The situation with public procurement in Ukraine is particularly complicated and problematic due to the ongoing armed aggression by Russia.
On the one hand, martial law requires quick and efficient provision of defence and security needs; on the other, it creates additional corruption risks, including lack of competition, non-transparent selection of suppliers, overpayment for goods and services, low quality of products, etc.
The national agency on corruption prevention, or NAZK, found out that 12,345 public procurements last year were carried out under the simplified procedure through the ProZorro system for a total of UAH 123 billion (USD 3.37 billion), of which 28 percent were related to the defence and security needs of the state.
NAZK found 456 violations in these procurements, such as non-compliance of the procurement item with the qualification criteria, failure to comply with the terms of the contract, conflict of interest between the procuring entity and the supplier, etc.
In addition, according to the Ukrainian prosecutor general’s office, law enforcement registered 132 criminal offences relating to embezzlement or seizure of property through abuse of office on a large scale, between January and August.
Corruption in public procurement is therefore a serious threat to Ukraine’s economic development and national security.
I believe that the public procurement reform should prioritise, among other things, strengthening control over the ProZorro system, introduced in 2016 to ensure transparency and competitiveness of procurement.
In practice, ProZorro is often used to circumvent rules and avoid competition. Procuring entities often fail to justify their need for simplified procurement; specify the criteria for selecting a supplier; monitor the performance of contracts, etc. Participants often submit inflated offers, do not meet the qualification requirements, and have conflicts of interest with procuring entities or other participants.
To reduce the risk of corruption in public procurement, comprehensive measures should be implemented to increase transparency, audit, and accountability. Here are some effective measures.
- Developing and implementing effective amendments to a government decree defining a clear list of goods, works and services, customers, and conditions under which public procurement can be conducted without an open bidding procedure.
- Developing and approving a new methodology for determining the expected value, using integrated search and analytical systems based on artificial intelligence, which will be mandatory for all customers.
- Introducing innovative, more efficient, and technologically advanced software products and filter systems in ProZorro that make it impossible to identify inflated or discriminatory requirements in the tender documentation of the procuring entity and block access to bidding for unfair tenderers.
- Obliging the procuring entity to develop and implement unified contracts at its enterprise that are concluded based on the results of the tender procedure, as well as to define a specific list of cases in which the essential terms of such a contract may be amended.
- Involving independent auditors from external organisations to verify and evaluate procurement procedures, which will help identify corrupt practices.
- Conducting training for participants in the procurement process on corruption risks, and providing them with tools to detect and prevent corruption.
- Involving third-party organisations in the public procurement process that specialise in the drafting of tender documents, tender proposals, and protection of the rights of the parties concerned.
Public procurement in Ukraine is an area that requires urgent and systemic changes. Implementation of those measures, together with strong political will and public support, can significantly reduce corruption risks and contribute to more efficient use of public funds.
However, this is a daunting task given how many stakeholders may oppose the reforms. Therefore, it is necessary to constantly monitor and analyse the situation, as well as involve professional and independent experts in the public procurement process who can provide qualified assistance and protection to the parties concerned.