Saving Ukraine $2.3 billion a year in embezzled or wasted money from state purchases is the ambitious goal of Ukraine's Economy Ministry.
An e-procurement system, ProZorro, has already saved $14.5 million since February, but much more could be saved with the expansion of the system.
But parliament needs to adopt a public procurement law, which it is expected to do by December, for the full savings to be realized.
ProZorro currently only covers the purchase of goods and services worth up to Hr 200,000 ($9,070) or Hr 1.5 million ($68,028) for labor, which represents some 1.5 percent of the Ukraine’s public procurement market of $11.4 billion.
If the draft law is adopted, all public purchases will be in the electronic format by the end of 2016.
According to Oleksandr Starodubtsev, director of the ministry’s public procurement department, the framework law on public procurement 2087a enacted on Sept. 30 solved some problems. But a total switch is needed to improve transparency and reduce corruption.
If the draft law on procurement is adopted, it will:
* oblige all procuring entities to conduct purchases in electronic format;
* introduce electronic procedure to contest the tender results;
* allow to include professional procurement specialists in tender committees from outside the entities. Currently the committees are composed of officials working on various posts inside the entity with no special training, for instance, the main doctor is conducting tenders for state hospitals; and
* allow creation of central purchasing bodies able to procure similar products for different entities in bulk, like local schools or hospitals. This will allow to aggregate demand, put pressure on prices and increase efficiency.
The ProZorro database, currently operated by international anti-corruption watchdog Transparency International, will then be transferred to the Economy Ministry, and at least one state bidding platform will be introduced alongside six private ones functioning now.
“The law is not a reform itself. It is also needed to force and educate tens of thousands of procuring entities and officials, so that they wouldn’t have problems (in using) the system,” Deputy Economy Minister Max Nefyodov said on Oct.9.
“We encourage them to join the pilot already, in order not to wake up one morning and understand that you have to work by new rules which you don’t understand,” said Khrystyna Hutsalova, ProZorro project coordinator who is responsible for training on using the new system in the regions.
ProZorro team has already conducted 25 trainings in 20 oblasts, and 11 local administrations have already decided to conduct all their sub-threshold purchases online while three more are planning to join in soon.
Resistance is coming not only from bureaucrats afraid of a new system, it’s very hard to convince business to start competing for public contracts as they have long associated those with difficulties, corruption and intransparency.
The marketing approach of the team resulted in “rebranding” of traditional for Ukraine term of “state procurement” into “public procurement” that they have put in the draft law. The change should eliminate negative associations and reiterate the totally new approach to the issue adopted by the current government.
The new procurement system is designed to establish total transparency of the process from the moment of planning to the fulfillment of procurement contract, easy access for business to increase competition, easy access to all data for the public for monitoring and analysis, and easy procedures of appeals and complains for the non-winning bidders.
“The best control over suppliers comes from their competitors,” Nefyodov said.
The system is in permanent development and the mid-term plan is to implement electronic contracts and invoicing, integrate it with the Finance Ministry’s public finance portal on budgets, spending and transactions via state treasury.
Kyiv Post staff writer Olena Gordiienko can be reached at [email protected].
