Fate of Prozorro: Will transparent public procurement survive

Maksym Shevchenko
14:10, 30 April 2018
Economy
443
Opinion

On the one hand, it's state customers, long used to non-transparent procurement. On the other hand, it's populist politicians initiating and pushing through parliament legislation such as "Buy Ukrainian, Pay Ukrainians" that would effectively kill the system. Besides, the government has become alarmed, dissatisfied with the blocking of tenders by the Antimonopoly Committee.

The attitudes on the part of politicians, officials and businesses are quite understandable - in 2017, tenders worth over UAH 500 billion were held via Prozorro. And it seems that the infamous "Buy Ukrainian, Pay Ukrainians" bill, allowing "domestic" businesses to win all tenders even if they set a price offer 40% higher than that of their foreign competitors, has little to no chance of passing parliament. After all, last year's stats show that 99.84% of procurement contracts concluded via Prozorro were granted to Ukrainian companies, although the authors of the bill claim they intend to protect national businesses from the "dominance" of foreign competitors. First deputy head of the Verkhovna Rada, Iryna Gerashchenko, also spoke about the lack of prospects for the adoption of "Buy Ukrainian" bill in the second reading.

Thus, the interests of two groups - state customers and the government - remained unbalanced.

The first seem to have not really liked the open and competitive bidding procedure via Prozorro, which is used in the procurement of goods (worth more than UAH 200,000) and services (worth more than UAH 1.5 million). In order not to apply a transparent procedure and in to continue the old ritual of concluding direct contracts with the "right" companies, state customers announce several tenders worth UAH 199,000 each.

One of the most striking examples is where the Haysyn City Council in Vinnytsia region as early as late January started preparing for the next New Year and to this end concluded six direct contracts for UAH 199,000 each.

Another "creative" move by state customers is to lay out discriminatory requirements to the supplier. Thus, a bidder with the best price offer often loses, simply lacking a couple of certificates or some signatures.

On the other hand, the government is also dissatisfied, because the Antimonopoly Committee last year canceled a tender for the purchase of scanners for customs, which seriously angered Prime Minister Volodymyr Groysman. The head of government claimed that a group of people in the AMCU had been blocking biddings for corruption-related reasons.

President of Ukraine Petro Poroshenko supported the PM's position and in April introduced a new bill to improve the Prozorro system, designed, on the one hand, to moderate unscrupulous customers, and on the other - to complicate appeals of tenders to the AMCU.

The basic norms of the bill include reducing the "threshold" of purchases to UAH 50,000, providing an opportunity for a bidding winner to fix paperwork errors within one working day, as well as increasing the fee for appealing the tender to the AMCU from UAH 5,000 to 1.5% of the expected purchase price with an upper threshold of UAH 600,000.

And while the first two norms theoretically allow to reduce opportunities for splitting biddings and to give businesses a chance to correct mistakes in their paperwork, the rule on the rise in price of appeals raises questions. After all, if the bill passes parliament, dishonest customers could continue to make discriminatory demands toward bidders, while the latter will have to spend huge amounts of money to protect their interests, which does not always make economic sense.

Moreover, Transparency International, which stands behind the creation of Prozorro, earlier noted that the work of the AMCU to review bidders' complaints on public procurement had generally been effective and consistent, while the main problem remained the low quality of bidding paperwork submitted by customers.

In other words, customers might continue to randomly or specifically create discriminatory trading conditions, while appealing their actions will become an endeavor too costly for businesses.

Time will show whether the bill passes parliament and whether it contains unexpected "pitfalls," but one thing is certain: losing control over $20 billion in public procurement remains an open wound for certain officials and businessmen.

Maksym Shevchenko

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