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You're reading: Activists report raft of state procurement violations in December

Ukrainian civic activists monitoring the ProZorro electronic state procurement system say they found plenty of violations in December that indicate corrupt practices are still going on, and they have urged the government to toughen the rules for procurement.

The ProZorro system, launched in Ukraine in February 2015, vastly increased the transparency of the notoriously corrupt state procurement process. Its backers say the system saved the budget around Hr 8 billion ($296 million) by eliminating corruption and paybacks.

But government agencies and ministries are still only required to hold an open auction via ProZorro when buying goods worth more than Hr 200,000 ($7,400), or services worth more than Hr 1.5 million ($56,000). When the purchase is below this price, a state agency can simply publish an after-the-fact report about the purchase on ProZorro.

Civic activists Oleksii Tamrazov and Glib Kanevskiy argue that this rule leaves open a loophole for corruption – a conclusion they made after monitoring activity on ProZorro closely for a month.

Announcing the results of their monitoring at a press conference on Jan. 10, the activists said they saw 130,000 reports of non-transparent purchases published on ProZorro in 2016, with 50,000 of them being published in December alone. The numbers are disturbing, they say.

“Money was hastily spent in the last days of the year,” Kanevskiy said. “Big road repairs were done in two or three days, without any prior competition.”

The controversial after-the-fact procurement reports included repairs that were made implausibly rapidly, purchases that were overpriced, and multiple procurements that should have been carried out in single auctions via splitting purchases into parts to decrease the value of each one, therefore avoiding the requirement to hold an auction.

The cases included those of four village councils in Kyiv Oblast that signed contracts for major repairs to six roads on Dec. 28. Next day, on Dec. 29, all of them signed agreements that stated the contracts had been fulfilled and the contractors paid.

“These cases will be looked at by the law enforcement bodies,” Tamrazov said.

Tamrazov, now a civic activist, is a former first deputy chairman of the state-owned public joint stock company UkrGasVydobuvannya and a former investor in the popular news website theinsider.com.ua, which closed in 2016.

Ivan Lakhtionov, a public procurement project manager at Transparency International Ukraine, told the Kyiv Post that the cause of the procurement violations was poor planning, with state companies scrabbling to spend leftover budget funds before the end of the year.

“They rush to spend the money, buying goods at inflated prices,” Lakhtionov said, adding that each individual report needs to be checked for corruption.

According to Tamrazov, about 70 percent of the after-the-fact procurement reports published by the state bodies on the ProZorro website failed to provide full information on the purchased goods or services, making it hard, if not impossible, for journalists and activists to verify whether the price was fair.

Lakhtionov also mentioned that many state companies split goods they want to buy into several contracts so that the value of each one is below Hr 200,000 ($8,000), thus avoiding the requirement to hold a transparent tender.

One such case was seen with the city council of Sumy, a town 350 kilometers northeast from Kyiv, which signed two very similar procurement contracts on Dec. 27, 2016 to buy two batches of “computer equipment” for Hr 195,700 ($7,250) each from one supplier.

According to Lakhtionov, this is an obvious violation – the council should have combined the contracts into one and purchased equipment via an open tender, as the total cost exceeds the Hr 200,000 ($8,000) threshold.

Sumy city council had not responded to a Kyiv Post request for comment by the time of the publication of this report.

Transparency International has reported the violations found by Tamrazov and Laktionov to the procurement controlling body, Ukraine’s State Audit Service.

Kyiv Post staff writer Alyona Zhuk can be reached at zhuk@kyivpost.com

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