"If Russia had been cut off from SWIFT immediately, the outcome would have been different," says Nadezhda Bigun from the Ministry of Economy on military purchases and EU envy.

A new phase of tender reform is about to take place in Ukraine, involving adjustments to several procurement procedures. In accordance with EU requirements, the Ukrainian Parliament plans to update the public procurement law, rewriting certain rules of the game as part of the accession negotiations. This is aimed at implementing European regulations into domestic practices. Amidst the ongoing war and in response to current demands, other significant changes in the tender sphere are also occurring concurrently.

Details of this situation were discussed in an interview with "Telegraph" by Nadezhda Bigun, Deputy Minister of Economy of Ukraine.

In the second part of the conversation with the representative of the economic block of the government, we discuss the fight against existing schemes in open tenders, the abuse by large state enterprises, and flexible procurement for the domestic defense industry. Additionally, in the context of the war, we touched upon the collapse of the Russian economy and why, contrary to forecasts, it has yet to collapse.

You can watch the full video of the conversation with Nadezhda Bigun on our YouTube channel.

On Tender Schemes and the Role of Prozorro

— Continuing on the topic of tenders, here's my question: despite the government's steps towards de-shadowing the procurement sector and the functioning of the Prozorro system, our ongoing monitoring and analysis of procurement in the public sector (for example, state entities like "Oschadbank", NAEK "Energoatom" etc.) indicate that persistent abuses, schemes, and "distortions" continue to exist. If we talk about below-threshold procurements (200,000 UAH for goods and services and 1.5 million UAH for works), they usually involve a single participant, a firm of questionable origin, etc. How can we strengthen state regulation, combat corruption, or use other tools to put an end to these phenomena, respond quickly by canceling these tenders, and punish the guilty?

— It seems very important for us to initiate a discussion about the fact that Prozorro is not an anti-corruption system. It is a procurement system. Its primary focus should be on who its client is and what problem it is solving. The client of the system is the customer.

Customers utilize this platform, and they need it to operate in a way that allows them to timely meet the needs of their organization. Prozorro should ensure that the procurement process occurs in such a manner that access to information (which may be crucial from an anti-corruption standpoint as well) is easily available.

They [the customers] do not need a complex, lengthy process requiring documents or anything else. If law enforcement wants to, they can simply access either business intelligence, our analytics module (which sounds like science fiction), or visit the Prozorro portal. There, law enforcement can quickly find all the necessary information without spending several days on requests for answers, taking only about 10 minutes to gather everything. This is what Prozorro is needed for.

However, if law enforcement identifies problems but then does nothing about them, Prozorro will not resolve the issue of corruption. Our system contains ample information, and the public sees and pays attention to it. Very often, as a result of public scrutiny [of abuses], movements begin from those who are supposed to control the effectiveness of procurement.

— Is this enough?

— Probably not enough. It seems to me that the entire transformation of the procurement system must shift towards focusing control bodies (the State Audit Office, the Antimonopoly Committee, the Accounting Chamber, and law enforcement) not on form but on substance.

It turns out that if a hypothetical "Energoatom" or someone else has a person who is very skilled at conducting procurement procedures according to the law, and everything is technically correct, but the end result is very expensive, our auditing bodies say "no" (i.e., everything is transparent and supposedly legal. — Ed.). And there’s nothing we can do about it. We can check whether all documents are attached, whether the commas in those documents are in the right places, whether the page numbers are on the correct sides, etc.

But how can we see whether there were any collusions between the customer and the supplier, or whether a non-market price was formed, and so on? This is more complex and requires a deeper market analysis, necessitating more in-depth analytics, which is why control and law enforcement bodies tend to avoid this area.

Therefore, Ukraine is currently trying to balance between the position that everything in state tenders must be regulated (where everything must be clear and unambiguous) and the notion that the entire system of control and procurement cannot be built solely around formal aspects, ignoring the results [of the tenders]. We are trying to find balance and move towards strengthening the control system so that our controlling bodies can focus on what the public is concerned about.

However, this shift will not happen quickly, and it also represents a change in mindset.

Right now, if you take any contractor (like "Energoatom") and ask them what they think about when they conduct a tender, they will say they think about what they will be punished for: for incorrectly placed commas and having all the tender documents. They will never be punished for an inadequate price. Therefore, they will focus on that and think about it. Consequently, we will have such results (the existence of schemes. — Ed.).

On Flexible Procurement for the Armed Forces During War

— In the context of the war, we have noticed a revival of our defense industry on one side and state regulation in this sphere on the other. There are several national producers who complain about excessive bureaucracy and paperwork. Is it possible to create a list of proven, conditionally honest companies that do not disrupt defense orders and have been in the market for a long time, to eliminate unnecessary bureaucratic procedures considering the demands of wartime?

— We have indeed found ourselves in a situation where there are two existing laws: "On Public Procurement" and "On Defense Procurement". Before the large-scale war, the law on defense procurement pertained only to weapons, military, and special equipment. In other words, it was purely a military law for military purposes.

However, when the large-scale war began, we faced the challenge that due to certain security and defense requirements, all products needed for security and defense could not be procured through public procurement procedures, where everything is visible to everyone. This was a huge challenge, and we were forced to rethink our approaches. We could no longer act as we had before.

The law on defense procurement actually provides for a register of suppliers. This register was supposed to be created and maintained by the Ministry of Strategic Industries. Unfortunately, it was never created. Although the relevant law seems to have been adopted in 2020. The register was never established, and then the large-scale war began, and it was no longer possible to do so. However, this issue is revisited from time to time.

Speaking globally about the needs of security and defense, there will still be a part of the products that must be procured through public procedures. And probably, it would not be advisable to create such a register for conditional producers of uniforms, shoe manufacturers, or bulletproof vest manufacturers. Still, the goods purchased by the State Material Reserve Agency (SMRA) go through public nomenclatures.

There is a common vision among colleagues in other ministries (we discuss this with them) that in this sphere, procedures should either closely resemble those in open tenders (where all data is fully open) or something similar.

We are currently testing a dynamic procurement system (which is an open framework and appears in the law №11520), and it has been introduced on Prozorro for tenders by the SMRA, the State Special Communications Service, and the Defense Procurement Agency (Nadezhda Bigun was recently appointed to the supervisory board of the SMRA. — Ed.).

They have non-secret nomenclatures of the goods they purchase. However, there are concerns about the risk of information leaks about manufacturers (for example, drones, electronic warfare systems, or even light industry). We have suppliers for the Ministry of Defense who are afraid to participate in tenders because they might be targeted due to their factory and production being relatively close to the front line or the border with Russia. They can be easily reached, and they express this concern.

For them, we are developing a procedure where, at the first stage, we have an open qualification phase and requirements for participation. However, the actual qualification takes place in a closed mode. The information is available in the system, and the controlling bodies have access to it, but detailed data about the production capacities and other specifics of such manufacturers is not visible to the general public.

There is no point