A new law on public procurement passed by Parliament on Sept. 15 could save the state Hr 50 billion, or $2.3 billion, a year by cutting corruption and red tape, Economic Development and Trade Minister Aivaras Abromavicius has said.
“We lose 10 percent because of corruption, and another 10 percent because of inefficient procurement,” the minister said in parliament during the session when the bill was passed.
The bill’s advocates say it will make the public procurement process more transparent, and open access to the Hr 250 billion ($11 billion) per year state procurement market to more bidders
Civic activist and member of the board of anti-corruption watchdog Transparency International Ukraine Yaroslav Yurchyshyn hailed the adoption of the bill, which he said would also help open doors for Ukrainian companies to the World Trade Organization’s $1.7 trillion public procurement market.
“Bill No. 2087а, (guaranteeing) transparency of tenders and access of Ukrainian enterprises to the World Trade Organization’s public procurement market, recommended by Reanimation Package of Reform civic watchdog, has been adopted! Finally!” Yurchyshyn wrote on Twitter on Sept. 15.
Apart from harmonizing rules for Ukraine’s public purchases with WTO requirements, the bill helps cut corruption risks. It obliges bidders to provide information on the ultimate beneficiaries of tender winners, makes tender committee protocols and financial proposals publicly accessible, and introduces a transparent appeals system.
In terms of deregulation, the bill prohibits tender committees from requesting certain data from bidders. In addition, bidders will now only have to prove their eligibility to bid if they win a tender.
The law applies to all customers and purchases if the value of goods and services procured exceeds Hr 200,000 ($9,070), or Hr 1.5 million ($68,028) for labor.
However, to fully implement public procurement reform, parliament still needs to pass an e-procurement bill that would transfer all purchases from paper to electronic form, Abromavicius said. The bill will be tabled in Parliament in October, he said.
Meanwhile, work to prepare the ground for a fully electronic system of public procurement is already well under way.
ProZorro, a full-service electronic public procurement system, was launched in pilot mode on Feb. 12. It is currently formally owned by Transparency International Ukraine, but once the pilot project is over, the system will be transferred to the control of the economy ministry.
In fact, only ProZorro’s database will be transferred to state by the end of the year – the bidding platforms will remain in private ownership. The continued involvement of private businesses, which have an interest in providing a quality service, makes this system “unique” and “hopefully, efficient,” said Yuriy Bugay, a representative of the economy ministry’s procurement department in an interview with Ukrainian television’s Channel 5 on Sept. 15.
About 9,000 tenders have been already conducted using the new system, according to Bugay. The system of analyzing bids is completely automated, and eliminates the need to convene tender committees, which in turn removes an opportunity for corruption to creep into the system.
While government ministries are already conducting purchases via the e-system, regional administrations are still being adapted to the changes.
“The (region) administrations are also getting involved, but the process is moving slowly,” Deputy Economy Minister Maksym Nefyodov said in an interview with Ukrainian news magazine Novoe Vremya on Sept. 11. It’s far more complicated to bring the regions into the system, as it requires on-the-ground training, Nefyodov said. In addition, since system doesn’t receive any money from budget, time is needed to search for funding, he said.
The project currently deals only with sub-threshold bids. However, in future it is expected to apply to all bids, whether they exceed the threshold set by the law or not.
Dmytro Shymkiv, the deputy head of the Presidential Administration, says only reforms that don’t affect vested interests succeed in Ukraine, and the same logic applies to ProZorro.
“It (ProZorro) started as something small, applicable only to sub-threshold bids,” Shymkiv said at the Crisis Media Centre on Sept. 14. “Nobody really paid attention to it … And now that it’s grown into something bigger… look at the resistance this initiative encountered in Parliament.”
As all bidding information is stored in electronic form, there is no unauthorized access to it, and in turn no possibility of data being manipulated in favor of a particular bidder. The system’s backers hope this electronic leveling of the playing field will encourage more bidders to take part in the procurement process.
“Previously business didn’t believe that it was possible to sell (something) to the state without having connections … in a tender committee. That is why (business) didn’t take part in bidding procedures,” Bugay said. He said the situation has now changed with the introduction of ProZorro.
And with the appropriate legislation and system in place at home, Ukrainian business may then have the opportunity to take part in procurement tenders in markets abroad.
Bugay said that a Ukrainian delegation is now at WTO headquarters in Geneva, Switzerland, to discuss Ukraine’s accession to the organization’s Agreement on Government Procurement, which has been ratified by 45 WTO members.
“We hope this is the final round of negotiations,” Bugay said.
Kyiv Post’s legal affairs reporter Mariana Antonovych can be reached at [email protected]
