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

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

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

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

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

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

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

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

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

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

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

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

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

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We have studied the data on tenders on Prozorro, which:

• were announced from February 24, 2022, to February 24, 2023;
• were conducted under the procurement code CPV 79340000-9 — Advertising and marketing services;
• were about advertising, not other services that fell into the sample after the first two filters; for this purpose, we cleaned up the data manually.

Let us note that some procuring entities could use a different CPV code for such services — for example, enter advertising as placing information in local newspapers. But it is very difficult to identify all such cases in order to include them in the general analytics. By the way, we have studied the procurement of periodicals in a separate material.

Another important note is that this analysis only considers information that is publicly available. Last year, procuring entities did not publish part of the tenders, and it is possible to report on them after the end of martial law.

General trends

During the first year of the full-scale war, public procuring entities purchased advertising for UAH 262 mln on Prozorro. Mostly they purchased:

• services to cover the results of their activities;
• development and placement of information materials in social networks (Facebook, Instagram, TikTok), on outdoor advertising objects (billboards), radio and television;
• conducting advertising campaigns.

Almost 82% of the total amount falls on two oblasts: Kyiv (UAH 108.5 mln) and Dnipropetrovsk (UAH 104.1 mln). But Kyiv Oblast has such an indicator because of PrivatBank and Ukrposhta, which are registered in the capital. Among the leading regions also Odesa Oblast — UAH 5.2 mln, Lviv Oblast — UAH 4.9 mln, and Cherkasy Oblast — UAH 4.4 mln.

Procuring during the war in Prozorro

• The amount of contracts for advertising, concluded in the oblast in the first year of the full-scale war, UAH mln
• Regions that are temporarily occupied by russia
• Data on procurement of advertising 24.02.2022-24.02.2023
• In addition, at the beginning of the full-scale war, procuring entities were allowed to buy everything directly for several months and not to report on it in Prozorro. Information on such procurement is not considered in the infographics.

Dnipropetrovsk Oblast — center of advertising orders for budget money

In this oblast, public procuring entities purchased the most advertising. Mostly such orders were made in Dnipro and Kryvyi Rih.

Support for junior entrepreneurs in Dnipro

In our sample, the largest procuring entity of advertising was the ME “Organizational and Analytical Service” of the Dnipro City Council. It signed contracts for UAH 53.5 mln:

• half — UAH 26.8 mln — falls on the agreements concluded in January 2023;
• the rest — UAH 26.7 mln — is the amount of agreements in 2022.

Interestingly, most of the advertising contracts were signed by the municipal enterprise with the newly created individual entrepreneurs, which participated only in its tenders.

Thus, the largest number of orders was received by individual entrepreneur M. D. Svyrydova — UAH 15.3 mln per year. Maryna Svyrydova started her entrepreneurial activity in September 2021, and in October, she concluded her first tender contract. During the full-scale war, Maryna Svyrydova signed two contracts to cover the activities of the Dnipro City Council on the Internet:

• in August — for UAH 7.4 mln for 1,050 publications on local and all-Ukrainian Internet resources (obozrevatel.com, centr.tv, rbc.ua, nashemisto.dp.ua, 56.ua, dnepr.express, dnpr.com.ua, gorod.dp.ua and others);
• in December — for UAH 7.9 mln for 1,100 such publications.

Thus, the total amount of contracts that the individual entrepreneur has signed with the ME “Organizational and Analytical Service” of the Dnipro City Council has reached UAH 21.3 mln. The entrepreneur does not work with any other procuring entities through Prozorro.

The second contractor in terms of the amount of advertising orders from this ME after February 24, 2022, was individual entrepreneur Kopach V. B. — UAH 14.3 mln. Vadym Kopach registered as an individual entrepreneur in April 2021, and in May, he already got awarded in the first public procurement in which he took part. Over the past year, he has received three contracts:

• in April — for UAH 4.7 mln for the placement of information on the activities of the city council;
• in August — for UAH 2.6 mln for similar services;
• in December — for UAH 7 mln for covering the activities of the Dnipro City Council on the radio in 2023. The information will be placed on the air of the radio stations “HIT FM,” “Radio Relax,” “Radio Melodia,” “kiss FM,” “Radio ROCKS,” radio “BAYRAKTAR.”

IE Kopach V.B. also participated only in those tenders that were announced by the ME “Organizational and Analytical Service” in Dnipro. The amount of contracts concluded with this procuring entity is UAH 18.8 mln.

IE Khrapko O. I. comes third among the advertising contractors of the “Organizational and Analytical Service.” His career path also began in 2021: in April — registration, in May — the first tender contract. At the end of 2022, he concluded an agreement for UAH 6.7 mln for informing about the activities of the Dnipro City Council in printed publications in 2023. We are talking about 200 publications in “Dnipro Vechernii,” “Nashe Misto,” “ZORYA,” “Vesti PRYDNIPROVYA.” The total amount of the IE’s contracts with his sole procuring entity is UAH 18.2 mln.

Another successful beginner in the procurement of advertising in Dnipro was IE Shulika A. O. Over the past year, she signed contracts for UAH 7.7 mln:

• UAH 5.3 mln will be used to cover the activities of the Dnipro City Council on regional TV channels (“11 TV Channel”, “Vidkrytyi”);
• UAH 1.5 mln has already been spent on covering the activities of local authorities on the radio and in the press;
• and another UAH 900,000 — on advertising on regional TV channels.

Traditionally, IE was registered in 2021, namely in March, and already in May, it successfully participated in the procurement of the ME “Organizational and Analytical Service.” Traditionally, the entrepreneur did not participate in the procurement of other procuring entities. The current amount of her contracts with the ME “Organizational and Analytical Service” is UAH 18 mln.

Participation in the procurement of only one procuring entity, as well as being awarded in Prozorro immediately after the start of entrepreneurial activity, is not prohibited by law. At the same time, let’s agree that in the case of the city council of Dnipro, this story looks extremely suspicious. 

By the way, this practice was used by them before. In 2018, individual entrepreneur Kolosova L.V. began to receive contracts from the “Organizational and Analytical Service” the next month after registration. And before that, in 2017, the police investigated a criminal proceeding on the fictitiousness of tender agreements of the municipal enterprise.

Over the past year, the Dnipro ME “Organizational and Analytical Service” had two more contractors with a slightly longer history — Atma-News LLC (existing since 2007) and IE Oleynikov O. O. (existing since 2017). They account for agreements worth UAH 9.5 mln, most of which were concluded in April-May 2022. But even these two contractors on Prozorro mostly work with the “Organizational and Analytical Service.”

Atma-News LLC is owned by Kudinova Olena Vladyslavivna. Dnipro media outlet “Litsa” calls her a relative of Hennadii Korban.

More Dnipro advertising

The second major procuring entity of such services in Dnipro was the Department for Local Self-Government, Internal and Information Policy of the Dnipro City Council. In the first year of the full-scale war, it signed contracts for UAH 15.2 mln.

The largest amount of funds falls on IE Tarasenko O.M. — UAH 7.9 mln. Thus, in 2023, she is to be paid UAH 4.8 mln for the promotion of information on the activities of the city council and its subordinate enterprises on Facebook. The cost of services in particular includes a targeted advertising campaign, remarketing setup, 24/7 technical support, development of creative advertising products. Tarasenko provided similar services in 2022. Then two agreements were concluded with her: one in May for UAH 1.8 mln, the other in August for UAH 1.3 mln. 

IE Serhieyeva O. M will also be paid for the coverage of the activities of local authorities in social networks — UAH 7 mln. Only here, the agreements concern not only Facebook, but also Telegram. UAH 4.8 mln of the cost of the services in 2023 includes the placement of information messages and explanations, expansion of the audience of subscribers, provision of media support, copywriting and rewriting of texts. Individual entrepreneur Serhieyeva also provided similar services during 2022 for UAH 2.2 mln.

And the least money spent on advertising from the department falls on IE Hryshchenko A.H. — UAH 146,000, and IE Vershynina S.H. — UAH 110,000.

Advertising in Kryvyi Rih

During the first year of the full-scale war, the Institute for the Development of Kryvyi Rih of the Kryvyi Rih City Council concluded advertising contracts for UAH 17.4 mln.

In 2022, the city spent:

• UAH 800,000 for “services to cover the safety and protection of residents, the implementation of social and humanitarian programs, the work of critical infrastructure objects and other important information under a special legal regime (martial law)” through radio and television;
• UAH 322,000 for similar services on the Internet and in printed periodicals.

For 2023, more plans are visible on Prozorro. The Institute for the Development of Kryvyi Rih wants to spend UAH 11.3 mln to inform the population about the work of local authorities under martial law, in particular, about the implementation of social and humanitarian programs, on radio and television. We are talking about 2,000 minutes on the radio stations “Radio Piatnytsia,” “NRJ,” “Perets FM,” “Stilnoe,” “Horod FM,” “RADIO KRYVBAS,” and 5,250 minutes on two TV channels: “Pershyi Miskyi” and Public Television of Dnipro “OTV.” The contract was concluded with ART-STYLE group LLC.

Another UAH 4.95 mln will be used to inform the population about the activities of the city council in the press and on the Internet. In particular, we are talking about the placement of information materials on the following Internet resources: “Kryvbas On-Line,” “Puls,” “Pershyi Miskyi,” “Informator,” “0564.ua” — and in the printed publications “Puls,” “Moya Hazeta Domashnia” in Kryvyi Rih, “Vecher,” “VEK.Vestnik Kryvbassa.” The contract was awarded to KRYVBAS ONLINE INFORMATION AGENCY LLC. The company was founded in 2009 and is owned by Yaroslav Hyvel, who is a member of the Dnipro City Council.

Not with Dnipropetrovsk Oblast alone

The largest procuring entities of advertising over the past year were two large state-owned companies: JSC CB PRIVATBANK — UAH 40.1 mln (not subject to general procurement rules) and JSC UKRPOSHTA — UAH 23.9 mln. These tenders are conducted not at the expense of the budget, but for money from entrepreneurial activities.

PrivatBank mainly ordered placement of information and advertising materials in the media, radio, and television, services of internal PR campaigns, creation of a reputation and communication strategy, SEO-optimization, etc.

In “Ukrposhta,” the largest amount of expenses falls on advertising on the Internet — UAH 13.2 mln. First, in August, the procuring entity signed an agreement for UAH 18 mln, but in the end, the volumes were reduced to UAH 2.5 mln. Another contract for UAH 10.7 mln was signed at the end of December 2022. Almost UAH 6 mln is provided for the marketing research “Tayemnyi Pokupets,” which will be carried out until 2025.

SE “Center for Protection of Ukrainian Information Space” concluded advertising contracts for UAH 16.8 mln during the first year of the full-scale invasion. UAH 9.6 mln in 2022 was spent on the creation and distribution of information audiovisual products on the air of the TV channels STB, Novyi Kanal, 2+2, Tet, Plusplus, M1, BIHUDI, OTSE, M2. The agreement was concluded with MEDIA SCOPE GLOBAL LLC.

UAH 3.7 mln was spent on monitoring information in the domestic media, another UAH 1.4 mln was allocated for these services in 2023. All three contracts were concluded with LLC MEDIATEKA.

And though not so expensive, but a very unusual tender was conducted in Zhytomyr Oblast. The Oliyivska hromada decided to purchase calendars with photos of members of their local council. The residents disliked the idea — ATO veteran and volunteer Oleksandr Shevtsov made sure that the story got publicity. It was he who submitted an application to the police. In the end, the contract was terminated, the official grounds “the impossibility of the Contractor’s fulfillment of the Procuring Entity’s requirement.” The supplier must also return all funds to the procuring entity. According to Suspilne, at the beginning of February 2023, criminal proceedings were opened under this case and a verification was conducted.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

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Weapons and military equipment

Let’s start with the most secret procurement. Procurement of weapons and military equipment in Ukraine has traditionally been a closely guarded secret. The state defense order (SDO) has always been classified. Any information about weapons-related procurement was considered sensitive.

You could probably agree that secrecy is important in this category of procurement, but in fact this is not always the case.

The fact is that in the modern world, there is no point in concealing the very fact of the development, production, or use of certain weapons. Either way, this information becomes public.

For example, it was no secret that Ukraine was developing the Neptune anti-ship system. Moreover, the information about the stages of development and adoption of this complex is public.

There are separate specialized publications that publish information about the number of weapons in each country, the latest developments and trends in technological development.

The United States has already realized that the approach of complete secrecy of defense procurement makes no sense. It is essential to keep the characteristics of the weapon secret, not its quantity. 

Unlike the Ukrainian SDO, anyone can freely go to the page of the US defense budget and see what weapons the Pentagon purchases: how many and at what price. For example, we can see that in 2023, the United States plans to purchase 4,764 GMLRS missiles for HIMARS complexes at a price of USD 165,600 apiece. These are the missiles that the Armed Forces of Ukraine use to destroy ammunition depots and enemy headquarters.

You can even see information about the number and price of taxpayer-funded rounds in the US defense budget reports.

In addition, the results of defense procurement audits are public.

This contributes to forming the trust of taxpayers. They know that their money is spent efficiently.

Of course, in the conditions of a large-scale war, most procurement of weapons and military equipment must be concealed. After all, this can create a certain tactical advantage and allow accumulating reserves that the enemy does not expect.

Therefore, the reform of publicity in the field of weapon procurement should probably be postponed until the end of the war. But what about everything else?

Procurement not related to weapons

The structures of the Ministry of Defense of Ukraine spend tens of billions on procurement of military clothing, footwear, food, fuel, and hundreds of different household products and systems. From generators and sleeping bags to trucks.

These procurement transactions raised many questions before 2022 as well.

• For example, in 2021, the SBI served the advisor to the Minister of Defense with charges of lobbying the interests of one of the food suppliers and accused him of causing damage to the state for UAH 720 mln.
• In 2018, during the inspection, 180 tons of low-quality canned food purchased for the army were found.
• For several years, the Ministry of Defense has been accused of lobbying for the procurement of lubricants from the company of MP Ponomariov.

And this list of dubious procurement transactions is very long.

It would be good if during the war, corruption disappeared from the defense departments altogether, but it is difficult to believe that this is possible.

Many people still play by the old rules — when the fate of contracts was decided by the Ministry of Defense not by the principle of competition between participants and the best price, but by agreements behind closed doors, lobbying, and orders from above.

Since in 2022 all procurement transactions of the Ministry of Defense were hidden from the public, it was only a matter of time when the first corruption scandal would emerge.

Therefore, without publicity, it is impossible to build confidence in the effectiveness of the use of taxpayers’ funds. And the system itself is unlikely to change quickly if it is not publicly overseen.

What information about Ministry of Defense contracts may contain sensitive information?

Here, we should understand when and what information can really play into the hands of the enemy, and how dangerous its disclosure can be. We should note that this is not about the procurement of weapons and military equipment — only about civilian products.

To summarize, only information about the manufacturer and the place of delivery can be truly sensitive. And only in exceptional cases.

After all, it is clear that russians will not target the producers of chicken eggs and canned fish with missiles to disrupt the contract of the Ministry of Defense. These products are not critical for the front, and alternatives can be quickly found on the market.

Such a risk is possible for manufacturers of more critical products, and in the case when there are not so many manufacturers on the market. For example, it can be vehicles for transporting personnel or military equipment, or in the case when there are only 1–2 manufacturers and there can be real negative consequences for the Armed Forces in case of an attack on production.

The place of delivery also causes a lot of discussion. But it can always be indicated not completely, so as not to expose a specific storage point for the enemy. For example, specify only an oblast, district, or city.

As for the number of servicemen, the total number of the Armed Forces is not classified information. The Minister of Defense himself openly speaks about this. But information about the number of troops in a particular region can be sensitive. And if we talk about the number of canned food and eggs, then such information can hardly be used by the enemy. However, for example, the number of grocery sets, sleeping bags, or sleeping mats may indicate the number of recipients of these goods.

Therefore, it is worth maintaining a certain information balance as far as the procurement of the Ministry of Defense is concerned. But in most cases, data on civilian procurement of the MoD will not help the enemy in any way.

At the same time, there are no objective reasons to hide information about prices and payment terms (the latter is also important as it allows manipulating the price) at all. The cost of eggs, shoes, and canned food interests only those who pay for them. That is, the citizens of Ukraine. The enemy has no benefit from this.

What do MPs and the government offer?

After the scandal around the procurement of the Ministry of Defense, draft law 8381 appeared in the Verkhovna Rada.

According to it, MPs plan to introduce mandatory reporting within 10 days from the conclusion of the contract by the Ministry of Defense (for procurement worth more than UAH 200,000). The report will indicate the name of the procuring entity, the name of the procurement item, the price per unit of goods.

In this way, the public will be able to find out information only about the prices for the goods. But this does not make it clear. After all, the price depends quite strongly on the terms of payment, the order of its revision, the terms of delivery.

The Ministry of Defense, rejecting allegations of corruption, in particular, referred to the fact that the contract has certain conditions for revising prices (saying that the price specified in the contract is maximum, not actual) and that the terms of supply are quite peculiar. In the end, society never saw evidence of either the first or the second. But it is quite obvious that the publication of the price alone will not remove all the issues. 

In addition, the fact of reporting does not tell us anything about how and why a particular supplier was selected. An opaque way of selecting suppliers will affect the trust of market participants, and such procurement will never become effective.

The Ministry of Economy proposes to expand the scope of application of Resolution No. 1175 on conducting framework agreements for the procurement of military clothing. But this will cover only part of procurement of civilian products by units of the Ministry of Defense.

In addition, the framework agreement is better suited for systemic procurement, which is carried out with a certain frequency. It is not quite effective for one-time or non-systemic procurement.

Why can’t all MoD procurement transactions that are not related to weapons be transferred to Prozorro?

Quite often, we hear that Prozorro is not suitable for certain procurement transactions. But this is a manipulation. After all, Prozorro is only an electronic platform that implements the protocol of the procurement procedure, which was laid in it by law and government resolutions.

Any procurement procedure looks one way or another because this is how it is described in a certain regulatory act.

And in fact, nothing prevents the Ministry of Defense from procuring through procedures in the Prozorro system. For the most part, they do not contain sensitive information. And even if it exists, there are mechanisms and ways of conducting such procurement. In particular, bidding with the NDA agreement. Then some data are not published, but anyone can see the tender, enter into a non-disclosure agreement (NDA) with the procuring entity, and learn the sensitive details of the contract.

In any case, it’s a matter of desire, not ability. And the Ministry of Defense of Ukraine should be a leader in transparency and integrity because the defense capability of our armed forces most of all depends on the effectiveness of procurement of this particular procuring entity.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

The post What Info Is Secret in Defense Procurement not Related to Weapons? first appeared on Transparency International Ukraine.

However, after a rather rapid consideration of the draft in the first reading — it took MPs a little more than a week from the moment of registration to the voting — its further passing of the legislative procedure got stalled. The Ministry of Infrastructure and the Ministry of Digital Transformation have already managed to present the Register of Damaged and Destroyed Property, and the number of applications received through Diia has almost reached 300,000, but the document was still being prepared for the second reading.

More than eight months passed, and the text of the draft law for the second reading was published. And the main committee, having worked on 725 submitted proposals, recommended its adoption.

The text has undergone significant changes, so, it is necessary to understand how the approach to providing compensation has changed, and what should expect those whose property suffered.

What is the case with reimbursement now?

To date, there is no legislation in Ukraine that would regulate the reimbursement of the value of property damaged due to hostilities. At the same time, there are certain rules that provide for the possibility of paying compensation to the affected persons. These are Articles 84-86 of the Code of Civil Protection of Ukraine, which determine the procedure for providing assistance by the state to persons affected by emergencies, which also include military events.

These provisions, in particular, provide for the construction/purchase of housing for victims who have lost it or if it has become uninhabitable, or monetary compensation for destroyed/damaged housing.

According to Article 86 of the Code, victims are provided with housing or paid compensation if they voluntarily transferred their destroyed or damaged housing to the state. The amount of compensation is determined not in accordance with the market value of such housing, but by the indicators of the indirect cost of its construction in the relevant region of Ukraine.

The procedure for providing and determining the amount of monetary compensation to victims of emergency situations is approved by the CMU Resolution No. 947. In 2020, this act was extended to determine the amount and payment of compensation to victims whose housing was destroyed as a result of a military emergency caused by the armed aggression of russia.

Although the said resolution remains in force, its provisions are not particularly relevant:

1. their effect extends to the territory of Donetsk and Luhansk oblasts only;
2. monetary compensation is provided only for destroyed property and does not exceed UAH 300,000.

Consequently, today, the issue of compensation for damaged or destroyed property as a result of the full-scale aggression of Russia is basically not settled at the regulatory level.

What does the draft law propose?

Compensation will be provided exclusively for property damaged/destroyed after February 24, 2022, and within three years after the cessation or cancellation of martial law in the territory where such an object is (was) located. The law will not apply to objects that were in the temporarily occupied territory on the date of the introduction of martial law.

Compensation is offered to provide only for damaged or destroyed residential real estate. This includes apartments, other residential premises (for example, rooms in dormitories), manor houses, garden and country houses, construction facilities in which support and external structures are erected. The common property of an apartment building will also be compensated for — but only in case of its damage.

Individuals — citizens of Ukraine who are owners (including members of cooperatives who bought housing but did not register ownership), construction customers, investors of damaged or destroyed real estate, as well as their heirs (hereinafter — owners) will receive the right to compensation. Condominiums, managers, housing cooperatives, or persons authorized by the co-owners of apartment buildings will be able to receive compensation for the common property.

Persons from sanctions lists, with convictions for committing crimes against the basics of national security and their heirs will not be able to receive compensation.

The approach to the methods of reimbursement in the draft law to the second reading was changed. For damaged property, it will be impossible to receive monetary compensation — for such cases, only restoration through construction work and/or the provision of building materials for them are offered.

Owners of destroyed apartments and other residential premises will not receive monetary compensation. Instead, they will receive a housing certificate — a document confirming the state’s guarantee to finance the purchase of an apartment or other residential premises (including one that will be built in the future) in the amount of the sum of money specified in such a document.

Only owners of private houses will have a choice — to receive a housing certificate for the purchase of an apartment or house or monetary compensation, which will be transferred to an account with a special mode of use to finance construction.

The maximum amount of compensation — both monetary and in the form of a housing certificate — is absent, as well as restrictions on the location, type, and area of new housing, the construction of which will be financed through a certificate. It will also be possible to choose more expensive housing and cover the difference at one’s own expense, or use several certificates of different owners to purchase one object. One can use the certificate within five years from the date of its issuance, but it is prohibited to alienate the object for 5 years, except for inheritance.

If the price of housing is lower than the amount specified in the certificate, the under-received part of the compensation will be paid to the recipient only at the expense of funds received from russia to reimburse for damages.

The deadline for submitting an application for compensation for destroyed residential property was increased for the second reading — it can be submitted during the martial law and within one year from the date of its termination or cancellation in the territory where such an object was located, using the Diia portal or in paper form through the ASC, social protection bodies, or a notary.

A copy of the document confirming the ownership or purchase of the property and, if available, photo and video materials recording the state before or after destruction will need to be attached to the application. If these documents are not available, the consideration of the application will be stopped until the moment when they are added.

The commission for consideration of compensation issues will consider applications and make decisions on granting or refusing compensation for destroyed property. Such commissions will be created by the executive bodies of local councils, military or military-civilian administrations of settlements, which will approve the decision to grant/refuse to grant compensation.

Moreover, before the second reading, the provision was excluded from the draft law, according to which the executive bodies of local councils had to provide compensation, for which they had to transfer a subvention from the national budget.

To finance the purchase of housing, the recipient of compensation will apply to a legal entity designated by the Cabinet of Ministers of Ukraine, which will be obliged to consider such an appeal within a period not exceeding 10 working days. The priority right to receive compensation for destroyed real estate objects will be given to combatants, large families, and persons with disabilities of groups I and II.

The recipient of compensation for five years will not have the right to alienate housing purchased or invested by them using a housing certificate.

Sources of financing for compensation for damaged and destroyed property will be the following:

1. funds of state and local budgets;
2. funds of international financial organizations, other creditors, and investors;
3. international technical and/or reimbursable or irrevocable financial assistance;
4. reparations or other recovery from Russia;
5. other sources not prohibited by the legislation of Ukraine, including local funds established for the purpose of compensation and restoration of damaged/destroyed real estate.

Transparency International Ukraine, together with RISE Ukraine Coalition, met with representatives of the Ministry for Communities, Territories and Infrastructure Development to discuss this draft law and provide recommendations to it.

Shortcomings of Draft Law No.7198

1. The methods of compensation determined by the draft law oblige their recipients to direct funds exclusively to finance the construction or purchase of housing. At the same time, it does not consider the fact that some owners of the destroyed property will not intend — both within the five-year period of validity of the housing certificate, and in general — to purchase real estate or wait several years for its construction, but need funds to ensure housing needs.

First of all, this applies to those who have other housing left, or those who have already purchased or received it (including at the expense of escheat), and needs funds for arrangement, that is, to conduct repair and finishing work, purchase and install sanitary ware, heating systems, furnish, etc. The draft law does not fully consider the interests of the owners of the destroyed apartments — they will not be able to receive funds to finance the construction of their own house, even if they own suitable land plots for this.

Position of the Ministry for Communities, Territories and Infrastructure Development:

This law and state guarantees are intended to ensure the need of the population for housing that has been destroyed or damaged as a result of hostilities.

The acquisition of movable property, entrepreneurial activity contradict the essence of this state guarantee: if a person has lost their home — they receive housing, and not other material benefits.

Expanding the use of monetary compensation will negate the essence of state support and can also lead to an unfair situation where one person will start a business for the cost of housing restoration, and another will not receive funds for the restoration of the only housing they possess due to lack of financing.
The owner of the destroyed property (apartment, house, etc.) will essentially receive financial targeted compensation (either for the purchase of housing or for its construction). There are no privileges for owners of private houses.

The point is that it is impossible to build one apartment. It will necessarily be an apartment building. Otherwise, it is a private house.

Therefore, obtaining monetary compensation for the construction of a separate apartment is illogical.

The owner will be able to choose — either they receive financing for the purchase of a finished apartment/house/other residential premises, or they receive compensation and builds their own house because it is impossible to build an apartment on their own.

The amount of compensation does not depend on the type of property that will be purchased or built. The amount depends on the value of the destroyed property.

2. If the amount of compensation specified in the housing certificate is higher than the cost of the purchased housing, the payment of the amount of the under-received compensation will be made exclusively at the expense of funds received from russiato compensate for losses for the destroyed real estate. We are talking about the possible reparations or recovery of funds from the aggressor by the relevant court decision. However, if Ukraine does not receive such funds, the balance of compensation will not be paid. In our opinion, it is appropriate to provide for the possibility of transferring the under-received balance to the current account of the recipient for the arrangement of housing purchased using a certificate.

Position of the Ministry for Communities, Territories and Infrastructure Development:

The essence of this law and state policy is to provide Ukrainians with housing in the first place. In this case, the state acts as a guarantor and gives people its own or borrowed funds to restore the violated rights. And then the state will deal with the issue of recovering these funds from russia.

Consequently, the state has not transferred the obligation to receive compensation from the aggressor to the people. At the same time, with this law, the state creates conditions for the restoration of violated rights “here and now,” and not after receiving reparations.

Basically, it is not Ukraine that is to blame for the destruction of property, and therefore it can legally not compensate anything in advance. However, the state does this and assumes all the risks of further receiving funds from the aggressor.

The points about the obligation to pay a person the amount of the under-received compensation in such conditions is inappropriate. 

3. Even after buying a new home, the recipient of compensation will not be able to freely dispose of it— the prohibition of alienation will be imposed for five years. It should be noted that in the original version of the draft law, this period was shorter and amounted to “only” three years. Such a condition for compensation is extremely doubtful and unfair because the right of a person to dispose of their property will be limited solely due to the fact that their home was previously destroyed as a result of hostilities. Such interference in the exercise of property rights does not comply with the provisions of the Constitution of Ukraine and the Civil Code of Ukraine, according to which the owner has the right to dispose of their property at their own discretion, and all owners are provided with equal conditions for the exercise of their rights. In addition, the sale of housing that has been owned by a person for less than 3 years is subject to personal income tax, which reduces the likelihood of alienation of housing purchased using a certificate.

The idea of the law is to provide Ukrainians with housing. And this goal is achieved by the proposed mechanism.

The prohibition on alienation of real estate is contained in the specialized legislative acts, for example, a prohibition on the alienation of housing of orphans, children deprived of parental care; a ban on the alienation of the property of a person recognized as dead for 5 years, etc.

The applied restriction is intended to preserve the essence of state support in providing housing, and not to turn it into a business process.

The restriction is applied not because the person’s property was destroyed as a result of hostilities, but because the person enjoys state support to restore the violated right in the form of financing for housing. Consequently, the logic of limited rights to alienate property for a certain period is justified. 

4. Such restrictions may be beneficial for representatives of the real estate market, and not the state or owners of destroyed/damaged property. The draft law does not provide for the mandatory reconstruction of residential real estate in cities that have suffered significant damage because the housing certificate is not bound to a particular locality. The possibility to use compensation exclusively for the purchase of residential real estate will stimulate excessive demand for it, and the subsequent prohibition of alienation will artificially keep the value of real estate on the market. At the same time, due to the limited validity period of housing certificates, citizens will be forced to agree, including to unfavorable prices, in order not to lose compensation.

Position of the Ministry for Communities, Territories and Infrastructure Development:

On the contrary, such restrictions are not beneficial to representatives of the construction market, since having received housing, a person will not be able to alienate it. This can reduce people’s demand for other apartments/houses, etc.

In the context of global destruction of the housing stock — the demand for housing is growing naturally, and not through government programs.

The use of compensation for the purchase of other real estate, in addition to residential, will contradict the idea of the legislator to provide Ukrainians with housing.

As for the binding to the locality — there is a great demand for the population to live in their hometown, and therefore the reconstruction of these cities will naturally take place.

In addition, already now the state has certain developments and plans for the reconstruction of cities, but this is a parallel line that cannot negate the provision of housing right now.

At the same time, a person has the right to independently choose a location for the use of a housing certificate within its amount. And the key indicator in this matter is only the amount of funds that will be commensurate with the value of the destroyed property.

5. It is also impossible to receive compensation for the damaged object in the form of monetary resources— it will be provided by performing work related to its restoration (in particular, the development of project documentation, its examination, construction work) and/or the provision of construction products for such work. At the same time, the draft law does not clearly outline the range of entities that will provide such compensationand, accordingly, will be procuring entities of works and building materials. Unlike compensation for destroyed property, where the recipient will independently search for and select the object for purchase/construction, the draft law does not provide for the right to choose a contractor to perform works or provide/receive goods to compensate for damaged property.

Position of the Ministry for Communities, Territories and Infrastructure Development:

The draft law (Article 10, part 2) stipulates: “The procedure for providing compensation for damaged real estate is determined by the Cabinet of Ministers of Ukraine.”

This issue will be resolved during the creation of bylaws to comply with the requirements of the law, and it will be possible to provide proposals for resolving this issue.

As for the impossibility of obtaining monetary compensation. Yes, the person will not be able to receive funds directly, but they will receive financial coverage of all repair costs, which allows them to achieve the goal of restoring damaged housing.

The primary goal is not to provide money, but to provide housing. The experience of the Donetsk Regional State Administration on the payment of ready money showed that most of these payments were not used for the purchase of housing and did not remain in Ukraine.

6. In general, the issue of compensation for damaged real estate has been improperly settled.The procedure for providing such compensation will be determined by the government, but the draft law does not even provide for general provisions on:

• the forms, terms of submission and procedure for consideration of applications for such compensation for various types of damaged real estate (apartments, private houses, etc.);
• the body that will decide on the granting/refusal of compensation.

Such uncertainty gives grounds for the conclusion that the issue of compensation for damaged objects may fall on the shoulders of local authorities. In particular, among the sources of financing compensations before the second reading, local budgets and local funds for compensation and restoration of damaged/destroyed real estate appeared, and according to the proposed amendments to the Law of Ukraine “On Regulation of Urban Development,” the executive bodies of local councils will be able to be procuring entities of construction (except for new construction) related to the restoration of damaged real estate objects that are not in municipal ownership.

Position of the Ministry for Communities, Territories and Infrastructure Development:

All interested entities will have the opportunity to express their proposals to regulate the issue of compensation for damaged objects at the stage of development of the Cabinet of Ministers resolution.

Financing will be carried out at the expense of the sources defined in Art. 13 of the draft law, which applies to both destroyed and damaged objects.

Therefore, the corresponding funding a priori cannot be assigned only to local budgets.

Empowering local councils to act as the procuring entity of construction will contribute to the development of cities and the faster implementation of the policy of restoration, including of housing stock.

7. The procedure for the formation of the Commissionfor Consideration of Compensation Issues has not been properly settled. According to the draft law, the personal composition of such a commission will be approved by the executive body of the local council, the military or military-civil administration of the settlement. The draft also provides for a list of persons who may be involved in the work of the commission by consent. At the same time, there are no formal requirements for persons who must be in the commission on a permanent basis. This may create a space for abuse in the formation of such commissions and further in their decision-making.

Position of the Ministry for Communities, Territories and Infrastructure Development:

The Cabinet of Ministers of Ukraine will approve an exemplary provision on the commission, which is provided for in Article 3, part 8 of the draft law. It will also be possible to provide relevant proposals during the development of this draft act.

Risks of abuse largely depend on the procedural issues of decision-making, which are regulated by law in terms of destroyed property and will be imperatively regulated by the Cabinet of Ministers in terms of damaged property. Deviation from the established methodology and procedure is prohibited.

This minimizes the risks of abuse. The issue of the official composition is a secondary stage and can be resolved at the local level. We would like to note once again that the relevant principles can be enshrined in the exemplary provision on the commission.

8. The draft law defines the list of individuals and legal entities that can receive compensation, including depending on the type of damaged or destroyed real estate. At the same time, it is possible for the Cabinet of Ministers of Ukraine to determine additional categories of persons who may be compensated. This approach is risky because it provides excessive discretionary powers for the government to include persons who may not be subject to the restrictions provided for by law in the list of recipients. This, in the end, can affect the adequacy of funding and the timeliness of providing compensation to recipients whose status will be enshrined in law.

Position of the Ministry for Communities, Territories and Infrastructure Development:

The adequacy of funding may be affected by the expansion of expenditure objects (movable property, business activities, etc.), as discussed above.

The list of persons who cannot be recipients of compensation is determined by law, and they cannot be included in the circle of persons entitled to compensation at the level of the Cabinet of Ministers.

The relevant right of the Government is enshrined in order to promptly respond to the needs of certain categories of entities for compensation that may not be covered by this law, and if such a need arises. At the same time, such a right does not invalidate the essence of the law — the housing sector will be financed exclusively to provide people with housing.

Conclusion

Draft law No. 7198 is primarily aimed at providing housing to people who have lost it as a result of the full-scale armed aggression and are in dire need of new homes. The state will act as a guarantor of financing the purchase or construction of housing at the expense of its own or attracted funds, while it will have the right to claim for the compensation from the aggressor for losses for the destroyed property.

Persons whose residential property was damaged will have a choice — to receive compensation on the terms specified in this draft law, or to expect to receive compensation from the aggressor. But as long as the possibility of paying reparations or confiscating the aggressor’s foreign assets remains a matter of time, most citizens will be interested in receiving compensation from the state “here and now.”

However, the approach proposed by the legislator to providing compensation for property damaged by the aggression of russia will consider the interests of only a part of its owners. Restrictions on the exercise of the right to property will also become an additional burden for the recipients of compensation. In addition, the draft does not adequately regulate important aspects of the mechanism for providing compensation for damaged property, the formation of Commissions for Consideration of Compensation Issues.

The purpose of the draft law No.7198 is important, but we consider it necessary to note the provisions that would need to be finalized:

1. To provide the right to choose the method of compensation for recipients whose housing was destroyed, regardless of its type — a private house, apartment, other residential premises, etc.
2. To provide the recipients with the opportunity to dispose of the funds provided as compensation for the destroyed real estate, not only for the purpose of financing the acquisition or construction of residential real estate, but also the arrangement of such housing.
3. To eliminate or reduce restrictions on the prohibition of alienation of housing obtained using a housing certificate.
4. To provide for the payment of the amount of under-received compensation to the recipient in case of using a housing certificate to the account with a special regime to ensure housing problems.
5. To regulate the procedure for the formation of the Commission for Consideration of Compensation Issues, in particular, to provide for requirements for persons who may be members of such a commission on a permanent basis, and the procedure for making decisions on the granting/refusal of compensation.
6. To exclude the possibility of the Cabinet of Ministers of Ukraine to determine additional categories of persons who may be provided with compensation and to expand the circle of persons who cannot be recipients of compensation (considering the recommendations given in the text).

Authors: Andrii Shvadchak, legal advisor at Transparency International Ukraine
Volodymyr Datsenko, project manager at Transparency International Ukraine

Legal analysis was prepared with the support of the USAID “Engage” project “Support to Anti-Corruption Champion Institutions in Ukraine” and USAID / UKaid project “Transparency and Accountability in Public Administration and Services / TAPAS.”

This publication was made possible by the support of the American people through the United States Agency for International Development (USAID). The content of this publication is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of USAID or the United States Government.

The post Compensation for Damaged and Destroyed Property: Analysis of Draft Law 7198 first appeared on Transparency International Ukraine.

The post Dynamics of Russia’s Losses in the War: Infographics first appeared on Transparency International Ukraine.

The lack of electricity has greatly increased the demand for generators, charging stations, batteries, solar panels, power banks, and inverters. The shortage of these goods in Ukraine caused an increase in prices and an increase in imports, as most of them are imported from abroad.

In early November, the government adopted a resolution exempting from VAT and import duty imports of electric generators, transformers, batteries, and other energy equipment. According to MP Yaroslav Zheleznyak, in 3 weeks of the month, 82,000 generators worth UAH 690 mln were imported under the customs privilege.

And starting from December 13, they were exempted from VAT and import duty at the legislative level.

Procurement dynamics in Prozorro

According to our estimates, during 11 months of 2022, procuring entities bought more than 10,000 generators for UAH 1.5 billion. As in the commercial market, in Prozorro, the demand for generators increased significantly in October. At that time, 1,900 generators were purchased, which is 2.3 times more than in September. Further, the growing continued.

Before this surge, another small peak in demand was in March, when 358 devices were bought. And after a slowdown in the spring, from July onwards, the number of generators purchased began to rise slightly.

In addition, at the time of preparation of the material, in Prozorro, 190 procurement transactions of generators were still in progress with a total expected cost of UAH 227 million, which the procuring entities announced in November. In December, another 2,000 tenders have been announced worth UAH 910 mln.

Prices for generators in Prozorro

Prices vary depending on the type of generator, capacity, manufacturer’s brand, and other factors. For example, by type of fuel, generators can be gasoline, diesel, gas, and combined. Gasoline ones are among the cheapest, but they have higher fuel consumption compared to diesel ones. Diesel models are economical to consume, as well as the possibility of long uninterrupted operation, but they are much more expensive.

Gasoline generators with a capacity of up to 10 kW were purchased the most. Such generators were bought mainly for educational institutions, municipal enterprises, city councils, co-ops, for the arrangement of shelters and Unbreakable Points.

Generators with a capacity of more than 100 kW were mostly purchased to ensure the functioning of critical infrastructure and housing and utilities services.

The cost of generators that were purchased from Prozorro during the year increased 2-3 times:

• in Prozorro, gasoline generator “Centaur KBG258a” with a capacity of 2.5 kW cost UAH 6,400–7,800 in February, and in November — already UAH 15,900;
• diesel generator “Forte FGD6500E” with a capacity of 4.5 kW cost UAH 34,200 in February, and in November — UAH 99,500;
• gasoline generator “Dnipro-M GX-70E” with a capacity of 7.5 kW in February was bought for UAH 23,900–24,900, while in November — UAH 53,900.

In addition, the cost of the same generator can vary significantly depending on the supplier. For example, the Könner&Söhneb KS10000E gasoline generator was sold by individual entrepreneur Barchuk V. A. for UAH 72,000, while individual entrepreneur Krytiuk H. M. — for UAH 88,000. Energen EN7500 gasoline generator with a capacity of 7.5 kW was sold by Panio A. S. for UAH 48,500, and Zahura O. S. — for the price of UAH 57,000.

At the same time, prices in Prozorro are often at least several thousand hryvnias lower than in the commercial market. Thus, the Hyundai HY3100 gasoline generator with a capacity of 2.8 kW in November can be bought online at the price of UAH 28,000. In Prozorro, such generators were supplied for UAH 19,900 each. Atimax AG3500 gasoline generators with a capacity of 2.5 kW were sold on the commercial market at UAH 28,500–36,000, and on Prozorro — at UAH 24,500.

Localization

In summer, localization started working in public procurement — the requirement to buy some engineering goods only if they have a sufficient share of the Ukrainian component. Generators also fell under this limitation.

But already on November 14, due to a sharp increase in demand, localization was canceled for them. However, the government did so with the help of the Covid resolution. It exempted goods that were on the list of the necessary things to combat the coronavirus in 2020 from VAT, import duty, and localization in public procurement.

Because of this, procuring entities had a question — who can buy generators without the requirement of localization? Everyone or just hospitals? The Ministry of Economy adheres to the idea that everyone, but the position of the control bodies is still unknown. In the end, devices are needed urgently, so buyers are now ordering them without localization.

Procurement of generators in the regions

The leader is the Kyiv Oblast, which accounts for a quarter (almost 2,600) of the total number of generators on Prozorro. Generators were bought for UAH 451 million. Who purchased the most?

• Department of Municipal Security of the Kyiv City State Administration — 400 generators worth UAH 28.6 million
  Here, 4 different types of generators were purchased with a capacity of 5.5 to 8.5 kW. The procurement was conducted outside Prozorro due to an urgent need, at the expense of the reserve fund of the local budget. Generators are needed for critical infrastructure facilities and those that ensure the livelihoods of Kyiv residents, such as municipal pharmacies and ASCs. The contract was concluded with LLC “Epicenter K.”
• Department of housing and municipal services of Bilotserkiv City Council — 85 generators for UAH 4.9 mln
  The Department purchased 85 Feider FG7000-RE gasoline generators with a capacity of 6.5 kW to equip shelters. The procuring entity concluded two direct contacts: one with individual entrepreneur O. I. Kharchenko for the supply of 40 generators, the second with Kharchenko S.I. for the supply of 45 generators.
• SWMUC “Kyivvodfond”— 83 gasoline generators worth UAH 3.5 million
  Open bidding was announced at the end of September, and in early November, a contract was signed with the Kyiv manufacturer “EKVIVES” LLC. The company must supply gasoline generators with a capacity of 7.5 kW by December 22, in particular, 21 EKV-TG-9000МЕ3 generators for UAH 35,600 each and 62 EKV-TG-9000ME generators for UAH 34,300 each.

Kyiv Oblast purchased significantly more generators compared to other regions, since there are many procuring entities in the capital who centrally procured devices for their regional units.

For example, JOINT STOCK COMPANY “UKRPOSHTA” purchased 81 generators for UAH 18.6 million. The enterprise purchased 40 diesel portable generators EKV-DS-7000ME/S with a capacity of 7 kW for UAH 42,800 each. (procurement 1, procurement 2). Contracts were concluded with the manufacturer of these generators — EKVIVES LLC. For another UAH 16.7 million, 41 WattStream diesel generators were bought, their power ranged from 16 kW to 100 kW. The contract was concluded with Highted Ukraine LLC. According to the company, these generators are already being used in oblasts.

Dnipropetrovsk Oblast comes second in terms of the number of the purchased generators, 860 devices worth UAH 196.6 million.

• The Executive Committee of the Kryvyi Rih City Council— 120 generators for UAH 5.5 million
  The largest number of generators was supplied to the Executive Committee by Epicenter K LLC, which won in five simplified procurement transactions. The company sold 30 Greenmax (Compass) 6GF-ME diesel generators; 25 Vulkan SCD8000 diesel generators; 20 diesel generators Compass 6GF-ME and 1 EnerSol SKD-3B; 10 Fogo F3001IS inverter generators; 5 Fogo F3001IS inverter generators.
  In September, the procuring entity purchased 5 Kraft&Dcle KD 194 gasoline generators. And in October, another 30 Genpower GBG15 gasoline generators with a capacity of 1.5 kW were purchased. In November, the procurement volume was reduced to 24 generators. The contract was concluded with the Kyiv LLC “M.B.”
• Regional branch “Prydniprovska Railway”— 64 devices worth UAH 3.2 million.
  “Prydniprovska Railway” purchased 57 German Scheppach SG65OOX gasoline generators with a capacity of 6.4 kW for UAH 47,800 each and 7 Chinese EnerSol diesel generators with a capacity of 6.5 kW.
• Municipal enterprise “ENERHODIM” of the Dnipro City Council— 43 generators for UAH 3.9 million
  At the end of November, the municipal company purchased 43 generators under direct contracts from local entrepreneurs. One contract for the supply of 34 KAMA 5.5-7.5 kW diesel generators was concluded with Ruslan Bondarenko. The second contract for the supply of 9 KAMA gasoline and diesel generators of various capacities was signed with Ihor Topolia. IE Topolia I.M. began to participate in public procurement in October 2022. During this time, the entrepreneur received 16 direct contracts for UAH 1.8 million.

Vinnytsia Oblast comes third in terms of the number of the purchased generators, with 784 devices for UAH 144 million.

• ME “Vinnytsiamiskteploenerho” — 247 generators worth UAH 62.4 million
  ME “Vinnytsiamiskteploenerho” provides heat to about 80% of consumers in the city. The enterprise purchased212 generators of the Polish company “Fogo” with a capacity of 7.7 to 176 kW. A direct contract was signed with individual entrepreneur Lukyan M. F. The contract was signed in September, its initial amount was UAH 32.5 million. And in November, the amount of the contract was reduced by UAH 2.4 million because of the exemption from VAT and import duties.
  ME “Vinnytsiamiskteploenerho” purchased another 32 generators of the same Polish company “Fogo” under the simplified procedure in August. The only participant in that procurement was also individual entrepreneur Lukyan M.F., and the price offer was only 2 kopecks lower than the expected cost and amounted to UAH 3.3 million.
  The enterprise purchased 3 FG Wilson Perkins P900E1 generators with a capacity of 720 kW at the end of November. The cost of one such generator was UAH 9.6 million. Only IE Lukyan M.F. applied for open bidding again.
  Individual entrepreneur Lukyan M.F. and his own LLC “COMPANY UKRSERVICE” were involved in the investigation of the Center for Investigative Journalism regarding the sale of electronic goods manufactured in the occupied Crimea.
• Education Department of Haisyn City Council — 27 generators for UAH 608,000
  The department purchased 20 WERK WPG 3600 gasoline generators with a capacity of 2.8 kW. The cost of one was UAH 21,900. A direct contract was concluded with individual entrepreneur Lypach L.P.  This entrepreneur supplied 6 more generators under two other contracts (first, second). In August, the department purchased another Forte generator for UAH 16,100. 
• Cultural institution “Vinnytsia City Centralized Library System” — 20 generators for UAH 1.4 million
  The institution purchased 20 gasoline generators of the Polish company “Fogo” with a capacity of 6.2 kW for UAH 69,900 each. A direct contract was concluded with the same IE Lukyan M. F.

In general, among the largest procuring entities in the regions are water utilities, heating providers, departments of housing and municipal services, large hospitals, and local councils. Thus, the Ternopil City Council purchased 65 generators for UAH 43.3 million. Cherkasyvodokanal bought 10 for almost UAH 15 million. In general, water utilities and heating providers account for almost a third of all generator costs.

Despite the fact that some of the spring procurement transactions probably have not yet been published, it is unlikely that the volume of procurement back then exceeded the autumn ones. Therefore, only certain institutions and state and municipal enterprises were preparing for blackouts in advance — this was not a mass phenomenon. Neither did MPs with the government prepare for an increase in the volume of generators procurement because of the blackout. This lesson needs to be learned; now, we need to review what other goods may be in short supply in public procurement in the coming months, and think about how to mitigate this deficit.

This publication was prepared with the financial support of the European Union. Its content is the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

The post Without you and with light: procurement of generators in Prozorro first appeared on Transparency International Ukraine.

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Before February 24, well over 5 million procurement transactions per year were published in Prozorro — from small direct agreements to million-worth tenders. We in the DOZORRO project of TI Ukraine studied how this sphere changed during the first 6 months of the full-scale war.

How did we manage to survive the first months?

There were no special instructions in the event of an invasion — how to conduct procurement in such a case — at least as far as most procuring entities are concerned. We are not talking about procurement for defense here because this is an entirely different story. Therefore, the government had to urgently change the rules, and on February 28, it approved resolution No.169. The Cabinet of Ministers allowed it to buy everything necessary directly with it, without any tenders or other procedures, and to publish these contracts after the end of martial law. Back then it was a well-founded decision because the country had to live and confront the enemy. In March, 85% of businesses cut or suspended operations, and the state had to close the needs promptly — so it was impossible to fully conduct the usual tenders.

However, the resolution №169 was not trusted by all: in general, all acts of the Cabinet of Ministers have lower legal force than the laws. Eventually, some procuring entities continued to use the main Law of Ukraine “On Public Procurement,” or at least partially published information. In fact, at least one procurement transaction in the first month of the full-scale war was published by 54% of procuring entities, compared to the number in March 2021. In general, the indicators of the western regions changed the least. For example, in Ivano-Frankivsk, Chernivtsi, and Khmelnytskyi oblasts, procurement was published by more than 80% of procuring entities.

However, despite doubts about the legality of Resolution No.169, we lived with it until mid-October. During this time, the document had 10 revisions.

Return to competition

Over time, the first shock passed, and people adjusted to the new working conditions. Therefore, the risks of direct agreements — overpayments and contracts for “the chosen” — began to outweigh the pros. Businesses had almost no chance to offer their goods or services to the state on their own because for the most part, in the system, they saw the already signed contracts, and sometimes not even all of them. However, when Ukrposhta in May announced a simplified tender for the selection of a supplier of furniture for mobile offices, 24 participants took part. There was a similar story with batteries — 19 bids, and signboards — 18.

Discussions about returning to competition grew, and eventually ended with June amendments to the resolution and clarifications to them from the Ministry of Economy. Thus, 3 main ways were paved for procuring entities.

• planned procurement not related to martial law should be carried out under the Law of Ukraine “On Public Procurement”;
• needs that arose due to the full-scale invasion had to be closed using easier and faster methods — simplified procurement or requests for quotations, without limits on the amount;
• procurement with sensitive information was still allowed to be conducted directly.

After that, procuring entities began to be much more active in conducting competitive procurement. Thus, in the regions that have not experienced occupation or active hostilities, in August 2022, 1.15 times more simplified tenders were announced than in August 2021. The same situation was with requests for quotations — their number increased 1.52 times.

In addition, the increase in the number of competitive lots was significantly influenced by the deoccupation of Kyiv region — about 25% of such tenders were announced by procuring entities of the capital.

So, are tenders possible during the war?

The short answer is yes. Even during the full-scale invasion, you can buy transparently and competitively:

• in the first months, procuring entities voluntarily continued to publish information on Prozorro, that is, at least some of them were able to do so;
• procuring entities promptly reacted to the change in the rules, and began to conduct competitive procurement when they were obliged to do so by the resolution.

Of course, it will not be possible to limit ourselves to standard rules and procedures because the circumstances are completely different. The situation was slightly similar during the COVID-19 pandemic — at that time, the necessary things were also allowed to be purchased directly, and then — using simplified procurement. But after that story, we didn’t do our homework, and during the full-scale war, we were unprepared. The Cabinet of Ministers had to urgently look for ways to regulate the sphere and then constantly correct the rules to adjust them to the changing situation.

We need to develop separate mechanisms for public procurement in case of extreme conditions: war, large-scale natural disaster, pandemic, or some other crisis, which so far seems very unlikely to us. This should be a set of procedures that will allow optimal procurement under different conditions, quickly, transparently, and competitively if possible.

Then there will be no need to immediately adopt regulations and numerous amendments to them to settle the situation, and the risk of legal conflicts will be reduced. Moreover, all players of the sphere will be able to prepare for emergency situations in advance, and they will have fewer doubts and questions about the rules (if at all).

And given the years of the pandemic and almost a year of the full-scale war, Ukraine already has a lot of experience to immediately make these mechanisms as effective as possible.

This publication was prepared with the financial support of the European Union. Its contents are the sole responsibility of Transparency International Ukraine and does not necessarily reflect the views of the European Union.

The post Public Procurement Was Not Ready for War first appeared on Transparency International Ukraine.

We looked at how money was spent on this in Prozorro.

How Many Shelters Have Been Arranged?

First of all, it should be noted that in the electronic system, we do not see all procurement transactions of shelter repairs. Procuring entities were allowed to conclude contracts for such works directly and report on them after the end of martial law. Therefore, we will be able to see the full picture later. In addition, sometimes procuring entities purchased the repair of several protective structures at once, and indicated only one address in the system — so it is not possible to automatically extract data on the full list of shelters in this contract. You need to open the scanned PDF files of the agreements and check everything manually.

However, we can see some repairs and contractors who perform them now. In 10 months of 2022, UAH 2 bln worth of agreements were signed for such works. With these funds, a minimum of 3,400 shelters have been repaired. The biggest expenditures visible are in Kyiv Oblast — 592 shelters for UAH 482 mln, in Dnipropetrovsk Oblast — 307 facilities for UAH 234 mln, and in Lviv Oblast — 429 for UAH 234 mln.

Almost 90% of the contracts were signed directly, in 10% of cases procuring entities chose simplified procurement. There are also isolated cases of open bidding.

UAH 993 million, that is half of the costs, was allocated for the current repairs of shelter facilities. Such services generally include:

• repair or implementation of engineering networks — water supply, sewerage, ventilation, lighting;
• repair of premises — painting of walls, ceilings, flooring;
• replacement of doors;
• arrangement of toilets.

Earlier, we calculated how much was spent on arranging toilets in shelters of schools and kindergartens.

All other funds were spent to purchase various goods that are required for civil protection structures: furniture, first-aid kits, flashlights, fire extinguishers, as well as building materials, if utility workers made repairs on their own. Less often, generators, solid fuel boilers, refrigerators are purchased for the arrangement of shelters.

Largest Procurement Transactions

All three most expensive contracts for the repair of shelters among those already visible in the system were concluded in Kyiv Oblast.

For UAH 14 mln, the simplest shelter in the MNE “Vyshhorod Central District Hospital” is to undergo capital repairs and arrangement. The procurement was carried out outside Prozorro, the contract was concluded on September 16. The works are scheduled to be completed by March 31, 2023. In addition to the repair and arrangement of engineering networks, the contractor must install and adjust the equipment. However, what exactly this equipment is, it is not specified in the contract. The works were ordered from LLC GREEN MAETOK, owned by Pavlo Krasenko. Until January 2022, he and Svitlana Shelest owned LLC Kyiv Develop Group.

UAH 11 million will be allocated for the arrangement of a shelter in the building of the Hatne Secondary School. The agreement was concluded based on simplified procurement, with only one participant — LLC ALTANA Engineering and Construction Company. Probably, other entrepreneurs would have come to the tender unless a number of ISO certificates had been required, in particular in the field of accounting and audit. Potential participants wrote about the inappropriateness of such documents, but the procuring entity decided not to change the procurement conditions. We turned to him with questions to understand why so.

In 2019, LLC ALTANA ECC was involved in criminal proceedings. At that time, the police of Kyiv region investigated the possible embezzlement of budget funds by officials of the Department of Education of Kyiv-Sviatoshyn DSA. In particular, the investigators analyzed the procurement of the construction of a pool in the lyceum in Boyarka for UAH 60 mln, where LLC ALTANA ECC should have been the contractor. However, then the procuring entity terminated the contract due to lack of financing.

Almost UAH 11 million more will be spent on repairing the shelter of the lyceum “IDEAL” in Vyshneve. What kind of work the contractor should do is unclear, as it is not described in the contract. The contract does not specify exactly what works the contractor should perform. According to the head of LLC METRA BUD Serhii Palienko, with whom the contract was directly signed, the order provides for the replacement of heating and water supply systems, installation of ventilation and sewerage systems, floor renewal, wall plastering, lighting and emergency lighting, lavatories, Internet with the installation of Wi-Fi routers, etc. Serhii Palienko added that today, most of the main works have been completed, except for the power grid and lavatories.

LLC METRA BUD was founded in 2021, and a month after its registration, it began to participate in tenders. Almost all contracts fall for 2022 — for UAH 38 mln out of 39 mln in total. According to our estimates, this company will receive the largest amount for contracts for the repair of shelters in Kyiv Oblast, UAH 36.8 million. In addition to the repair of the shelter of the “Ideal” Lyceum, the enterprise will equip 7 more protective structures, including in the “Osnova” Lyceum for UAH 8.9 mln and the “Rosynka” kindergarten — for UAH 8.2 mln.

Shelter Stops 

In addition to shelters in basements, protected stops began to appear in Ukraine. The first such stop was opened in Kharkiv on 19 August. Kharkiv Mayor Ihor Terekhov noted that “the stop is equipped with a direct connection to the dispatcher, free Wi-Fi, as well as a screen that allows passengers to see public transport approaching. The shelter can accommodate about 30 people. However, it has a modular design, so depending on the district and passenger traffic, the size of the shelter may vary.”

According to information on Prozorro, there are currently 5 such shelter stops planned. They are to be installed by November 21. Four stops cost UAH 783,000 each, one more — UAH 1 mln.

Shelter stops were ordered from Kharkiv LLC CITYRAIL TECHNOLOGY. Currently, the director of the firm is Vadym Sinhutskyi. According to Nashi Groshi, he headed a company that made money repairing tram crossings in Kharkiv.

The total amount of contracts of LLC CITYRAIL TECHNOLOGY is UAH 171 mln. All these contracts are concluded only with two Kharkiv procuring entities: the Infrastructure Department of the Kharkiv City Council — UAH 136.3 million, and ME MISKELEKTROTRANSSERVIS — UAH 34.7 million.

Moreover, a shelter stop appeared in Mykolaiv in September. This is a gift from Odesa businessman Anatolii Reder. The shelter was made of reinforced concrete according to the Israeli model, it is designed for 24 people. According to the media, the cost of such a structure is UAH 400,000.

Subsequently, Kropyvnytskyi joined the arrangement of shelters at the stops. Here it is 3 meters underground, designed for 12-15 people. In Kropyvnytskyi, the protective facility was also financed by private investors.

Another city where there are already works underway on shelter stops is Dnipro. It is planned to make 28 such protective structures for 28 people each, with light and benches. They are made at the expense of the budget, however, so far, there is no information about the price in Prozorro. LLC “Avtomahistral 2016” arranges the shelters.

Another unusual shelter appeared in Lviv region, not at the stop, but in the kindergarten. A modular shelter of concrete was arranged there, which is used for the construction of bunkers. Namely, the shelter is not completely dug under the ground — it was lowered by 1 meter, and from above, an embankment was made for another 2+ meters. The technology was developed by local companies “Industria LV” and “Hobbit House.” The shelter is designed for 25 places, it cost the community UAH 201,000.

A similar structure was also installed on the school grounds. However, it can accommodate already 100 people. For this shelter, there is a contract for UAH 89,000 on Prozorro. The third shelter was arranged near the local school of arts.

Contractors Involved in Criminal Cases

Sometimes, direct contracts for the arrangement of shelters are signed with companies involved in criminal proceedings. On the one hand, it is not forbidden because the fault of the business has not yet been proven. On the other hand, there is a question to procuring entities whether it was possible to conclude contracts with companies without a questionable past.

For example, in Cherkasy, a contract for the repair of a shelter in a school was received by an entrepreneur accused of appropriating metal for UAH 800,000 during the reconstruction of the premises for the Court of Appeal.

The same situation is with shelters in educational institutions of Odesa region — there, the persons involved received contracts in at least 4 communities. And most of the local journalist’s questions to procuring entities remained unanswered.

Who Is Responsible for Ensuring that Shelter Is in Proper Condition?

According to “Slovo i Dilo,” at the beginning of the year, there were 5,704 shelter facilities in Ukraine (sealed structures for long-term stay), 15,393 anti-radiation shelters. The simplest shelters — a variety of underground spaces — can also be used to protect people.

Those who have them on the balance sheet are responsible for their condition.

Therefore, if the shelter closest to you is in an improper condition, and you have not found the procurement transaction of repairs on Prozorro, please contact the balance holder. You can find out if a direct contract was concluded for the arrangement of the premises, how much money is allocated for its maintenance, as well as encourage the procuring entity to improve the conditions unless they did so.

The access to shelter cannot be restricted. Thus, in Kyiv, local authorities reported that emergency workers would cut off locks from shelters if they were not opened during an air raid alarm.

In July, MPs adopted a law stipulating that city-planning documentation at the regional and local levels should contain a section on shelters. Unless it is available, it is forbidden to approve the relevant documents. Moreover, the structure cannot be put into operation if there is no shelter in it. In Lviv, new construction standards for residential complexes, etc., were adopted back in May. According to them, all buildings should have an underground parking, part of which will be arranged for a comfortable stay for a long period.

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

The post How Ukraine Spends Money on Shelters first appeared on Transparency International Ukraine.

Accordingly, most of the information about whom and for what the bodies of Ukravtodor pay public funds is non-public. We are not aware of the final amount of the concluded contracts, as well as the works to be performed by the contractors. Probably, the UAH 1.8 billion of expenses that are visible now are only advance payments.

Some companies that were paid hadn’t had contracts with road services previously. 

The road service in Ternopil Oblast concluded a contract with the LLC “Center for Safety and Comfort,” which had never participated in the Prozorro bidding before. Judging by the purpose of payments, the contract concerns the operational maintenance of roads. LLC “Center for Safety and Comfort” was founded at the end of last year in Ternopil. According to the main economic activity code of the firm, it is a private security service. According to the clarification provided by the road service, they bought security services for costly weighing-in-motion devices. However, this information was not publicly displayed on Prozorro.

The road service of Ivano-Frankivsk Oblast paid only to LLC PBS. No other company received funds from this procuring entity under contracts concluded after February 24.

When there are no transparency and competition, the risk of corruption increases.

“In the first months of the large-scale invasion of Ukraine by Russian troops, public procurement was allowed to be conducted without Prozorro because it was more important to close the urgent needs. However, at the beginning of the summer, the system was adapted to new challenges, and now procuring entities have to conduct competitive procurement for the most part. Mostly, there is no need to hide information about the contracts of state bodies, except in the military and energy spheres,” says Volodymyr Datsenko, Project Manager of Transparency International Ukraine.

Let us remind you that recently, journalists of the “Schemes” and “Ukrainska Pravda” published an investigation about how a company of a friend to the head of the Dnipropetrovsk RMA received UAH 1.5 billion for roads in the oblast during the war.

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

The post After the start of the full-scale war, only 3% of the money for roads has been spent through Prozorro first appeared on Transparency International Ukraine.