How "made in Ukraine" promoters in Rada decided to kill Ukraine’s pride

Maksym Shevchenko
23:10, 08 December 2017
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The Verkhovna Rada on the budget adoption evening of December 7 passed in the first reading a populist bill "Buy Ukrainian, Pay to Ukrainians", which in case of its final adoption will kill the very essence of the electronic procurement system, ProZorro.

The bill has actively been lobbied for in the Rada since around mid-October. It was authored by a group of people's deputies, including 12 representatives of the Bloc Petro Poroshenko, four MPs from the Popular Front, eight representatives of the Radical Party, two deputies from the Opposition Bloc, and individual deputies from Batkivshchyna, Samopomich, and Will of the People group.

On the night when the budget for 2018 was also considered, the bill was supported by 241 people's deputies, including 58 representatives of the BPP, 65 deputies from the Popular Front, 35 MPs from the Opposition block, 24 deputies from Vidrozhennia group, 17 representatives of the Radical Party, seven representatives of Batkivshchyna, 12 deputies from Will of the People and 23 independent MPs.

The bill says that if a product is recognized as "domestic", its supplier must be recognized a winner in a state bidding even if its price offer is 25% to 43% higher than that of its competitors. For the goods to be recognized as "domestic", some 23 documents must be collected. Moreover, in its current form, the bill grants the government the right to determine the list of preferential goods and change it. If the bill is adopted in the second reading, it will violate the main principle of the ProZorro system – market competition - thanks to which budgetary savings are achieved.

If the bill is adopted in the second reading, it will violate the main principle of the ProZorro system – market competition - thanks to which budgetary savings are achieved

Now the only criterion for winning in a competitive bidding procedure is the willingness of the bidder to deliver to the customer the goods at a minimum price, to satisfy their needs. This approach eliminates the human factor and limits the possibilities of manipulation in public procurement.

With the adoption of the law, it will be difficult to justify why the winner in a tender is a bidder who came up with a price offer which was not the best one. In fact, the bill says the following: to win the tender in the fight for taxpayers' money, you need to get 23 certificates. So it’s not about offering the best products at the best price, not about meeting the state's needs in the best way, it’s about getting 23 certificates! You can bid at 43% worse than competitors, and still win!

In other words, if some German company and a regional road repair firm with all certificates required take part in a tender on road reconstruction, then the Germans will have no chance, and the asphalt will continue to be shoveled into puddles for a price that is 1.5 times higher. And this is all at the expense of Ukrainian taxpayers, whose money will not be allocated for healthcare, education, or the army, but to support the cunning "Ukrainian businesses".

Will such legislation stimulate businesses to invest in development? The answer is obvious. Of course not, because it will be enough to get the necessary certificates from certain officials which will guarantee a win in all tenders.

Moreover, in the Ukrainian realities, a phrase "23 certificates" will inevitably become synonymous with a word corruption.

Whatever the initiators of legislative innovations may say, the priority task of public procurement is high-quality roads, modern equipment for state-owned companies, schools, and medical institutions, efficient public transport, and a quality infrastructure for businesses. And all of this - for the lowest possible price.

The initiative to destroy ProZorro blatantly violates the Ukraine-EU Association Agreement and our country’s obligations within the framework of the World Trade Organization

Every Ukrainian, given low pensions, poorly developed social security system, and scanty salaries, already has someone to support. Populists in the Rada for some reason decided that at our own expense we need to support businesses that are unable to win market competition, and, accordingly, are ineffective.

In addition, the initiative to destroy ProZorro blatantly violates the Ukraine-EU Association Agreement and our country’s obligations within the framework of the World Trade Organization. You don’t need a crystal ball to tell that other countries will introduce mirror restrictions on the participation of Ukrainian companies in their tenders.

According to the estimates by the Ministry of Economic Development and Trade, if the bill is passed in the second reading, the overpayments on public procurement may amount to tens of billions of hryvnias. And these funds are proposed to send to the members of a 23 Certificates Club! Of course, the ProZorro system is not perfect, but still it is one of the few successes in real reforms, not their imitation after the Revolution of Dignity.

Priorities for further development of the system are also well known: it is the extension of the system to sub-threshold purchases of less than UAH 200,000 for goods and under UAH 1.5 million for services, the improvement of the mechanism for appealing tenders in the Antimonopoly Committee, and the strengthening of control and competition on the part of businesses and the public.

Instead, the Rada decided to actually kill the system at a time when small and medium-sized businesses had just begun to believe in the possibility of winning a state tender, while international companies with good reputation and quality products received their first state orders. Unfortunately, it is obvious that neither the first nor the latter will obtain certificates needed. But only an effective business can provide high salaries and economic development. But it seems that populists and corrupt officials in parliament are not happy about it.

Meanwhile, every Ukrainian between the first and second reading of the bill will have the opportunity to answer the rhetorical question, what is more important: a high-quality road, school, kindergarten, hospital, equipment for extraction and cheapening of energy resources, or the financial well-being of the management of state-owned companies, officials, and businesses close to authorities.

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