest amount among all settlements participating in the experimental project. But not a single hryvnia of it was used.

The Restoration Service announced the procurement of services for emergency recovery works in regard to the Tsyrkuny Lyceum and the district hospital. According to the results of the bidding, only the contract for the reconstruction of the lyceum was concluded, which, however, was terminated due to lack of funding. As of June, the development of project documentation was ongoing regarding two other objects—the village council building and the preschool institution.

Posad-Pokrovske

Posad-Pokrovske in the Kherson region is a settlement with the largest number of approved restoration projects (128). As in the case of Yahidne, more than 90% of them relate to the reconstruction of private housing. The list also includes:

–       a kindergarten-lyceum;

–       the building of the village council and the security center;

–       an outpatient clinic;

–       gas, water and electricity supply systems;

–       road network;
road section.

The restoration of Posad-Pokrovske was the first and only case in the experimental project, where the restoration service used more than half of the allocated funding for 2023, and the amount of the funds spent (UAH 345.5 million) exceeded the total costs under the rest of the settlements.

In addition, the only object in regard to which construction works were completed as part of the experiment was one of the restoration projects of Posad-Pokrovske. The Restoration Service in the Kherson region did not provide an answer to our inquiry, but it is probably related to the major repairs of the M-14 highway, passing through the settlement. However, almost UAH 298 million was used to restore the road section, while none of the residential buildings under the project was restored. This was the reason for the regional authorities to accuse the Agency. However, the head of the department reported that the reconstruction of housing was complicated by the need to transfer the rights to construction procuring entities from the owners (this problem was also characteristic of other settlements). According to him, as of June, restoration works continued in all 120 homes, but with the cessation of funding in 2024, construction slowed down or stopped altogether.

Conclusions and recommendations

It was expected that the implementation of the experimental project would help to find a new, effective solution for the restoration of settlements, the infrastructure of which was significantly affected by Russian aggression and required an integrated, rather than object-by-object, approach to reconstruction. The project was tasked with simultaneously ensuring transparency, efficiency, consistency, and swift recovery. However, during the first 8 months of the project implementation, it became clear that it was easier said than done in practice.

The results of the first year of the experiment can hardly be considered successful: out of more than 300 planned restoration objects, only one was completed, which was not the primary need. The government and regional authorities blamed the Agency for Restoration and its head for the failed project, given the low performance. He, in turn, referred to the long delays on the part of the government and the lack of funding.

In the end, the political upheavals that accompanied the implementation of the project were one of the reasons for the dismissal of the Agency’s head. However, it is important to find out what went wrong and what should be considered for the future because we cannot do without a mechanism for comprehensive recovery.

In our opinion, the successful first phase of the project (implementation was expected from 2023 to 2025) was hampered by several problems:

1. Gaps in the experiment conditions. The selection of restoration objects to implement the experiment for the restoration of settlements lasted more than three months. During this time, regional administrations collected proposals from local governments of affected settlements, formed lists based on them, which were then submitted to the Agency for Restoration for approval. At the same time, some RMAs repeatedly submitted updated lists, and some lists were returned for revision, which required a repeated appeal to the local authorities for updated proposals. Moreover, not only the participants of the experiment, but even representatives of the Cabinet and the Office of the President intervened in the selection and approval of projects. Overall, this slowed down the process and shifted the actual launch of the project to the autumn of 2023.

Apart from the political component, this situation was caused by the lack of clear requirements and criteria for the eligibility of restoration projects in the Procedure for the Implementation of the Experimental Project (the same type of object was approved or not approved in the list of different settlements), as well as the inclusion of intermediaries (RMAs) in the procedure for selecting projects. Interestingly, it was the representative of the local authorities—the mayor of Trostianets—who opposed the statements by the heads of RMAs and the government and did not agree with the negative assessments of the agency’s activities when its head reported on the results of the restoration.

In addition, the lack of a unified approach to the selection of restoration projects led to the fact that the reconstruction of Moshchun was almost completely excluded from the experiment.

1. Funding delays. The lengthy process of selecting restoration projects directly affected the financing of the experiment, since the allocation of funds for its implementation in 2023 took place simultaneously with the approval of the list of these projects—on August 4. At the same time, the approval of the passport of the budget program took place in mid-September. As a result, the regional restoration services were able to start procurement only five months after the official launch of the experimental project and three months before the end of the budget year.

During this time, the restoration services conducted at least 237 procurement transactions for the development of project and estimate documentation, construction, and technical supervision. The level of nominal savings (the difference between the expected cost and the amount under the concluded contract) for procurement averaged 21%. As of the end of 2023, UAH 558 million was transferred to contractors—17% of the allocated funds for the corresponding year.

With the end of the budget year, there was a need to obtain additional funding to pay for the works performed and services provided in 2024. However, as of June, the balance of unused funds in 2023 was not allocated by the government, despite the fact that funds were reallocated to other areas in March. Lack of funding led to the suspension of work by contractors or even the termination of contracts.

1. Government procedures and political instability. According to the latest report of the Agency for Restoration, the institution sent a request for the allocation of the remaining unused funds in the amount of UAH 2.8 billion to continue the reconstruction works in February 2024. As of June, the draft order on financing was under consideration in the Cabinet of Ministers Secretariat but was not considered for more than a month due to the failure of the relevant government committee on recovery, headed by the former Vice Prime Minister for Recovery of Ukraine, to hold meetings. However, the dismissal of Kubrakov should not have caused a collapse in the work of the committee because, according to the existing distribution of powers, he should have been replaced by another deputy prime minister—Fedorov.
2. Failure to transfer the rights to construction procuring entities. The implementation of the experimental project was also hampered by problems associated with the reconstruction procedure. In accordance with the conditions of the experiment, the entities of state or municipal property management, as well as the owners of private property, had to transfer the functions of the construction procuring entity to the restoration services. But in practice, private owners had long ignored this duty and even opposed it. Moreover, as of June 2024, the restoration of part of residential real estate in Yahidne, Chernihiv region, is further blocked due to the non-transferred rights to the construction procuring entity.

Analyzing the circumstances and results of the first year of the project for the comprehensive restoration of settlements, we come to the conclusion that the unsuccessful launch of the project is due to the lack of its proper legal regulation and obstacles on the part of both the government and the project’s participants. In view of this, the government should reconsider its position on the effective suspension of funding for the experimental project. Moreover, for some settlements, it is a “safety ring” needed to restore life in them. But understanding the conditions in which we all find ourselves now, the government must allocate the financial resources efficiently, considering all other priorities of the country.

Taking into account that comprehensive reconstruction has prospects for use as a mechanism for the recovery of cities, towns, and villages of Ukraine and that the relevant provisions are already included in draft legislative initiatives, we recommend:

1. Developing criteria and approving the procedure for determining settlements that will be subject to comprehensive restoration, in order to exclude the possibility of making subjective decisions in the process of selecting such settlements or intervening in it.
2. Determining the criteria for the eligibility of objects for the purposes of comprehensive restoration and providing for their mandatory priority in accordance with approved methods.
3. Excluding intermediaries (regional state (military) administrations) from the procedure for selection and approval of objects subject to restoration, as in the case of the object-by-object recovery.
4. Appointing leaders for the coordinating bodies of the experimental project—the Minister Communities, Territories and Infrastructure Development of Ukraine and the Head of the State Agency for Restoration and Infrastructure Development.

This research was prepared within the framework of the Digital Transformation Activity, funded by USAID and UK Dev.

This research is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of Transparency International Ukraine and do not necessarily reflect the views of USAID or the United States Government.

This research has been funded by UK International Development from the UK government; however, the views expressed do not necessarily reflect the UK government’s official policies.

Authors: Andrii Shvadchak, Yaroslav Pylypenko and Borys Nesterov

Funding and its allocation

The main source of funding for reconstruction projects last year was the Remediation Fund. It was filled mainly at the expense of forcibly withdrawn funds of banks with Russian capital and part of the profit of the National Bank, which it transfers to the budget. In 2023, almost UAH 20 billion of the planned UAH 37.5 billion was allocated from the fund for areas related to reconstruction and compensation for damaged/destroyed housing. There is little money left in the fund for this year. Therefore, the new management will be forced to seek either new sources of money or other funds and programs to finance the reconstruction.

However, this is not the greatest challenge. To finance the recovery, another, already existing fund (for example, the national budget reserve fund) can be chosen, or even a new one (a similar attempt was made last autumn) can be created. The main question is how this money will be distributed.

We at Transparency International Ukraine have been advocating for a long time so that the funds for reconstruction are distributed according to clear priorities. Last year, the Ministry for Restoration finally approved a project prioritization methodology to remediate the consequences caused by the armed aggression of Russia against Ukraine, developed by World Bank experts. However, the problem is that this methodology is advisory in nature and applies only to projects financed by the remediation fund. It is important that new leaders responsible for reconstruction continue the course towards transparent prioritization. To achieve this, it is necessary to make the use of the methodology mandatory for the selection of projects for funding, regardless of the money’s source.

DREAM

The DREAM ecosystem is an innovative digital tool designed to ensure transparency and accountability of recovery processes in Ukraine. The DREAM system operates according to the principle of “everyone sees everything” and collects, organizes, and publishes open data at all stages of project implementation, from planning and approval to financing, procurement, construction, and reporting. To date, more than 5,000 projects with a confirmed amount of funding, including donor funding of UAH 89.1 billion, have been included in the system.

The system was developed in cooperation with the Ministry for Restoration, the RISE Ukraine coalition of CSOs, and international partners. Subsequently, the Ministry actively promoted its use. In particular, following its initiative, starting from 2023, regional and local reconstruction projects have been submitted for financing with the resources of the Remediation Fund through the DREAM system. In general, any initiator of a reconstruction project can now use the system. However, so far, this is only a pilot project, in accordance with the government decree.

The obligation to apply the DREAM system is not defined at the level of the law. Therefore, the fate of the system is in the hands of future reconstruction leaders. We hope that they will maintain the vector of support and promotion of the DREAM system, in particular in terms of enshrining the obligation to use the system at the legislative level.

The Agency for Restoration and regional reconstruction

Back in March, the Agency for Restoration was responsible for implementing approximately 40% of all reconstruction projects in Ukraine. This causes high corruption risks in its activities.

The key problem of the Agency is related to its structure. Regional recovery services operate as separate legal entities, due to which the Agency has limited influence over them. For example, last August, the agency developed methodological recommendations for holding construction tenders related to the reconstruction of civil infrastructure facilities. But not all recovery services applied them in their activities.

However, the services are the procuring entities of works on recovery projects, the implementation of which is the responsibility of the Agency. Therefore, it is important to reorganize the body into a single legal entity to increase control over the activities of regional units.

Another risk is the potential division of the ministry. Before the transformation in 2023, regional services had belonged to the vertical of the Ministry of Infrastructure. Therefore, after the separation, they are likely to remain in its sphere of management and, accordingly, will no longer be responsible for regional reconstruction projects. Instead, the new/old Ministry of Community and Territorial Development will have to create a new structure that will take over the restoration of the regions or choose it from among the existing ones; this will require significant time and human resources.

And last but not least, we should not forget about the personnel issue. First of all, the procedure for appointing the head of the Agency. For the period of martial law, this person is appointed without holding a competition, in accordance with the legislation on civil service. In addition, candidates for this position are not properly vetted for competence and integrity. Therefore, there are no guarantees of the independence of the head of the body.

Another risk is the fact that the Agency’s employees are in the status of civil servants—salaries in the agency are low relative to the need for qualified specialists, as well as high corruption risks of positions.

Considering all these risks and the responsibility, it is necessary to establish the procedure for appointing the head of the Agency for Restoration based on a transparent competitive procedure (similar to how the heads of anti-corruption bodies were selected) and provide guarantees for the independence of its activities, as well as establish reasonable salaries for Agency employees.

Public engagement

The Ministry actively cooperated with civil society in restoring the country from the consequences of the war. In addition to the development of the DREAM system, public experts were engaged in the prioritization of reconstruction projects and the overall development and discussion of specialized legislation.

This interaction ensures the realization of the rights of citizens to participate in the management of public affairs as well as in decision-making that takes into account the real needs and priorities on the ground. Therefore, close cooperation in the reconstruction sphere should continue. For instance, through the engagement of members of the public in working groups, expert councils, and other advisory and consultative bodies on recovery issues. An example of such engagement is the mandatory participation of the public in the commissions to consider matters of compensation for damaged property.

We hope that the new leadership will continue the course of openness and cooperation with the public.

Transparency International Ukraine will continue to work with the state in the field of reconstruction to ensure its efficiency and transparency. Whoever heads the reconstruction process, we hope that the priorities and course of the country will not change.

The new leadership of the bodies responsible for the recovery of the country will have to act in conditions of limited financial resources. However, despite this, we expect that the proactive policy in terms of the country’s reconstruction will continue. In such circumstances, the responsibility for ineffective or unreasonable decisions is significantly increasing, so future heads of these institutions need to be clearly aware of the challenges that they will face and how to avoid their negative impact.

The cost per square meter in new commercial buildings

According to dom.ria, the average price for 1 sq. m in new buildings in March 2024 was:

•       UAH 31.4 thousand in the Kyiv region (excluding Kyiv);
•       UAH 31.4 thousand in Volyn region;
•       UAH 40.9 thousand in Dnipropetrovsk region.

The new buildings, whose prices are presented above, typically do not include specially equipped shelters. This is because they commenced construction prior to the onset of large-scale war when building regulations did not mandate such a requirement. However, they may have parking lots or basements that can serve as the simplest shelter.

For reference. New construction standards entered into force in November 2023. According to these standards, residential and public buildings, including schools, kindergartens, and hospitals, must be equipped with protective structures for civil defense and dual-purpose structures. These are intended to safeguard the population from dangers arising from emergency situations, military actions, or terrorist acts.

Prices from the Ministry of Recovery

The Ministry of Recovery also provides its own recommendations on the appropriate construction costs funded by the state or local budget. Every quarter, the Ministry calculates the indirect cost of housing construction per region in Ukraine. That indicator takes into account all costs associated with construction, including design, administrative expenses, and the profit of contracting organizations. According to the resolution, this indicator should be used, among other instances, in determining financing from the state or local budget for housing construction. As of April 1, 2024, the indirect cost of 1 sq. m of the total area of the apartments in the building (including VAT) was:

•   in Ukraine — UAH 21.5 thousand;
•   in the Kyiv region — UAH 21.5 thousand;
•   in Dnipropetrovsk region — UAH 20.9 thousand;
•   in Volyn region — UAH 20.7 thousand.

The State Audit Service advises procuring entities to use these prices as guidance when determining the expected cost of building new housing. However, in Mezhova, Dnipropetrovsk region, a procuring entity contested the monitoring conclusion, and the court ruled in its favor. The court concluded that the procuring entity accurately determined the expected cost of the procurement based on the project and estimate documentation.

Prices in Prozorro

Very roughly

If we divide the amount of the contract by the total area of the apartments in the building, the lowest price for 1 sq.m. in Strumivka is UAH 26.3 thousand. We remind you that, as mentioned earlier, according to dom.ria, the average cost of 1 sq.m. in that region in March 2024 was UAH 31.4 thousand.

Mezhova, in the Dnipropetrovsk region, is second with a price of UAH 39 thousand per square meter. Neither of these buildings’ projects include special shelters (anti-radiation shelters), but they do have basements. According to dom.ria, the average cost of 1 sq.m. in new buildings in the Dnipropetrovsk region in March was UAH 40.9 thousand.

The price for 1 sq.m. in houses in the Kyiv region is almost twice as high as the cost in other regions: UAH 61.6 thousand in Vasylkiv and UAH 59 thousand in Buzova. According to dom.ria, the average cost of 1 sq.m. in that region in March 2024 was UAH 31.4 thousand. However, the projects for both of these buildings include the installation of full-fledged anti-radiation shelters in the basements, plumbing in the bathrooms of all apartments, and in Vasylkiv – gas stoves in each apartment.

The comparative characteristics of four buildings according to key parameters are presented in the table:

The construction documentation did not include separate estimates for the construction and arrangement of anti-radiation shelters. However, it is impossible to accurately calculate the cost per square meter without accounting for the expenses related to such shelters. We sent requests to procuring entities and procurement initiators, asking them to provide detailed information on this matter.

Minus anti-radiation shelter

The KRMA’s Regional Development Department responded that the estimated cost of building a shelter in Buzova is UAH 19.1 million. So, the price of 1 sq. m without taking into account the costs of the shelter will be UAH 52.7 thousand.

The Vasylkiv City Council replied that the estimates do not include separate calculations of costs for the shelter. Instead, the Infrastructure Restoration and Development Service in Kyiv Oblast stated that the estimated cost of the shelter is UAH 10.2 million. Therefore, the approximate price of 1 sq. m in a house in Vasylkiv, without taking into account the costs of building a shelter, will amount to UAH 59.7 thousand.

We understand that such calculations are quite approximate, but even with possible errors, we see that the cost of 1 sq. m in projects in the Kyiv region significantly exceeds the price on the commercial market (UAH 31.4 thousand/sq.m). We tried to investigate why this happened.

What’s in the estimates?

In Buzova, Mezhova and Strumenivka, the contract price is dynamic, that is, it immediately assumes that it will be adjusted, depending on market prices. At the same time, the price in Vasylkiv is fixed for the duration of the contract, making it much more difficult to change.

We reviewed the estimates of all four constructions and found that the prices for similar building materials differ significantly. The most expensive ones are in estimates in Buzova.

Many construction materials in Vasylkiv, as indicated in the estimate documentation, cannot be clearly identified by their names. The construction project was ordered by the city council itself. It does not contain detailed specifications for certain types of work, such as facade arrangements or reinforcement of reinforced concrete structures. As a result, there is no detailed information on these items in the contractor’s estimates.

According to our calculations, over 50% of the total cost of construction materials comprised items where groups of construction materials were used instead of individual material names. These groups generalize materials with similar production technology but differing characteristics and prices. For example: “Basin”. The price range for ceramic washbasins varies by 2300%, ranging from UAH 299 to 7015. For all manufacturers, the price depends on the size. “Reinforcement frames” make up 40% of the cost of all materials. This position also cannot be clearly identified, and the value of its components cannot be determined. Under such conditions, any analysis of the market price cannot give a reliable result.

We were alarmed by the extremely high prices in the estimate for Buzova, so we sent a request to the procuring entity asking for certificates of the services rendered. The prices on those certificates were significantly lower than the prices in the initial estimate. And not only selling prices, but also costs for delivery and storage of materials. In the contract estimates, the contractor justified the price by stating that the distance of delivery of building materials would be 80 km, while in the documents, it is indicated as 28-40 km. For some items, the price in the certificates of the services rendered was 1.5 times lower than the price in the estimate. For example, the current price for 16-18 mm Class A-III reinforcing steel was UAH 50.7 thousand per ton in the estimate, whereas it was UAH 27.9 thousand per ton in the certificate.

Given that the prices of materials in the certificates are significantly lower, the question arises: where will the difference go? It would be logical to adjust the total value of contracts through an additional agreement. But this is an uncommon occurrence in construction; the cost of projects typically only increases. We will continue to monitor the prices in the certificates for this project.

Based on the results of this analysis, we conclude that, for now, it is more advantageous for the state to compensate the victims for their destroyed real estate with certificates. After all, housing on the commercial market is currently cheaper than constructing new buildings funded by the budget.

Is this a final conclusion? No. These initial projects highlight the need for closer control at all stages if the state plans to rebuild with its own funds.

At the same time, constructions funded by the budget should be more transparent to allow both the public and relevant authorities to monitor them. The names of construction products in project and estimate documentation, offers, and especially in contracts, should be as specific as possible. This is the only way to objectively assess whether they contain potential overpayments.

Additionally, it may be considered to publish certificates of services rendered because only through them can we see the actual costs of various materials, wages, and other expenses. This is quite a difficult task because the appropriate platform should be selected. Since these documents are not directly related to procurement, it may not be entirely appropriate to publish them on Prozorro. Spending does not have the corresponding functionality, and DREAM is not yet fully operational.

Perhaps it is worth considering the development of standardized typical drafts for such reconstructions, which could serve as a basis and be partially adapted. This would reduce project documentation costs and constrain the creativity and flexibility of procuring entities regarding design and architectural solutions for budget-funded projects.

Until all of this is regulated, the data suggests that the compensation tool is more cost-effective, transparent, and efficient in terms of budget expenditure.

The material was prepared within the framework of the USAID/UK aid TAPAS Project/Transparency and Accountability in Public Administration and Services.