Date of publication: 23 April 2026
Oleksandr Fefelov, Partner, Attorney-at-Law, Head of Antitrust and Competition Practice
Source: Client’s Choice 2026: TOP-100 Lawyers of Ukraine
The sphere of public procurement in critical sectors – energy, defense, and logistics – currently operates under the principle of “speed, security, transparency.” Classic competitive procedures are supplemented by special mechanisms that allow for rapid responses to the needs of the state and communities. The primary task is to ensure reliable supplies and the protection of sensitive information, while maintaining control over the use of funds and reducing the risk of abuse.
Shift in Approaches to Public Procurement
At the beginning of the full-scale invasion by the RF, the lion’s share of procurement for the AFU and infrastructure was simply exempted from the Law “On Public Procurement.” Most such procurements were carried out through direct contracts (based on CMU Resolution No. 169), which ensured lightning speed but created high risks for transparency (everyone remembers the scandals that arose concerning various goods for the military).
Since late 2022, following the adoption of Resolution No. 1178 (which replaced CMU Resolution No. 1275, which was in effect for some time), a stage of “controlled transparency” began. Most non-classified procurements above established thresholds (e.g., goods/services from UAH 200,000) were returned to the ProZorro system via the procedure of open tenders with specific features.
Current control standards are based on a triad of “speed – security – transparency/accountability.”
In addition to the Law “On Public Procurement,” which operates with the specifics provided by CMU Resolution No. 1178, special procurements are regulated by the Law “On Defense Procurement.” It defined the concept of “defense procurement” – goods, works, and services intended for the implementation of state programs in the fields of national security and defense, as well as others, to guarantee the security and defense needs. The Law provided for the possibility of carrying out such procurements through a non-competitive procedure, which is exceptional due to the specific nature and conditions of the procurement objects that prevent them from being conducted through any other competitive procurement.
The main document regulating public procurement in critical sectors (excluding classified defense) continues to be CMU Resolution No. 1178 “On Approval of the Specifics of Public Procurement…”, which stipulates that contracting authorities defined in paragraphs 1–3 of part 1 of Article 2 of the Law shall carry out public procurement by conducting open tenders or using an electronic catalog for the purchase of goods in accordance with the mentioned resolution.
Regulation of Public Procurement in the Defense Sector
The sphere of defense procurement has become the object of the most radical changes and scrutiny. Two procurement regimes were established:
- Classified defense procurement (procurement of weapons, military equipment, and services constituting a state secret); such defense procurements constituting a state secret are conducted in the manner prescribed by the CMU without the use of the electronic procurement system;
- Non-classified procurement (non-lethal support – food, fuel, clothing, repairs) is carried out through the ProZorro system (open tenders with specifics under the rules of Resolution No. 1178), which allows for significant acceleration of all processes.
Due to scandals involving price overcharging, the regulation of the cost of “non-combat” goods was tightened.
While the primary regulation of defense procurement is carried out by the special Law “On Defense Procurement,” the control of profit is managed through amendments made to it. Law No. 3633-IX introduced strict regulation of the maximum profit margin. In closed defense procurements where there is no competition, the state established new rules.
It was clearly established that the supplier’s profit cannot exceed the maximum level determined by the Cabinet of Ministers. This was the response to numerous cases of unjustified price hikes. Now, the supplier is obliged to provide a detailed calculation (cost breakdown), accounting for direct material costs, labor costs, general and administrative expenses, and others (duties, logistics).
At the same time, the state has set a ceiling on the amount of profit for imported goods and locally produced goods, while the SASU (State Audit Service of Ukraine) and the MoD verify the economic justification of the price.
If the profit margin is exceeded, the contracting authority has the right to demand a reduction in the contract price. If payment has already been made, the unjustifiably obtained profit is returned to the state. Violation of this pricing procedure may lead to financial liability under the contract, and in cases of intent and damage, to criminal liability (for embezzlement or fraud).
Separate consideration should be given to international auditing: if the funds for procurement come from foreign partners, they involve their own auditors. To avoid the risks of delivery failure or low quality of goods, justification for an abnormally low price is also required.
Energy Sector: Recovery, Construction, Protection
Energy (thermal and power plants, grids, electricity, and gas supply) is currently a particularly sensitive area. Constant enemy strikes require urgent restoration of supply and reconstruction of energy facilities.
Primary energy procurements are carried out under the rules provided by the “specifics” (CMU Resolution No. 1178). Contracting authorities of goods and services are allowed to carry out procurements without applying open tenders and/or the electronic catalog for purchasing goods when they perform procurement:
- For the construction, repair, and other engineering and technical measures for the protection of critical infrastructure objects of the fuel and energy sector of critical infrastructure, the cost of which is equal to or exceeds UAH 100,000;
- Services for current repairs, the cost of which is equal to or exceeds UAH 200,000;
- Works, the cost of which is equal to or exceeds UAH 1.5 million.
For the sector of critical infrastructure life-support systems, procurements are allowed under contracts concluded until March 1, 2026, without the use of open tenders and/or an electronic catalog. This ensures significant acceleration of the procedure: it is possible to use both simplified open tenders and direct contracts if the consequences of attacks need to be liquidated urgently. At the same time, ensuring the energy efficiency of equipment (generators, transformers, etc.) is required, even when the procurement is carried out in so-called “emergency mode.”
Concurrently, in this industry, it is permitted to conduct procurements without tenders if only one supplier applies, as well as to conclude direct contracts for the rapid restoration of infrastructure facilities damaged by shelling.
Regarding gas and electricity supply, their procurement through the ProZorro Market electronic catalog has become a mandatory tool. This allows for the reduction of the procurement period to one week while ensuring real competition without conducting full tender procedures.
Compliance with service requirements and localization (mandatory 20% share of the Ukrainian component) is also taken into account.
I draw attention to the issues of pricing and the possibility of price review, for example, adjusting the price of electricity on a “day-ahead” basis. Since energy equipment is extremely expensive, rules and mechanisms requiring justification of the proposed price have been introduced. Third-party independent experts are engaged for inspections, having the opportunity to evaluate the cost of relevant materials, components, etc., including imported ones. The exchange rate is also fixed; the price must be linked to the Hryvnia equivalent with clear review rules.
Logistics and Infrastructure: Specifics of Public Procurement
Railways, ports, road transport, and warehouse infrastructure are “favorite” targets of the enemy. Ensuring the speed of repairs and restoration of stations, tracks, bridges, and warehouses, and immediate liquidation of consequences, is carried out through accelerated procedures provided by the Cabinet of Ministers (without applying open tenders and/or using the electronic catalog for purchasing goods).
Here, time plays a more significant role than adherence to procedure. At the same time, even rapid procedures (for example, works exceeding UAH 1.5 million) pass through the ProZorro system.
When procuring heavy special equipment, it is important to consider the legal requirements regarding localization.
Currently, there is also a mandatory requirement for cargo insurance in logistical procurements, especially in frontline zones.
At the same time, contracting authorities are encouraged to cooperate with various suppliers, diversifying supplies to avoid the risk of non-delivery due to enemy actions.
It is worth noting that in the field of design and construction, contracting authorities increasingly offer contractors to combine both areas, and to avoid certain inflationary risks, the possibility of using dynamic prices in estimates is utilized.
Regarding logistics, the transition from one-off contracts to framework agreements allows contracting authorities not to conduct tenders every time a need arises.
Contracting authorities should also remember the verification of suppliers and goods, and the full ban on procurement from suppliers associated with the RF or Belarus. The contracting authority must reject a tender proposal, justifying the electronic procurement system, if the participant of the procurement procedure is a citizen of the RF/RB (except those residing in Ukraine on legal grounds) or a legal entity formed and registered in accordance with the legislation of the RF/RB.
Conclusion
Public procurement in energy, defense, and logistics functions in a high-risk mode, where classic competition gives way to security and operational requirements. The state has effectively built a model of “controlled flexibility”: simplified or closed procedures are combined with strict financial and price control, profit limitation, and mandatory economic justification.
This approach simultaneously ensures the speed of supplies, the protection of sensitive information, and accountability in the use of public funds, minimizing the room for abuse even under wartime conditions.
