You're reading: A tender that is not sweet at all

Even Santa Claus or his local counterpart, Father Frost, doesn’t get to deliver sweets to Ukrainian children. Here, that privilege goes to a deputy prime minister.

For the third consecutive year, the government’s contract to supply seasonal candy to children went to Konti, a giant confectionery company that belongs to Deputy Prime Minister Borys Kolesnikov.

A whopping 4.3 million boxes of treats worth some $12 million will be purchased with public money and given away free to Ukrainian tikes. The state disability insurance fund is the government agency that procures and then distributes the candy.

There was no way Donetsk-based Konti could lose this year’s public procurement bid, required for any public purchase worth more than Hr 100,000. That’s because it was the sole bidder, even though there’s no shortage of businesses that would like to cash in on the holiday season.

Other candy makers simply decided not to bid because they thought the competition was unfair. “We don’t bid because there’s no sense,” said Halyna Bida, assistant director general of Kharkiv-based Biscuit–Chocolate company.

Petro Poroshenko, the economy minister and owner of the biggest confectionery business in Ukraine, Roshen, also said recently that the State Fund for Social Insurance tenders are non-transparent, and that his company “doesn’t need money earned in this way.”

In a recent interview with TVi, Kolesnikov denied all allegations of foul play, but admitted that Konti, which has taken part in similar bids for 11 years, has been remarkably lucky in winning it, despite healthy competition on the market. Konti is the sole suppliers of sweets for the third straight year, and previously supplied at least 60 percent of the volume, according to Konti’s own data.

“You are deeply mistaken if you seriously assume that I’m constantly busy with selling New Year’s candy boxes,” Kolesnikov told journalists.

The State Fund for Social Insurance Against Temporary Disability didn’t respond to requests for comment for this story by the time the Kyiv Post went to print.

Konti’s holiday boxes are about 10 percent more expensive than those made by Biscuit-Chocolate, for example, according to data of one tender in Kharkiv revealed by Nashi Groshi, a procurement watchdog.

This year Biscuit-Chocolate won a bid to supply a small volume of presents in Kharkiv for another state-run agency, the Children’s Food Company.

Past experience suggests that at least some of Konti’s tender victories were about more than luck.

In 2010, Biscuit-Chocolate bid for the lucrative New Year’s contract along with Konti. The company offered lower prices, but the tender was canceled abruptly. Instead the public agency commissioned the sweets from Konti. Since then, no other companies have attempted to bid.

The holiday candy procedure has been the same for three years.  After Konti is chosen as the sole supplier in early November, it has a month to produce and deliver the goods to local departments of the fund, which operates nationally.

Bida of Biscuit -Chocolate says this is a short time frame for a company to fulfill the contract, meaning it would require guarantees of winning the bid to start preparing early.

“In 2009 and 2010, there were boxes of candy with August date stamps, and the delivery took place in December,” Bida says.  She said other companies would need to know the result of the tender in advance to be able to fulfill the contract. It’s not clear why the competition is held so late in the season each year, though.

Konti, in a written response to the Kyiv Post, denied the allegations. The company says its production capacity is 28,000 tons per month, more than enough to produce the 2,000 tons of sweets required to fulfill the state fund’s contract in a short time.

“The company produced the required amount (of New Year’s candy boxes for the fund) in November, in   accordance to the requirements of tender documentation,” the company’s statement said.

Konti admitted the delivery term is very short, and said it starts preparing wrapping and boxes early on, and plans intensive manufacturing of the variety of sweets that are then packed inside.

“The company does it at its own risk, conscious that it might lose the tender. But Konti, as a leader in producing New Year’s boxes of sweets, is confident of its strength and capabilities and considers the risk reasonable,” the manufacturer says.

Konti is the leader of Ukraine’s traditional seasonal sweet “presents” with 42 percent of the market, according to the company’s own assessment. Kolesnikov has been in business since the early 1990s. His Konti Group now accounts for more than 13 percent of sweets sold in Ukraine and 3 percent in Russia.

But Konti rejects any speculation of having advantages over other market players because of Kolesnikov, saying that he does not actually affect “operational decisions made by Konti management.”

The candy tender is not the first time Kolesnikov finds himself in the middle of sensational allegations. Earlier this year, he was in charge of preparing Ukraine to co-host the Euro 2012 football championship, and most of the projects financed by the government featured in corruption scandals and investigations, whose status are unclear. Kolesnikov has consistently denied all allegations.

Kolesnikov reported an income of Hr 166 million ($20.7 million) in 2011. The lion’s share of his earnings came as royalties for his ownership of most of Konti’s trademarks.

Kyiv Post staff writer Denis Rafalsky can be reached at [email protected]