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Public Procurements since Implementation of ProZorro

Date of publication: 28 August 2018

Oleksandr Fefelov, Attorney at Law, Head of Antitrust and Competition Practice at Ilyashev & Partners Law Firm

Source: Ukrainian Law Firms 2018. A Handbook for Foreign Countries

In  the last few years the number of public procurements in Ukraine has grown more and rapidly and more and more foreign businesses are offering their products to budget organizations. According to statistics on the bi.Prozorro portal more than 1 million public procurements were organized in 2017, with agree­ments to the value of more than UAH 836 billion.

Normative Regulation

The major legal points regulating public procurement in Ukraine are:

— The Association Agreement between the EU and its Member States, on the one side, and Ukraine, on the other side (Association Agreement);

— WTO Agreement on Government Procurement (AGP) (Ukrainian accession —18 May 2016);

— Law of Ukraine No. 925-VIII On Public Procurement (Procurement Law).

Pursuant to the Association Agreement, Ukraine ensures non-discrimination and equal access of foreign bidders to public procurement markets on the basis of the principle of national treatment at national, regional and local level for public contracts and concessions in the traditional and utilities sector.

AGP provides, in turn, legally binding access for foreign bidders (originating from other AGP countries) to Ukrainian procure­ments based on the national regime and non-discrimination principle, subject to certain savings provided by AGP. Also Ukrainian bidders can have access to foreign public services markets.

Under the Association Agreement and GPA Ukraine has to approximate national pub­lic procurement legislation to EU public procurement acquis and effectuate institu­tional reforms. So as to create an efficient, transparent public procurement system based on EU principles and GPA norms the Procurement Law implemented fairly revo­lutionary rules for conducting public pro­curement ensuring that foreign and national bidders may partici­pate in procurement procedures on equal conditions. Procedures shall be held on the basis of principles of fair competition, maximum cost saving and efficiency, transparency, non-discrimination, objective and impartial assessment of bidders and preventing cor­rupt practices.

As the overcoming unrelenting wave of violations in the sphere of public service markets traditionally re­mains one of the most important agenda items in development of the national econo­my in addition to the revolutionary changes in the procedures of public procurement, the Procurement Law also sets out a de­pendable and trusted system of control over compliance with competition rules directed at saving monetary re­sources of budgets of various levels.

Legal specifics provided by procurement law

Specific requirements of the Procure­ment Law shall apply to buyers, provided that the value of goods or services to be procured is equal to or in excess of UAH 200,000, or works — UAH 1,500 000, and, if buyers carry out specific business ac­tivities, provided that the value of goods or services equals to or exceeds UAH 1 million or works — UAH 5 million (“above thresholds” procurements”),

The most important development stipulated by the Law is that, subject to some exceptions related mostly to safeguarding national security and interests, all “the above thresholds public procurements” shall be conducted exclusively in the electronic pro­curement system on authorized trading e-platforms connected to the web-portal called ProZorro, which is the information and tel­ecommunication system consisting of an e-auction module and database (part of the e-procurement system) ensuring the generation, storage and publication of all procurement information, holding an e-auction, automatic exchange of information and documents via the Internet. It provides free access to, among others, information on procurement, discussions of buyers and bidders, complaints and results of their re­view, etc.

ProZorro makes public all information on procurement, ten­der documentation, offers and documents supporting bids, etc., and any interested person can freely access and examine it all, detecting inconsistencies and violations.

If the expected value of goods or ser­vices reaches EUR 133.000, or works EUR 515.0000, all information is duplicated in ProZorro in English. Procurements with a value below above thresholds may still voluntarily use ProZorro. When the value of procurement conducted reaches UAH 50.000 the buyer must publish a report on the awarded con­tract via ProZorro.

Procurement Forms

Procurement Law provides for three forms of procurements that must be carried out:

— open tender (requires at least two bidders);

— competitive dialogue (two-stage pro­cedure used when a buyer cannot define the necessary characteristics of works or type of services and needs to discuss them with the bidders, or when the requirements of certain services need to be negoti­ated);

— negotiated procedure (selection of supplier based on results of negotiation), used mainly when certain specific things like works of art are purchased, or in absence of competition, emergency situations, or if two tenders were cancelled due to the absence of the required number of bidders.

Qualification Criteria

The bidders have to meet the qualifi­cation criteria set up by the buy­er, which mainly include: availability of equipment and material and techni­cal facilities, qualified experienced per­sonnel; experience in performing simi­lar contracts. Qualification requirements are not required when certain products are purchased. The most attractive bids may be rejected if the winner does not meet the qualification criteria or if required collateral for a bid has not been provided.

Certain persons may not qualify to be bidders, including those who make offers to the buyer’s or other public au­thority’s officers with the aim of winning a tender; individuals included in the Unified State Register of Persons who Committed Corruption Offences; individuals or entities which authorized officers held liable for a corruption offence in the sphere of public procurements: undertakings which during the 3 preceding years were held liable for anticompetitive concerted practices in the form of distortion of tender results; persons related to other bidders or to members of tender committee or to a buyer’s authorized person; bankrupt and subject to liquidation; on whose UBO there is no information in the state register; which does not have an anticorruption program or officer responsible for effecting an anti-corruption program if the value of the purchase exceeds UAH 20 million, etc.

Timing Requirements for Publications

The Law On Procurement provides for the timeframes when the information on certain aspects of the procedure must be made public via ProZorro. For instance, the announcement on the procurement pro­cedure and tender documentation shall be downloaded not later than 15 days prior to the date of opening of offers, pro­vided that the value of goods/services does not exceed EUR 133.000 and works — EUR 5.150000, and no later than 30 days if the above thresholds are higher. No pro­curement can be held without a prior an­nouncement via ProZorro.


— Hearing of appeals through Appeal Authority

The Antimonopoly Committee of Ukraine is an independent complaint review authority in the sphere of public procure­ment. The appeals are reviewed by its Per­manent Administrative Board for Handling Complaints against Violations of Public Procurement Legislation (the Administrative Board), consisting of three AMCU state com­missioners. Consideration of complaints is only possible if they are downloaded in ProZorro. As soon as the Administrative Board accepts the claim ProZorro automatically stops commencing the electronic tender and does not make the purchase agreement public. During an appeal buyers may eliminate vio­lations stated in a claim, but cannot act in any manner and take decisions in respect of procurement, the purchase agreement is not concluded. The Board has to resolve a claim within 15 business days.

Appellants may expect from the Board the establishment of the presence of violation(s) and instructions to the buyer like: providing the required documents and explanations, eliminating discriminatory con­ditions, cancelling the procedure or decisions on rejection of bidder, access to auction, or selection of winner. The filing fee is just UAH 5,000 in case of purchase of goods or services and UAH 15,000 in case of purchase of works. Statistically, more than a half of the accepted and reviewed claims are satis­fied. For instance, in 2017 the Administrative Board reviewed claims for a total value of UAH  90.58 billion and obliged buyers to remedy breaches to a total value of UAH  37.38 billion. Thus, the bidders shall not pass up the appeal procedure to protect their rights and lawful interests.

— Monitoring public procurements

Recently, on 27 January 2017. due to the urgent need to improve the system of monitoring and controlling expenditures and preventing losses of budget monetary resources in the course of public procure­ment, Law No. 2265-VIII On Amendments to the Law of Ukraine On Public Procurements and Certain Other Laws of Ukraine Regarding Performance of Monitoring Procurements came into force (Monitoring Law). It defined the State Audit Service (Audit Ser­vice) as the only relevant public authority empowered to conduct monitoring of pub­lic procurements at all stages, including conclusion and fulfilment of the purchase contract. It is important that the Monitoring Law implemented the launch and use of automatic risk indicators, i.e. specific crite­ria with predetermined parameters, which will enable the Audit Service to detect suspicious procurements automatically. Commencing the monitoring could also be possible if information on violations is obtained via the public authorities, from media, from data held by ProZorro, etc

It should be noted, however, that monitoring does not halt procure­ment procedures, as this happens when a complaint is accepted by the Adminis­trative Board. Ob­viously, all information on monitoring and exchange of information between the Au­dit Service and the object of monitoring should be carried out in electronic form via ProZorro and is, therefore, publicly avail­able.