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    Analytical research “Public Procurement: Can It Be Improved”

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    PROBLEM The study is about how to avoid corruption risks in the area of public procurement. In this research certain factors are determined that infringe the rights of bona fide bidders and cause money loss on a large scale, mainly involving such methods as concealing the contract tendered, dividing a single procurement into smaller parts … Continued

    PROBLEM

    The study is about how to avoid corruption risks in the area of public procurement.

    In this research certain factors are determined that infringe the rights of bona fide bidders and cause money loss on a large scale, mainly involving such methods as concealing the contract tendered, dividing a single procurement into smaller parts and increasing the price after signing the contract using additional agreements. 

     

     

    Research process

    We examined the development of the public procurement system since the adoption of the law “On Procurement of Goods, Works and Services with the Public Funds” in 2000 until the adoption of the updated version of the law “On Public Procurement”, which will enter into force in April 2020.

    The research males use of the analytical materials of the practitioners in the area of public procurement, which contain the description of top schemes used by customers or contractors.

    Since the launch of the electronic procurement system, approximately 35,000 procurement organizers and more than 210,000 procurement participants have been registered in it.

    2.730 million purchases have been announced, with an expected value of almost 2.072 trillion UAH, of which: 458 thousand above-threshold procurement with an expected value of 1.626 trillion UAH, 784 thousand sub-threshold procurement, with an expected value of almost 235 billion UAH. 1.488 million reports on concluded agreements were published, the overall value of which is 210 billion UAH.

     

    The study identified factors that infringe the rights of bona fide participants and lead to the expenditure of the large amounts of budget funds. Those factors are: concealment of contract tendered in the system; division of a single procurement into smaller parts and increasing the price after signing the contract using additional agreements. 

    Results

    To date, the new version of the law of Ukraine “On Public Procurement” provides all the opportunities to change for the better the situation regarding the tender participants conspiring among themselves. Effective implementation of framework agreements allows customers to save time and reduce transaction costs, as well as ensure significant savings in the state budget. It is a matter of effective application of these regulations by controlling bodies.

    Based on the research, we believe that compliance with the law depends on the effective supervision of regulatory authorities. Most cases of abuse and disregard of the system requirements occur in close cooperation of the customer and the supplier. In most cases, either the public contracting authority or the winner of the tender knowingly violates Prozorro rules, i.e. violates the requirements of public procurement law. In other cases, they jointly commit administrative offenses.

    If we summarize the experience and try to identify some ways in which Ukrainian officials avoid the requirements of the procurement system, these are the most popular ones:

    • Changing the contract price using additional agreements;
    • Procurements worth less than 200 000 UAH;
    • Conspiracy of tender participants.
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