With the support of the EU, CES and IER conducted an analysis of construction and recovery procurements carried out by the Ukrainian state in 2023

The Center for Economic Strategy and the Institute for Economy Research and Policy Consulting conducted an analysis of construction procurement, which includes reconstruction and recovery procurement, based on the data from the Prozorro system for 2023. A total of 173,000 procurements worth UAH 283 billion were successfully completed in 2023 under the code of construction works and current repair works (under the CPV 45 code). Due to the lack of an identifier for purchases specifically for reconstruction and recovery projects, analysts were unable to separate the corresponding purchases. But analysis of the separate procedures shows that the problems in reconstruction procurement are the same as in all construction procurement.

"Resources for reconstruction are limited, and it is very important that they are spent in the most effective way - to bring as much benefit as possible to Ukraine and people's lives. Public procurement is an extremely important part of public finances: last year, the amount of public procurement reached 12% of GDP. Therefore, the proper functioning of public procurement is a tool for stable economic recovery of Ukraine. That is why the EU Delegation in Ukraine actively cooperates with the Government in this area," said Henrik Huitfeldt, Head of the Department of State Funding for Business Support and Social Policy of the EU Delegation in Ukraine.

The procurement analysis revealed a number of problems in the reconstruction procurement. Volodymyr Landa, senior economist of the Center for Economic Strategy, has elaborated on them.

In 2023, there was low competition in construction and reconstruction procurements. In procurement using the Prozorro electronic system, the average competition rate was about 1.4 participants per tender. While the State Agency for Recovery and Reconstruction has more than 2.2 participants.

Another problem is the fragmentation of purchases. In 2023, 2.9 thousand purchases were made in the 180-190 thousand UAH range, 15.6 thousand purchases in the 190-200 thousand UAH range, and 0.6 thousand in the 200-210 thousand UAH range.

"There is also a problem with the large number of normative legal acts that regulate the sphere of procurement: 12 laws and more than a dozen by-laws that change very often. For example, the main two laws were changed more than 50 times," said Volodymyr Landa.

In addition, according to Landa, there is also a problem with the openness of project budget calculations (кошториси). "Now only every fifth budget calculation is open, and those that are open are not always in a machine-readable form. This complicates the possibility of effective participation in reconstruction procurement for potential participants," emphasized Volodymyr Landa.

Analysts of CES and IER have developed a number of recommendations to increase the transparency and efficiency of procurement for reconstruction, in particular:

1. Increase the transparency and competitiveness of reconstruction procurement by making public estimates of construction procurement (draft law No. 11057, "Transparent construction").
2. In the electronic procurement system, enter an additional procurement identifier that would determine belonging to the field of reconstruction and restoration procurement.
3. Streamline the designation of procurement codes, which would allow:
   1. to group purchases of homogeneous goods, works, and services by the same codes
   2. apply a uniform CPV code detailing practice for all purchases.
4. Ensure publication of tender documentation in machine-readable form.
5. Investigate purchases with signs of fictitious value in order to preserve the subthreshold sign.

Read the full analytical report with a list of developed recommendations at the link.

Disclaimer. This news was prepared within the framework of the project "Control of recovery costs", financed by the European Union. The project is a joint effort of the Center for Economic Strategy, the Institute of Economic Research and Political Consultations, and the NGO "Technology of Progress". All project participants are members of the RISE coalition.

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