Date of publication: 9 July 2024
Oleksandr Fefelov, Partner, Head of Antitrust and Competition Practice
Source: Yurydychna Gazeta
Since we continue to receive requests from clients for legal advice on challenging public procurement decisions (which significantly complicates business processes for both customers and suppliers), we consider it necessary to remind them about the existing opportunity of effective participation in such procurements and the elimination of the appeals stage (which significantly slows down the process of purchasing/delivering necessary goods to budget organizations) at a time when procurement should be carried out clearly and quickly.
Since the introduction of the Prozorro system, public procurement in Ukraine has undergone significant changes. Among its innovations is the Prozorro Market, an electronic catalog that allows you to make purchases, which is an effective tool for monitoring, ensuring, and promoting transparency, efficiency, and competitiveness.
With martial law in force, this method of procurement is an excellent alternative to open tenders, as it is relatively easy, convenient, and effective for tenderers, and, most importantly, it can be carried out in the shortest time possible. Purchases of goods are generally made by requesting proposals from pre-qualified suppliers and selecting the most cost-effective one.
In this section, we will explore the procurement process through Prozorro Market, the requirements for tenderers, the functions of central procurement organizations, the advantages of procurement through the electronic catalog, and the peculiarities of its use under martial law.
Regulatory framework
The regulatory framework for public procurement in Ukraine is based on the Law of Ukraine “On Public Procurement” (No. 922-VIII), which establishes the basic rules and requirements for conducting procurement. Prozorro Market is an integral part of the procurement system and operates in accordance with the Law.
In addition, the procedures are regulated by the Peculiarities of Public Procurement of Goods, Works and Services for Customers, provided for by the Law of Ukraine “On Public Procurement”, for the period of the legal regime of martial law in Ukraine and within 90 days from the date of its termination or cancellation, approved by the Resolution of the Cabinet of Ministers of Ukraine No. 1178 dated 12 October 2022, which establishes the general rules for the functioning of Prozorro Market. According to the latter, purchases through Prozorro Market can be made without conducting a tender procedure, which greatly simplifies and speeds up this process.
Requirements for the purchase amount
During wartime, the government provided electronic catalogs to enable people to purchase goods without regard to marginal value. Purchasing them through an electronic catalog is extremely effective in such circumstances. In certain cases, customers are required to use open tenders or electronic catalogs when purchasing goods. By using the electronic catalog, customers can purchase goods at a lower price.
When purchases through an electronic catalog are mandatory?
Clause 11.1 of the Peculiarities stipulates that in the event that customers who are health care institutions or health care structural divisions of the regional and Kyiv city state (military) administrations purchase medicines that are registered in Ukraine in accordance with the procedure established by law, and medical products according to the list in accordance with Annex 1, the cost of which is or exceeds UAH 50,000, such purchases shall be made using the electronic catalog.
Also, Annex 2 to the Peculiarities contains a list of food products that are purchased by customers using the electronic catalog.
In addition, Clause 5 of the Procedure and Conditions for Providing Subventions from the State Budget to Local Budgets for the Purchase of School Buses, approved by the Resolution of the Cabinet of Ministers No. 418 dated 28 April 2023 “Some Issues of Providing Subventions from the State Budget to Local Budgets for the Purchase of School Buses”, stipulates that the purchase of school buses is carried out by local budget subvention managers using an electronic catalog in accordance with the procedure established by law.
In a request for proposals from suppliers regarding the purchase of goods, the cost of which is less than UAH 500,000, the customer can determine information about the product characteristics and their acceptable values within the product specification, i.e. a set of the product characteristics and their acceptable values within the product category defined by the administrator, which may correspond to one or more products defined by the administrator of the electronic catalog.
At the same time, the request for proposals from suppliers regarding the purchase of goods, the cost of which is equal to or exceeds UAH 500,000, is carried out in accordance with the product specification, formed by the administrator of the electronic catalog, which does not provide for the possibility for the customer to independently determine information about product characteristics and their acceptable values.
To purchase goods worth UAH 50,000, the customer can independently find the product in the electronic catalog and agree on the purchase with the supplier.
Formation and structure of the electronic catalog
The electronic catalog is a centralized database that contains information about goods, works, and services that can be purchased using budget funds. The electronic catalog Prozorro Market consists of product categories and specifications. It is formed from the list of goods offered by suppliers. The catalog is structured by categories (sets of goods structured in the electronic catalog according to the indicators of the third to eighth digits within one section of the main dictionary of the National Classifier of Ukraine DK 021:2015 “Unified Procurement Dictionary”), which allows customers to easily find the necessary goods. Each category contains detailed information about the products, including technical specifications, prices and delivery terms. Product categories and specifications are created by defining a list of product characteristics with their exact and/or minimum and maximum values.
The process of including goods in the electronic catalog is as follows:
- Supplier registration. Suppliers intending to include their products in the electronic catalog must register in the Prozorro Market system.
- Supplier qualification. Suppliers must be accredited by one of the Centralized procurement organizations, which involves checking the supplier for compliance with the established requirements, create an electronic cabinet and be included in the list (electronic database) of qualified suppliers who have been qualified for the electronic catalog. In this way, the appropriate level of quality of goods offered by a particular supplier is achieved.
- Product information. After the supplier has been qualified, he will be able to include his products in the electronic catalog, specifying the description of the products, their technical characteristics, prices and other necessary data.
- Moderation and verification. Product information is moderated and verified by Prozorro Market to ensure compliance with quality standards and regulatory requirements.
Another noticeable feature of the electronic catalog is that it is supplemented with new products, and it is advisable for customers to monitor its updates. Also, information about goods is constantly updated by suppliers, supplemented or changed in terms of current prices and details of consumer characteristics. That is, by accessing the electronic catalog, the customer can always see up-to-date information about the goods they may be interested in (the purchase of which is included in the procurement plans). The product profile in the electronic catalog includes detailed product characteristics (technical specifications, quality and safety). This allows customers to find the necessary goods quickly and efficiently, taking into account all requirements and standards. The use of standardized product categories and codes in the catalog also allows for a unified approach to product description and makes the process of finding the necessary product and selecting items significantly easier. Also, the use of codes and categories facilitates interaction with other databases, since they must meet international standards.
Requirements for customers and suppliers
Customers wishing to conduct public procurements through Prozorro Market must meet the following requirements:
- be registered in the system and have a current account to be able to make purchases through the electronic catalog;
- use a digital signature to confirm their actions;
- ensure equal conditions for suppliers and observe the principles of fair competition.
If suppliers wish to have their products included in the electronic catalog and sell them through the Prozorro Market system, they must:
- be registered in the system to be able to access it, have a corresponding electronic account; submit the necessary documents and information for preliminary qualification, that confirms business activity, financial stability, availability of appropriate licenses and certificates;
- properly fulfill their obligations under supply contracts.
Centralized procurement organizations
Centralized procurement organizations (CPO), determined by the Cabinet of Ministers of Ukraine, act as administrators of the electronic catalog, they ensure the formation and maintenance of the electronic catalog in the electronic procurement system. There can be several administrators. Centralized procurement organizations are the key element in the Prozorro Market system, ensuring the implementation of purchases in accordance with unified standards and regulations, and also developing strategies to improve the efficiency of procurement processes. They can make purchases for the benefit of other customers, which allows to optimize processes and reduce costs. CPOs combine the needs of several customers and conduct centralized procurement, which allows to achieve economies of scale.
The following CPOs are currently operating: State Institution “Professional Procurement” (performs the CPO functions that makes purchases for state institutions and enterprises, consolidates the needs for a particular product, by combining customer requests for larger purchases, monitors the proper execution of supply contracts); State Enterprise “Medical Procurement of Ukraine” is a procurement of medical products, medicines and equipment. The State Enterprise carries out quality checks of goods for compliance with regulatory requirements, organizes delivery and distribution among medical institutions; “Centralized Procurement Organization”, the branch of the State Enterprise “Ukrainian Special Systems”, makes purchases of special equipment for government agencies, monitors the quality of supplies in conditions, ensures information security in conditions where it is necessary to ensure the confidentiality of supplies.
These organizations provide the supplier and customer with access to the electronic catalog and other services related to the use of the electronic catalog, organize and select participants for the electronic catalog by qualifying them.
You can work in the Prozorro Market system from any accredited platform.
Procurement procedure through an electronic catalog
For customers
(i) register in the system to be able to make purchases through an electronic catalog;
(ii) approving and publishing of the annual procurement plan;
(iii) find the product planned for purchase, by using codes, categories, specified characteristics and price offers;
(iv) request for price proposals from suppliers, the system itself will select the most cost-effective one among them, i.e. the one, the price of which, is determined to be the lowest, based on the results of the customer’s request for proposals by the electronic procurement system;
(v) conclude a relevant supply contract with the selected supplier.
For suppliers
(i) register in the system and go through the qualification procedure by submitting the relevant application to the administrator – an application for joining the electronic catalog through the electronic procurement system in accordance with the requirements established by Resolution No. 822 of Cabinet of Ministers of Ukraine;
(ii) add your goods to the electronic catalog;
(iii) after receiving a request for price offer, provide it to the customer;
(iv) conclude a supply contract with the customer in the system and properly fulfill its terms by providing the necessary supporting documents.
The customer selects a supplier by requesting offers from suppliers. The request for offers is made in the electronic catalog through the system, by indicating information about the name, expected cost, quantity, term, place of delivery of the goods, payment terms and the deadline for the supplier to submit the offer price. In the request, the customer can determine only information about the characteristics of the goods and their permissible values within the product specification.
The electronic procurement system sends the request automatically (via the electronic catalog) to suppliers qualified for the relevant category. The customer does not need to spend a lot of time and efforts on the preparation of tender documentation and carry out pre- or post-qualification of the supplier.
The supplier submits an offer via the electronic catalog in accordance with the requirements set by the customer in the request for offers from suppliers. The evaluation of proposals is carried out automatically by the electronic procurement system based on the information specified by the customer in the request for proposals.
The customer shall conclude an agreement with the one who won the qualification no later than five calendar days from the date the electronic procurement system determines the supplier as the winner of the qualification. The supplier does not need to spend a lot of time and efforts on preparing a tender offer.
Advantages of purchasing through the electronic catalog
First, this is an incredible saving of time and efforts. You can receive the goods in a couple of weeks from the beginning of the procurement process, the electronic system significantly simplifies the organization of purchases, by significantly reducing administrative costs and efforts, and also ensures the efficiency in the implementation of the procedure, concluding and executing the supply contract.
Secondly, purchases are made transparently and clearly for all related parties. Thirdly, taking into account the transparency of the catalog and ensuring equal conditions for all suppliers, they compete with each other by reducing the price of goods, updating information about goods. In general, such purchases provide an opportunity to promptly monitor the fulfillment of the terms of supply contracts and identify violations and abuses.
It is especially important in the conditions of martial law to attain top speed of supplies. The Prozorro Market system provides an opportunity to promptly purchase the necessary goods for the proper functioning of budget institutions in critical circumstances, significantly reducing the risk of inefficient and untargeted use of budget funds and other abuses. Prozorro Market is a valuable tool for public procurement in Ukraine. The use of an electronic catalog ensures transparency, efficiency and competitiveness of the procurement process, which is critically important for economic development and meeting the needs of the state, especially in the conditions of martial law.
Purchases can be made in the Prozorro Market system through any accredited platform.
