Opaque Prozorro: why auctions were removed and where it will lead
They want to make holding auctions optional, hiding behind external requirements
On December 30 last year, the Ukrainian government made a resonant decision: the Cabinet of Ministers approved Decree No. 1495 and canceled mandatory auctions in the Prozorro public procurement system. Recall that it was Prozorro that at one time became the locomotive of anti-corruption reforms in the country and allowed society to control the costs of taxpayers. Will this locomotive go off the rails, rolling the country back to the times of terry corruption – Apostrophe found out.
What happened to Prozorro
How auctions worked on Prozorro before. Bidders submitted their proposals for the tender, and then an online auction took place in real time, during which each of the participants had three steps to reduce the price of their goods or services for the state. The one with the lowest price wins. It's simple.
What will happen now? And now there will be no auctions. Bidders immediately submit their price proposals and the one with the “sweeter” price will win. That is, the opportunity to “play” with offers, compete with competitors in real time, is lost.
Why did this happen
The government says it's because of the constant blackouts. And to take part in the auction, you need to be online.
“Businesses, especially small and medium ones, faced with a blackout and not being able to provide uninterrupted Internet and power supply, were deprived of the opportunity to participate in auctions”, – said the Deputy Minister of Economy of Ukraine Nadezhda Bigun.
According to the Ministry of Economy, the blackout led to the fact that by the end of December the share of trading with only one participant was 88%. That is, in fact, there were no auctions anyway. What kind of competition can we talk about here?
“An auction is a very short-term stage: from 10 to 20 minutes of time. And if you don’t have the Internet at this time, then you just skip your step, ”ex-director of Prozorro State Enterprise Vasily Zadvorny explains to Apostrophe.
Therefore, in order to provide all participants bidding equal conditions, the government made such a decision. True, temporary – for six months.
“Relevant changes in the procurement procedure may be reviewed when the situation with electricity stabilizes,” the Cabinet of Ministers explains.
Non-transparent Prozorro. How this will affect corruption
The government assures that no way. Moreover, public procurement, they say, will become even more efficient and economical. After all, bidders will immediately set the lowest price for their goods and services, and not wind up a high margin, realizing that there are no longer three stages of the auction.
“Will it get better or worse? So far it's hard to say. There are two opposing trends, and what will happen as a result, we will be able to see only when everything works, adds Zadvorny. – The first trend – due to the disappearance of the auction, participants have an additional motivation to immediately set the lowest price that is acceptable to them. Previously, a participant could put not the lowest price acceptable for him in order to lay some kind of delta for trading. Now, when he realizes that he will no longer be able to bargain, the participant will be inclined to immediately give the lowest price in order to win the tender. The second trend is that in most cases there are simply no auctions, because economic activity has decreased. Accordingly, this may encourage participants, on the contrary, to lay a large delta, in the expectation that it will be the only one in the tender.”
But according to experts interviewed by Apostrophe, potential corruption risks still exist.
Firstly, auctions were not invented in vain, because they could still significantly drop the price. But this is the money of Ukrainians.
“There are purchases where the difference from the starting to the final price can be millions of hryvnias – and this is a significant savings,” Elena Shcherban, an expert in public procurement at the Anti-Corruption Center, explains to Apostrophe.
Secondly , “The question is who will be allowed to look at the offers of other bidders in order to submit their offer a little cheaper,” adds Georgy Mogilny, an urban planning expert, commenting on the situation to Apostrophe.
And a “slightly cheaper” price is a victory in the tender. However, if we are talking about public procurement in construction, then there are no guarantees that cheaper will not become much more expensive later.
“Already now there is a scheme of how to raise prices for purchases. Take, for example, the road junction at Shulyavka. What happened there? They make a purchase, find a company, start building, and after that Klitschko re-approves the project with a new examination of the estimate and the price rises by about 30%. The scheme was used but was not expressly provided for by law. And now there is a draft law in the Rada, where they want to directly prescribe that if the examination confirms the price increase, then it is possible to make changes to the contract. And this is where corruption really begins. “His “participant dumps the price at the tender, knowing that in the future the expertise will increase it,” explains Mogilny. during the auction period, but now it's easier.
Thirdly, “Prozorro sales, where they sell property from auctions, do not transfer to any other system. For some reason, a power outage does not affect this,” Mogilny says.
Fourthly, “There are risks in the general degradation of the Prozorro system,” adds Yury Nikolov, editor of Nashi Groshi, to Apostrophe.
“With such small steps at the end of the war, we may find ourselves in a situation where tenders, auctions and auctions will disappear altogether in our country. And this cannot be allowed,” says Elena Shcherban.
Finally, fifthly, the power outage as the government's main argument for canceling auctions, according to experts, looks rather strange.
“If you participate in a tender where there are millions, and you need this money, then you you will definitely find a generator and access to the Internet,” Shcherban assures.
“The government never provided information on how many complaints there actually were. If some five businessmen complained who, due to the lack of electricity, could not take part in the auctions, then why break the rules of the game for hundreds of thousands for their sake? If a person wants to get a tender for a million, then he will find a place with a guaranteed connection,” Nikolov adds. “This argument is used rather as a reason to do the main thing: to go in the direction that the World Bank points us to, looking at the Opaque Prozorro” .
Opaque Prozorro. And what does the World Bank have to do with it?
And here's what. “EU directives stipulate that auctions should be optional. At the request of World Bank Ukraine, we are implementing a separate procedure in which auctions will be optional, that is, at the discretion of the customer. Therefore, in 1-2 months we will look at the numbers. If it is confirmed that the tender strategy without an auction can be more effective in different categories of purchases, we will return auctions as an optional bidding tool for all purchases,” explained Minister of Economy Yulia Sviridenko.
That is, the temporary six months may become permanent.
“The World Bank Procurement Rules are the complete antagonist of Prozorro. They actually incline us to adjust our truly phenomenal Prozorro system to less transparent tenders. This is a certain rollback from existing positions,” says Nikolov.
But why does the World Bank “require”, as the minister says, to change the procurement rules?
“This is not a World Bank requirement for Ukrainian procurement. This is the requirement of the World Bank to adapt the Prozorro system for World Bank procurement, explains Zadvorny. — The World Bank is now providing money to Ukraine. And when he provides money, for example, to some ministry, then this money is spent not according to Ukrainian legislation, but according to the rules of the World Bank. And now Ukraine is fighting to ensure that the maximum number of purchases for donor funds also go through the Prozorro system, so that we can guarantee that we will not be accused of corruption and thus receive more money. Therefore, if Ukraine wants the World Bank procedures to take place in the Prozorro system, then auctions in Prozorro should be optional for the World Bank procedures. Indeed, there is such a requirement. But the World Bank in no way insists that auctions be optional in Ukrainian procurement.”
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