In December 2021, just a few months before Russia’s full-scale invasion of Ukraine, the Open Contracting Partnership published a guide on public procurement reform at the municipal level. It was based entirely on the experience of Mariupol – a 500,000-strong industrial city on the shores of the Sea of Azov in Ukraine. Since 2016, when Ukraine’s Prozorro e-procurement system was launched, Mariupol saved tens of millions of dollars on its tenders, directing these funds to new infrastructure and benefits for citizens. The city developed rapidly and attracted investment, despite being in the immediate vicinity of the war zone in the Donbas since 2014.
But a full-scale Russian invasion has turned Mariupol into a place of human tragedy and ongoing humanitarian catastrophe. Thousands have died. Few buildings remain intact.
Ever since Russian troops invaded Ukraine, our country has endured colossal destruction. According to the Kyiv School of Economics, the direct damage to infrastructure has already reached $97 billion. The total losses to the Ukrainian economy stand at about $600 billion. And with no sign of Russian aggression abating, so will it continue.
At the same time, the heroic resistance of our Armed Forces, which has already forced Russian troops to withdraw from much of the occupied territories, and unprecedented support from the United States, including the revival of the lend-lease program, as well as the EU and other countries, instill confidence in Ukraine’s victory — and its reconstruction.
We hear from our Western partners that Ukraine will need a new Marshall Plan after the war and is ready to deliver. Leading economists from VOX EU are convinced that further reconstruction should allow Ukraine not only to rebuild bombed-out buildings and infrastructure but also to make the leap to a more digital, green, and integrated economy. To do this, Ukraine must embark on the path to EU accession and at the same time, economists say, must “own” the process of reconstruction.
The success of the reconstruction will also depend not least on whether funds are allocated efficiently, and thus, on procurement.
Transparency and cooperation
In 2016, public procurement reform was already implemented in Ukraine. Prozorro has disclosed all information about government tenders, as well as created a huge array of standardized data needed for control and analysis. In addition, the system has significantly reduced the scope for corruption: through transparent online auctions and public scrutiny, it has allowed the state to save more than $7 billion. At one time, the European Bank for Reconstruction and Development called Prozorro a recommended model for public procurement reform. And the White House highlighted Ukraine’s approach to public procurement oversight in its strategy to combat corruption at home and abroad.
But it is worth acknowledging that procurement in Ukraine will face far greater challenges than value for money and combating corruption. The approaches that worked in procurement before Russia’s full-scale invasion will no longer work effectively. We need to rebuild quickly. Simultaneously, we need to implement large-scale infrastructure projects throughout the country, and rebuild the economy, creating opportunities for Ukrainian businesses and jobs. February 24 divided the lives of Ukrainians into “before” and “after”. And we also see that Prozorro will never be the same again.
At the same time, it is very important to maintain the key principles enshrined in the system. First of all, the transparency of procurement information, the transparency of the criteria by which the supplier is selected. Now, confronting the Russian aggressor, Ukrainian society has an unprecedented level of trust in its own Armed Forces and authorities. In order to preserve this unity in the post-war period, state and international institutions involved in organizing the reconstruction process must commit to transparency and openness. And this can be done, using a single platform already widely recognized by Ukrainian society.
Prozorro was created as a result of very close cooperation between the government, business, civil society and international organizations. Therefore, I am confident that together we will be able to make the Prozorro system as easy to use as possible by international organizations. International expertise, as well as effective external control and audit of tender procedures, will undoubtedly play a crucial role in the effective reconstruction of Ukraine. After all, it should be acknowledged that to date, institutional control has remained a weak link in ensuring the efficient use of funds and combating corruption in public procurement.
Procurement for the reconstruction
With the guidance of the Kyiv School of Economics, the government and the procurement community are already developing a common vision of what procurement should look like for the reconstruction of the country. And we already have a consensus on many things.
Focus on quickly meeting the needs of the state. The use of long-term tender procedures for relatively small-value procurement will no longer be economically feasible. Therefore, it is necessary to raise the thresholds for tenders, which in Ukraine are significantly lower than in Europe (such thresholds were introduced in order to use funds more efficiently). At the same time, it should be possible to purchase all standardized goods and services through an electronic online catalog. In addition, in order to speed up the actual tender procedures, it is necessary to develop registers of qualified suppliers in various fields, so that customers do not need to check them every time and be confident in their ability to quickly implement large-scale projects.
Non-price criteria for purchasing and pursuing sustainable development goals. The issue of purchase price in many cases will no longer play such an important role as before. In order for reconstruction to really contribute to the development of our economy and Ukraine’s integration with the European Union, we must evaluate suppliers according to other criteria. Will they use advanced and green technologies, take into account the need for inclusiveness, and create new jobs, for example. This is an area where we need to actively learn from our counterparts in Europe, where the use of non-price criteria in procurement is already common practice.
Maximum procurement flexibility. The Prozorro system needs to be adapted to different procurement formats so that organizers can assemble, like a designer, the procurement procedure for their own needs. This is especially true for international organizations and donors, who will be able to conduct tenders according to their own rules and control their progress.
Development of public-private partnerships. Concession agreements, open framework agreements, and exchange mechanisms are the tools that will allow suppliers’ associations to participate and work effectively with the state on various forms of financing.
Transparency and standardized data. The Prozorro system is already a world leader in terms of the volume of open data it produces and analysis capabilities. Further improvement based on the Open Contracting Data Standard will enable comprehensive oversight of the process of rebuilding Ukraine at the level of individual projects to both international donors and Ukrainian regulators. And last but not least, to involve Ukrainian civil society in procurement control, which is currently experiencing another boom in attracting volunteers, who are more united than ever.
Procurement itself is only part of the reconstruction process. At the same time, it will be a deciding factor in whether Ukraine can use the chance not just to rebuild, but to rise to a new level of development. I am confident that we will be able to ensure reconstruction efforts are transparent and effective, and Ukraine will once again become a country that sets a vision for public procurement for the world.