Transparency and competition increased: Government adopts decision on defence procurement

The Cabinet of Ministers of Ukraine has adopted a decision that enhances transparency and publicity of defence procurement for the Armed Forces of Ukraine, promotes competition and reduces the cost of food services for the country's budget.

The Government adopted the relevant amendments to Resolution No. 1275 "On Approval of the Specifics of Defence Procurement for the Period of Martial Law" at a meeting on 9 May 2023. The decision was made in pursuance of Law No. 2958-IX on the introduction of transparency in defence procurement.

"We are enhancing the transparency of the procurement process for the army, while maintaining the level of security required in times of war. In addition, we are creating opportunities for the public customer to purchase goods through simplified procurement in the Prozorro system, thereby increasing competition in the market and, accordingly, facilitating the purchase of products at competitive prices," said Yuliia Svyrydenko, First Deputy Prime Minister of Ukraine and Minister of Economy of Ukraine.

The decision establishes the Procedure for determining the subject of procurement when procuring food, services for the provision of food packages, and catering services for the personnel of the Armed Forces of Ukraine.

The key provision of the Procedure is that food is procured as a commodity, unless the cost of related services (including catering and refreshment services) exceeds the cost of the food itself. Also, a public customer may define the type of procurement item as a service in the case of providing food in educational institutions and in certain military units that do not have cooks or cannot employ them for objective reasons.

"In this way, we are abandoning the system of procurement of services, which has compromised itself, and moving on to the procurement of goods. The procurement of services will remain in small volumes and will be carried out mainly for military universities and lyceums, where cooking services are actually provided," explained Deputy Minister of Economy Nadiia Bihun.

In addition, the decision unlocks the possibility of purchasing using simplified procurement in the Prozorro system and the list of information to be submitted by the customer prior to the procurement announcement.

In particular, the announcement must include:

• name and EDRPOU (National State Registry of Ukrainian Enterprises and Organizations) code of the procuring entity;
• title of the procurement item with the code according to the Unified Procurement Dictionary and the names of the relevant classifiers of the procurement item and parts of the procurement item (lots) (if any)
• technical, quality and other characteristics of the procurement item;
• approximate quantity and place of delivery of goods or volume and place of performance of works or provision of services (the place of delivery of goods, provision of services or performance of works may be indicated as a settlement, district or region);
• terms of delivery of goods, provision of services or performance of works (in particular, the period within which goods must be received, works performed or services received), payment terms, etc.

The Government is also bringing the timeframe for disclosure of procurement information and its list in line with the law on introducing transparency in defence procurement so that contracting authorities do not have to report twice.

Thus, the law stipulates that procurement reports that have not been made public since the beginning of the invasion until the law on transparency in defence procurement comes into force must be published in the Prozorro system by 22 June 2023. For the safety of suppliers and the military, annexes to reports on concluded procurement contracts for the provision of food packages, catering services for military units are published in Excel format without specifying the total volume procured, but instead with prices for each unit of food and related services.

With regard to future procurement agreements concluded without the use of the electronic procurement system, provided that the value of the goods and services purchased equals or exceeds UAH 200,000 and the value of works exceeds UAH 1.5 million, the public customer must publish information about them within 10 business days after the conclusion. The corresponding contracts under such reports must be made public within 90 days after the end of martial law.

The Decision does not apply to procurement of defence goods, works and services that constitute a state secret, as well as procurement of weapons, military special equipment, ammunition and their components and services for the development, repair, modernisation of weapons, military and special equipment, ammunition and their components, etc.