The monitoring information is up-to-date as of 1 September 2024.

Between 1 and 30 August 2024, the State Logistics Operator (DOT) announced 40 procurements (83 lots) on Prozorro with a total expected price of UAH 4.5 B.

A total of 60 companies participated in the tenders, while the average number of offers was less than three per tender. At the same time, 34% of the procedures were held involving only one participant.

In August, DOT signed 26 contracts totalling UAH 2.56 B based on the results of procurements initiated both in August and earlier. For the second month in a row, the largest contract worth UAH 882 M was awarded to TRADE GRANITE INVEST LLC for the procurement of 8.25 M ration packs (average cost is UAH 106.92 per pack).

StateWatch think tank analysed the largest contracts signed by DOT and outlined the main challenges in agency’s procurement process in August 2024.

Considering that part of DOT procurements are conducted under closed procedure or without the use of an electronic platform (defence procurements), information on which is published on Prozorro in part, the monitoring includes only those procurements the data for which is available to the public. 

Top largest DOT contracts

DOT signed the three largest contracts for supplying 19.8 M ration packs worth a total of UAH 2.1 B. In particular, two contracts worth over UAH 800 M were signed with previous suppliers: TRADE GRANITE INVEST LLC and ATOMSERVIS LLC, the third contract worth UAH 406.5 M was signed with a new company, SANDERS LLC. The average price in three procurements was UAH 106.6 per pack. In addition, the top largest DOT procurements predictably included tenders won by PJSC UKRNAFTA. The company was contracted to supply motor petrol, including A-80 for UAH 317.9 M and A-92 for UAH 72.7 M.

Among uniforms and equipment, the largest contracts were signed for the procurement of 10,000 tracksuits for UAH 18.75 M, 20,000 bags for personal hygiene kits for UAH 12.1 M, and 300 leather jackets for the flight crews for UAH 2.4 M. 

Of the 40 procurements announced in August:

Cancelled and failed procurements

In August, 7 procurements (9 lots) worth UAH 500 M were declared failed. In particular, the procurement of 53,000 ballistic helmets with a total expected price of UAH 396.64 M (UAH 7,400 per item) was cancelled due to a lack of offers. Earlier, StateWatch reported that three companies supply helmets to the Defence Ministry: scientific production enterprise TEMP-3000 LLC – with a share of the contracted goods of 54.91%, KM Disti LLC – 37.25% and Ak-Investprom LLC – 7.84%. The first two businesses are national manufacturers that produce helmets in Ukraine. Instead, Ak-Investprom LLC acts as a distributor of the Bulgarian manufacturer MARS Armor Ltd. The dominance of SPE TEMP-3000 in this market is explained by its ability to offer the most competitive prices and the absence of proposals from other participants in a number of tenders. None of the three companies submitted a bid for the August tender, although the expected price (UAH 7,400 per item) was in line with prices in previous contracts, which ranged from UAH 7,292 to UAH 7,656. StateWatch assumes that the reason for the lack of bids may be the insufficient production capacity of the manufacturing companies. A similar situation occurred earlier during the procurement of bulletproof vests when SPE TEMP-3000 LLC declared its inability to cover the entire demand for the Armed Forces.

Also, due to the lack of bidders, it was not possible to procure 25 thousand sleeping bags (2 lots) worth a total of UAH 102,5 million (UAH 4,100 per item). The other lots of this procurement for the purchase of 20,000 bags were won by GRIN-MODA LLC.

Challenges

DOT justified the expected price (EP) of UAH 1877,72 per suit within the State Audit Service’s monitoring of the tracksuits procurement. Despite the results of the two methods of EP calculation – comparison of the market prices (UAH 1877,72) and determination of the most economically advantageous price offer (UAH 2,040) – the first method was preferred, as it corresponds to the indicative price (UAH 1,900) set out in the List and procurement volumes for 2024. At the same time, the most economically advantageous offer was determined based on the data of only two suppliers, although at least three companies participated in the bidding process. It is worth noting that starting in 2025, DOT will be responsible for determining the indicative price, while the methodology for determining this index has not yet been approved. This creates additional risks when planning the List and volumes for 2025 and future procurements. 

Recommendations

U-MOD:

• Introduce a methodology for establishing and revising the indicative price of goods based on market consultations with suppliers and determining the average market price;
• initiate a comprehensive audit to evaluate the first year of DOT’s activities and develop recommendations for improving the agency’s work. 

DOT:

• audit failed procurements to develop anti-crisis solutions involving a wider range of participants; 
• divide procurements into multiple lots with smaller quantities of goods to avoid the lack of offers from participants due to large order volumes;
• initiate the introduction of “framework agreements” for long-term contracts.

DOT, which has been responsible for procuring fuel, uniforms, and food for the military since December 2023, was established as part of the anti-corruption procurement reform of the Ministry of Defence. The agency’s total annual budget is nearly UAH 95 billion. Of this amount, the agency is supposed to receive a commission of 0.4% of the executed contracts (this should not exceed UAH 250 million per year). Procurements are carried out through the Prozorro e-system. 

The monitoring of DOT procurements is part of the support programme of the Special Adviser on Defence of the UK Embassy in Ukraine, implemented by the EDGE Foundation and StateWatch.