Public Procurement in Ukraine: How Foreign Companies Can Qualify and Bid

 Oleksandr Fefelov, Partner, Head of Antitrust and Competition Practice

Alina Borovets, Attorney

Source: Chambers

The public procurement market in Ukraine today is one of the most dynamic and interesting instruments of interaction between the state and business. Procurement of goods, works, and services for organizations and enterprises financed by budgets of various levels is actively carried out even in the face of full-scale aggression by barbarians from the east and the ongoing war against them for as long as for more than 11 years.

In theory, this market should be of great interest to foreign business entities, as it is almost limitless. In addition, according to the law and obligations of Ukraine as a party to the EU-Ukraine Association Agreement, foreign businesses, except for those connected with certain states, have the same rights and opportunities to participate in procurement procedures as national suppliers. This market is also attractive because its mechanisms ensure that the activities of all participants are as transparent and minimum corrupted as possible.

Operating on the basis of the Prozorro electronic platform provides open access to tenders and creates equal conditions for participants regardless of their country of origin. For foreign companies, this is not only a chance to win large government contracts, but also an opportunity to gain a foothold in a market that is actively integrating into the European legal space and gradually adapting international standards.

At the same time, entering the Ukrainian procurement market requires thorough preparation from foreign businesses. The success of participation is determined not only by a competitive price, but also by the ability to confirm one’s own qualifications, meet legal requirements and comply with local procedures. A correct understanding of the peculiarities of Ukrainian legislation, preparation of appropriate documentation, as well as cooperation with experienced local advisors can turn challenges into advantages.

The Importance of Public Procurement in Ukraine for Foreign Companies

Public procurement is currently the only system that ensures the supply of goods, works, services to organizations and enterprises financed from state or municipal budgets. We understand that for foreign business entities, direct participation in Ukrainian public procurement (without Ukrainian intermediaries) may be interesting due to the fact that the range of requested supplies is extensive, the amounts spent by budgets are huge. Ukraine, as one of the largest countries in Europe and also one whose economy is largely focused on military affairs and the reconstruction of civilian and infrastructure facilities, is interested in supplying an enormous number of quality goods as well as services. We need quality, speed, experience, high technologies. And all this in a great volume. We are talking not only about modern equipment, but also about ordinary things, for example, those that are necessary for the construction of infrastructure facilities, roads, communication systems, pharmaceutical products, etc.

The attitude towards foreign participants is practically equal to that as for locals. The country has created a special electronic public procurement system Prozorro (the name is created using a play on the words “transparent” and the name of the famous movie hero “Zorro”), on the platform of which absolutely all and complete information about tenders is necessarily placed, which makes corruption in this area as limited as possible, because access to the system is free and anyone can easily and freely familiarize himself with the materials and documents of a particular procurement and tender at any time. Thus, foreigners do not need to worry about inequality of participation conditions or lack of competition.

This article aims to outline the key aspects of foreign companies’ participation in Ukrainian public procurement: from qualification requirements and legal restrictions to practical advice on preparing proposals and appealing against client decisions. Its goal is to provide foreign participants with a comprehensive view of the rules of the game on the Ukrainian market and help them compete successfully in the field of public procurement.

Conditions of Participation: Key Analytics

Legal Framework and Key Conditions for Foreign Suppliers in Ukrainian Public Procurement

As mentioned above, the public procurement mechanism in Ukraine is functioning through the electronic platform Prozorro, which ensures complete transparency in this field. Although Prozorro has been implemented to ensure openness for all participants, foreign suppliers must adhere to a specific set of requirements in order to proceed. Here we will provide certain advice how foreign suppliers can successfully participate and win.

The primary legal point that regulates public procurement in the country is the Law of Ukraine “On Public Procurement“, which together with by-laws, such as Resolutions of the Cabinet of Ministers of Ukraine, provides basic principles, procedures and conditions for all public procurement activities. In this context, it is important to cite the provisions of Article 5 of the law, which stipulates that public procurement in Ukraine shall be carried out in accordance with the following core principles:

• fair competition among participants;
• maximum economy, efficiency and proportionality;
• openness and transparency at all stages of procurement;
• non-discrimination of participants and equal treatment of them;
• objective and impartial determination of the winner of the procurement procedure/simplified procurement;
• prevention of corrupt practices and abuse.

Participants (residents and non-residents) of all forms of ownership and organizational and legal forms shall participate in procurement procedures / simplified procurement on equal terms. The above ensures national treatment for the foreign bidders.

Although the basic principles shall apply to all bidders, foreign ones have to comply with certain specifics that often differ from those for local suppliers. Such differences primarily relate to documentation and legal representation.

• Documentation and Apostille/Legalization/Translation: all documents submitted by the foreign bidders, such as statutory and financial documents, certificates, have to be apostilled, if necessary, and translated into Ukrainian by a certified translator and notarized.
• Authorized Representation: Foreign bidders usually authorize a legal representative or agent to prepare the proposal and supporting documentation, as well as to participate in tender procedures. Also, the local representatives are needed if the foreign bidder communicates with the buyer, contesting certain requirements or decisions. It is hard to believe that a foreign participant would be able to handle disputes with the Ukrainian buyer without legal assistance of the local experts.
• Qualification criteria: Article 16 of the Law provides that the client shall require the participants in the procurement procedure to submit documented information on their compliance with the qualification criteria. The client shall establish one or more of the following qualification criteria: (i) availability of equipment, material and technical base and technologies at the participant in the procurement procedure; (ii) availability of employees with appropriate qualifications who have the necessary knowledge and experience at the participant in the procurement procedure; (iii) availability of documented experience in the implementation of similar (similar) contracts in terms of the subject matter of the procurement; and (iv) availability of financial capacity, which is confirmed by financial statements.

Ukrainian Documentation Standards

Obviously, a common challenge that foreign bidders face is meeting Ukrainian documentation standards. For example, you may be required to file a guarantee letter from your bank along with your annual financial statements.

We emphasize once again that Prozorro is a unique platform for public procurement in Ukraine. At the same time, bidders must register and participate in tender procedures through one of several authorized electronic platforms connected to Prozorro. Together with Prozorro, these platforms constitute an information and telecommunications system that has a comprehensive information protection system and is part of the electronic procurement system, as well as an online service that provides registration of persons, automatic placement, receipt and transmission of information and documents during procurement, and use of services with automatic information exchange, access to which is provided via the Internet.

All applications and documents must be encrypted with an electronic signature. Foreign companies are generally required to obtain a qualified electronic signature (QES) from an accredited provider in Ukraine or use an equivalent procedure recognized by international agreements. In the case of an appeal, the complaint is also submitted in electronic form with a qualified electronic signature, by filling out electronic forms with separate fields in which the necessary information is indicated.

Foreign bidders, as well as local ones, are provided with complete information related to the procurement process, including tenders, submitted applications, evaluation reports and concluded contracts, which are publicly available through Prozorro. This allows them to control the process, analyze competitors’ applications, etc, which eliminates manipulations, giving preference to the “profitable” supplier, and generally unequal treatment of participants.  However, in any case, newcomers to public procurement in Ukraine who are not indeed familiar with the local realities and the practice of preparing documentation and participating in tenders are advised to engage local procurement experts and lawyers to ensure effective and successful activity in this market.

Qualification Requirements for Foreign Companies in Public Procurement in Ukraine

For a foreign business to successfully participate in the public procurement in Ukraine, it is necessary to comply with the qualification requirements established by law and avoid circumstances that may serve as grounds for refusal to participate. The Law of Ukraine “On Public Procurement” and the Resulution of the Cabinet of Ministers established Peculiarities of Procurements within wartime (as mentioned earlier) grant the procuring entity the right to determine one or more criteria to verify the ability of the participant to fulfill contractual obligations. Together, they form a comprehensive picture of the supplier’s reliability and professional competence.

• Material and technical base. The procuring entities are entitled to require confirmation that the participant possesses the necessary equipment, technologies and other resources sufficient for the performance of the future supply contract. In procurement practice, this may include both certificates of the availability of its own production facilities and equipment, lease agreements or agreements on cooperation with subcontractors. For a foreign supplier, it is important to demonstrate not only the fact of the availability of a technical base, but also its suitability for performing the subject matter of the procurement in accordance with Ukrainian standards.
• Qualified personnel. One of the key criteria established by the procuring entities is the availability of specialists with a proven level of competence. As a rule, bidders provide documentary confirmation of the professional experience of key employees, such as their professional certificates/education and special training diplomas.
• Experience in performing similar contracts. Evidence of successful performance of previous similar contracts is a strong argument to confirm the reliability of the supplier. Procuring entities may require copies of contracts, certificates of work performed or customer reviews. For foreign companies, the translation of these documents into Ukrainian and proper certification of their authenticity is of particular importance. Practice illustrates that documented experience often becomes the determining factor in evaluating proposals.
• Financial capacity. The financial stability of the participant is confirmed by financial statements, in particular, the balance sheet, the income statement and other documents required by law. The requirement to demonstrate a stable financial position is aimed at protecting procuring entities from the risk of non-performance of the contract. Foreign companies operating in Ukraine through subsidiaries or representative offices should consider Ukrainian accounting standards.

In addition to the qualification criteria, it is extremely important to comply with the technical requirements for the procurement item. Procuring entities specify in detail the characteristics of the goods or services to be provided: compliance with standards, delivery time, warranty terms, etc. Practice shows that even a minor formal non-compliance with the specification may be grounds for rejecting a bid, regardless of its competitive price. Therefore, foreign bidders should be particularly careful to conduct an internal audit of their bid`s compliance with the requirements of the tender documentation.

According to Ukrainian law, a participant in public procurement must not have tax arrears. The only exceptions apply where the debt has been restructured or a repayment schedule has been agreed. The winning bidder must confirm that it has no tax debt.

Legal Restrictions for Foreign Companies in Public Procurement in Ukraine

At the same time, Ukrainian legislation establishes clear restrictions on participation in public procurement by companies under sanctions or with ties to the aggressor state. This applies to both legal entities and their ultimate beneficiaries. The procuring entity is obliged to reject the bid if it establishes such facts. Therefore, foreign bidders must prepare in advance the relevant statements and documents confirming the absence of sanctions and any ties with entities from the Russian Federation or the Republic of Belarus. In practical terms, this means conducting an internal compliance audit before submitting a tender bid.

An important principle of the public procurement system is the prohibition to demand documents from participants that are not directly provided for by law. The Law of Ukraine “On Public Procurement” (part 11 of Article 26) stipulates that the absence of documents not required by law in a tender proposal cannot be considered a ground for its rejection. Thus, the procuring entity is limited in its discretionary powers and is obliged to prepare tender documents solely within the legal requirements.

It is important to note that foreign companies must submit documents in accordance with the laws of the country in which they are registered. Accordingly, it is the responsibility of the procuring entity to clearly define the requirements for non-residents and provide for possible options in cases where a specific document that it requires does not exist in the legal system of another state.

To this end, the procuring entity may expressly state in the tender documents that if a non-resident tenderer is not required by national law to draw up a particular document or use an electronic signature, it must provide

• a letter of explanation in any form indicating the relevant legal grounds;
• a copy or an extract from the official explanation of the competent authorities of the country of registration;
• other documentary evidence of the absence of a requirement or impossibility of using an electronic signature.

This approach helps to balance the interests of the procuring entity and non-resident bidders, avoiding situations of unjustified rejection of bids for formal reasons.

Thus, the participation of foreign companies in public procurement in Ukraine requires not only formal compliance with legal requirements, but also a comprehensive approach to confirming their reliability and integrity. Well-prepared tender documents adapted to Ukrainian standards and legislation significantly increase the chances of foreign businesses to successfully secure large public contracts.

Engaging Subcontractors in Public Procurement: Legal Requirements and Practical Aspects

Ukrainian public procurement legislation provides for the possibility of bidders to engage other entities – subcontractors or co-executors – to fulfill the contract. This mechanism is especially relevant when the subject of procurement is complex and requires additional resources, specialized knowledge or technical capabilities. At the same time, the law establishes clear rules of transparency and responsibility in such cooperation.

According to the Law and the Specifics, the tenderer is obliged to indicate in the tender proposal all information about subcontractors (or co-performers) if their scope of work or services is 20% or more of the contract value. This imperative requirement is aimed at ensuring that the procuring entity has a full picture of the actual contractors and can check their compliance with the integrity criteria.

If the volume of involvement is less than 20%, formally, the declaration obligation may not arise. However, in practice, it is advisable for bidders to inform the procuring entity of all subcontractors at the bid stage to avoid the risk of not approving their participation at the contract execution stage.

At the same time, it is important to note that the procuring entity applies the same rejection criteria to subcontractors as to the main tenderer. This includes, in particular, the absence of sanctions, corruption offenses, tax arrears, bankruptcy or other grounds for refusal in accordance with the Law. Thus, a subcontractor cannot remain “in the shadows”: its legal status and reputation directly affect the admissibility of the main bidder’s participation in the tender.

For example, if a subcontractor is under sanctions or is included in the list of debtors, this may be grounds for rejection.

With regard to liability, foreign companies should be aware that the general contractor bears full responsibility to the client, even if a significant part of the work is actually performed by subcontractors. Such a principle is enshrined in both the Law and standard contractual practice: the contractor has the right to engage subcontractors only with the consent of the client, but remains responsible for the proper, timely and high-quality fulfillment of obligations.

All claims, fines or other sanctions for non-performance or improper performance of the contract are addressed to the main contractor. At the same time, the general contractor may provide for provisions on compensation for losses or risk insurance in internal agreements with subcontractors, but this is the area of private contractual relations between the parties.

It is worth mentioning the provisions of Art. 838 of the Civil Code of Ukraine, according to which the contractor has the right to engage other persons to perform work, unless otherwise provided by the contract. However, in public procurement, procuring entities often explicitly state in the tender documentation restrictions on the replacement or engagement of new subcontractors without prior approval. Therefore, it is advisable for a bidder, especially a foreign one, to clearly define the range of partners at the stage of submitting a tender bid and formalize their participation.

Advantages of Ukrainian Subcontractors for Foreign Companies

With regard to cooperation with Ukrainian subcontractors, it is important to note that engaging local partners has a number of significant advantages. Firstly, Ukrainian subcontractors often have the necessary licenses and permits, without which the contract would be impossible to fulfill.

Secondly, they are more familiar with national regulatory and technical standards.

Thirdly, local companies have well-established logistics and access to resources, which allows them to optimize the project implementation process.

Moreover, a subcontractor’s experience, reputation, and material and technical base may be taken into account by the client when evaluating the proposal. This is possible, in particular, through the mechanism of confirming compliance with the qualification criteria by using the capabilities of other organizations. Thus, close cooperation between a foreign company and local subcontractors can significantly increase the chances of success in a tender.

As a result, the involvement of subcontractors in public procurement in Ukraine is not only a legal option, but also an important strategic tool for foreign participants. However, the success of such a model depends on transparent declaration of partners, proper distribution of responsibilities and consideration of the peculiarities of the Ukrainian legal framework.

Guarantees in Public Procurement in Ukraine

The public procurement system in Ukraine provides for a number of financial instruments aimed at protecting the interests of procuring entities and ensuring proper fulfillment of obligations by participants. Foreign companies planning to participate in tenders should take into account the requirements for providing guarantees and security instruments in advance.

In most open bidding procedures, the customer requires participants to provide a bid security. Most often, it is issued in the form of an unconditional bank guarantee (Bid Bond).

Such security confirms the seriousness of the bidder’s intentions and can be enforced if the winner refuses to sign the contract.

According to the law, the amount of the tender guarantee may not exceed:

• 5% of the expected procurement value for works;
• 3% of the expected procurement value for goods and services.

At the same time, the guarantee must not contain conditions that complicate or make it impossible to collect it in favor of the customer. In particular, requirements to sign additional agreements, submit letters or other documents from the participant or third parties to confirm the occurrence of a warranty event are unacceptable.

Non-resident companies should take care of obtaining a bank guarantee in advance. If the foreign company has accounts in Ukraine, the guarantee can be obtained from a Ukrainian bank. However, for non-residents that are not registered in Ukraine, this process is often complicated.

In this case, it is possible to use a guarantee from a foreign bank.

International practice requires that such guarantees be issued in accordance with the Uniform Rules for Demand Guarantees (ICC Uniform Rules for Demand Guarantees, Publication No. 758, 2010). The guarantee of a foreign bank shall be confirmed by a Ukrainian resident bank, and the confirmation of avalization shall be submitted as part of the tender bid in electronic form with a qualified electronic signature.

Bids shall remain valid for the period specified in the tender documents. The Procuring Entity may request an extension of this period, and the Tenderer has the right to

• refuse the extension without losing the security provided;
• agree and extend the validity of both the tender bid and the bank guarantee.

The tender documentation should specify that the bank guarantee shall be valid for at least 90 days from the date of the final submission of the bids. At the same time, given the possibility of appeals to the AMCU and other circumstances, procuring entities are advised to set a longer period, for example, 120 days.

In addition to the guarantee at the bidding stage, the procuring entity may require the winner to provide a performance security. This is a kind of financial insurance that allows the procuring entity to compensate for losses in case of improper performance by the supplier.

The amount of such security may not exceed 5% of the contract value. The specific percentage is determined by the procuring entity in the tender documentation. The guarantee must cover the entire contract period.

When fulfilling procurement contracts, foreign suppliers assume the same warranty obligations as local companies. In particular, contracts for the supply of goods provide for warranty periods of operation or storage, during which the supplier is obliged to eliminate defects or replace the goods free of charge.

Foreign companies should carefully analyze the terms of the quality guarantee, the scope of warranty service and possible penalties (for example, for equipment downtime). A reasonable solution is to engage a local representative or partner service center in Ukraine to promptly fulfill warranty obligations. This is especially true for the supply of equipment that requires on-site maintenance.

Summary for Foreign Suppliers and Practical Advice

Ukraine is steadily moving towards integration into the European and global public procurement market. The Prozorro system, which is based on the principles of openness, transparency and equal access, has already become not only a tool for public procurers, but also a platform for international competition. For foreign companies, participation in procurement through Prozorro can become a promising area of business development, opening up new markets and forming long-term partnerships.

Below are some key guidelines that will help increase the chances of success.

• First of all, you should carefully study the tender documentation: qualification criteria, technical specifications, proposal form, and draft contract. It is important to assess whether the company is able to fulfill these requirements. If certain provisions seem discriminatory (for example, mandatory work experience in Ukraine, local registration, or availability of a warehouse), the bidder has the right to challenge them. Take advantage of the period for submitting questions and clarifications – ask specific questions to the customer and request clarifications if they are justified.
• Prepare documents confirming compliance with the requirements: statutory materials, financial statements, extracts from registers, certificates from tax authorities and criminal records of managers. Foreign documents must be translated into Ukrainian with notarization or official certification. The law allows for equivalent documents to be submitted under the laws of the country of registration. If a document specific to residents is required, it should be officially clarified which similar foreign document is accepted.
• The bid must be submitted exclusively in electronic form via an authorized platform. Register your account in time and take care of applying a qualified electronic signature. For non-residents, an international electronic signature or the signature of an authorized representative may be used. Fill in all fields, upload documents, specify information about subcontractors and generate price offers for each lot. Apply in advance to avoid technical failures.
• Winning the tender is just the beginning. It is equally important to properly execute the contract: organize logistics, customs clearance, compliance with technical standards. Appoint a representative who will coordinate the fulfillment of obligations and communication with the client. Document all stages – sign acts, send notifications of readiness. This will allow you to receive confirmation of the work performed and payment in a timely manner. In case of force majeure or disputes, act in accordance with the contract: contact the Chamber of Commerce and Industry to confirm the circumstances and maintain official correspondence with the client.
• Ukrainian public procurement legislation has many features, so the role of professional advisors is difficult to overestimate. An experienced lawyer will help prepare a package of documents, check the compliance of the bank guarantee with the requirements, and also advise on the nuances of an electronic signature or the execution of certificates. In case of controversial situations – for example, rejection of your proposal or unlawful determination of the winner, the lawyer will prepare a complaint to the Antimonopoly Committee of Ukraine. Appealing to the AMCU is an effective defense mechanism that can overturn the client’s illegal decision.

Commercial practice has already demonstrated really positive examples: dozens of foreign companies have successfully implemented projects in Ukraine, supplying goods, hi-tech equipment and unique services to customers financed from state or municipal budgets. They prove that with proper preparation, foreign suppliers are able to compete on an equal footing with local companies.

Thus, for foreign participants, the main challenge in this field will be strategic adaptation to the Ukrainian rules of the game. Having completed the necessary preparatory steps, from checking compliance with qualification requirements to organizing proper legal support, non-residents will have a good opportunity not only to win some tenders, but also to gain a foothold in the dynamic Ukrainian market.