Activists claim that in majority of sub-threshold procurement agreements prices exceed market prices


Monitoring of public procurement revealed a number of malpractices, the activists suggest making all state tenders use online system ProZorro to ensure fair state expenditures on regional level.
130 thousands of sub-treshold procurements took place in 2016 and 50 thousands of them took place in December. Over the final days of 2016 and in the first days of 2017 public enterprises, institutions and local authorities have signed a significant number of procurement agreements worth millions of hryvnia. A short analysis revealed a number of typical malpractices, said activists at a press briefing at Ukraine Crisis Media Center.  In many cases item names and technical specifications are not mentioned in the procurement agreement.

“70 – 80 percent of agreements cannot be analyzed at all, as it is not mentioned in the document what exactly was procured. In a half of agreements that can be analyzed the price exceeds fair market price,” said activist Oleksiy Tamrazov. He noted that in most cases these contracts with unreasonably high prices were signed with self-employed individuals.


For instance, on January 3, 2017 Pavlograd Chemical Plant (Dnipropetrovsk region) signed a contract with “Rimol” company to supply machine oil І-20А for UAH 29,7 per liter, VAT and supply cost included. The total cost of the procured oil is nearly UAH 12 million. According to Mr. Tamrazov, the highest price on the market is 20 UAH. Another example is the state-run Poltava Region Road Company. In the beginning of January they signed a UAH 92,4 million contract on supply of materials during 2017 without tender procedures.  The agreed prices are 10 – 15 per cent higher than market prices. “This kind of procurements by public enterprises is the most dangerous, when a contract is signed with obscure companies and signed for more than one year. As a result, we cannot control the process and cannot influence the situation later,” stressed Glib Kanevskiy, head of Anti-Corruption Section at “Eidos” think-tank.


In Vinnytsia, 35 schools and kindergartens signed contracts on procurement of milk for UAH 15,96 per liter, VAT included. The total price exceeds UAH 5,5 million. However, Ohmadyt Children Hospital procured the same product through “ProZorro” system for UAH 9,79 per liter. This is 60 percent cheaper.


One more example is the Service Center for Units of the Ministry of Internal Affairs. On December 22 they procured from “Novitnye Obladnannya” company 20 printers and multifunction devices Hewlett-Packard for UAH 141 thousands, nearly UAH 7 thousand per unit. However, the activists say, retail price in online shops is UAH 4-5 thousand. “They would pay UAH 53 thousand more,” Oleksiy Tamrazov stressed. In this case the activists revealed the problem right on time to fix it. As a result, this equipment was procured for UAH 90 thousands. They also succeeded to change the situation with procurements for a military unit in Yavoriv, Lviv region, where prices in the contract were 2-3 times higher than on the market. “The Military Law Enforcement Service addressed the case, as a result the contracts were re-signed and the prices became more reasonable,” Oleksiy Tamrazov explained.


Bilovodsk Central District Clinics (Luhansk region) procured from a self-employed individual three air conditioners Luxeon -SH20Y, SH25TG, SH25TW for UAH 70 thousand in total. However, according to prices on “Luxeon” website, these three air conditioners would cost UAH 35 thousands. In other words, the price in the contract is 100 percent higher.


In Berdychiv, Education Department of a District Administration signed a contract on procurement of six projectors NEC M303WS for almost UAH 200 thousand. According to prices in online shops, they would cost only UAH 130 thousands. Under one more contract they procured three sets of projectors and multimedia boards for UAH 196 thousand in total. However, their colleagues from Yavoriv procured five sets of projectors and multimedia boards for only UAH 169 thousand.
In Mykolayiv, Berdyansk and Kherson Departments of Culture at local State Administrations signed more than 10 procurement contracts on December 27-28. However, they did not specify item names and technical specifications of goods that they are going to procure.


One more typical malpractice is an abnormally short period between the signed contract on supply of services and the alleged work delivery. For instance, four village councils in Kyiv region signed six contracts on road repairing works with “Samsa-05” company. Three of them are on the amount of over UAH one million. These agreements were signed on December 28. However, reports on work completion were signed already on December 29 and on the same day the costs were transferred to the company. “We will pass these documents to law enforcement authorities today. This case obviously looks like a criminal offence,” emphasized Oleksiy Tamrazov. The cases of this kind were registered also in Ivano-Frankivsk and Rivne regions.


Systemic amendments to the legislations would prevent such cases in the future, the activists say. At present, the use of “ProZorro” system is obligatory only then when the cost of procured goods and services exceeds UAH 200 thousands, or UAH 1,5 million for procured works. “We call on the Government to make “ProZorro” system obligatory for every procedure dealing with choice of supplier of any works, goods or services. This will give to the civil society more tools for control,” stated Oleksiy Tamrazov. Glib Kanevskyi added that the Ministry of Economic Development and Trade has started work on such changes, however, it is important that the Government and the society support the initiative. Oleksiy Tamrazov mentioned  that in Kyiv  where most procurements are made through “ProZorro” system, he did not reveal such obviously unrealistic prices.


The second proposal is to amend the law on public procurements so that all public enterprises, where the share of the state exceeds 50 percent, would comply with this law.


The activists also called on their colleagues to join to monitoring of procurements that took place in December. They are going to create an online-database where those who joined the campaign will be able to register the revealed violations. Later the information will be passed to the State Auditor’s Service. Glib Kanevskyi noted that several violations, for example, a late publication of a contract may result in a UAH 17 thousand fine for the responsible official.