June 19, 2024

Ukraine’s state budget has saved about UAH 5 billion (roughly US$134 million) since bringing part of the Defence Ministry’s procurement back under the Prozorro system [a state-owned system for transparent procurement – ed.].

Source: Nadiia Bihun, Deputy Minister of Economy, in an interview with Telegraf

Details: Since May, the Ministry of Defence has started to bring back some of its procurement back to the Prozorro system.

Quote from Bihun: “As of now, they have completed about 50 tenders worth a total UAH 31 billion (roughly US$833 million), saving 16%, which is about UAH 5 billion. This is a very good result. But this is definitely not all their needs. I’m not talking about military equipment. I’m talking about logistical support only.”

Details: Bihun added that the Ministry of Economy has proposed setting up competence centres that would assess the relevance of certain procurements, in particular for the needs of the Armed Forces.

Quote from Bihun: “We need to have decision-making centres that take responsibility for what we buy and how we buy it. Those who allocate funds, together with the recipients, should share responsibility for effective spending, and therefore they should have the relevant expertise and professionalism and do much more effective planning.”

More details: Bihun believes that when local governments receive additional powers as part of decentralisation, it is a good thing. However, at the same time, with extra powers comes extra responsibility.

Currently, each budgetary institution holds the same tender as all the others, buying electricity, gas, cleaning services, etc. This means that hundreds, sometimes thousands, of entities are doing the same work.

Quote from Bihun: “For this reason, from a KPI perspective, this raises the question of how to be more productive and make the process itself more efficient. The procurement process requires enormous resources: people, their salaries, time, etc. All of this could be used for more important work. This task means that we need to review how we allocate the budget and how we spend public funds, and try to centralise these needs wherever possible.

If it is not possible to centralise needs, it is at least worth centralising the outline of procurement requirements (terms of reference, draft contract, etc.), so that each institution, each lawyer and each person in charge does not have to come up with their own contract.”

More details: To reduce the number of dubious procurements, a requirement has been introduced for all procuring entities to publish their reasons for not using competitors’ services.

Quote from Bihun: “As a next step, we want to introduce procurement requirements that are also shared on Prozorro. Now we have to justify the non-use of a tender. And the next step is to implement functionality that would allow the orderer to explain the reasons for their purchase. In my opinion, this is the evolutionary path that will allow us to conduct procurement more consciously and achieve better results.”

Background: The Cabinet of Ministers has changed the rules for public procurement during martial law – any purchases over UAH 50,000 (roughly US$1,300) must be justified.

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