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

Between 1 and 31 July 2024, the State Logistics Operator (the DOT, also known as the SLO) announced 43 procurements (78 lots) on Prozorro e-platform with a total expected value of UAH 10.59 billion.

A total of 77 companies participated in the DOT tenders, while the average number of bids was lower than three participants per tender. Meanwhile, 46% of the procedures involved only one bidder.

In July, the DOT concluded 104 contracts totalling UAH 7.8 billion based on the results of procurement initiated both in July and earlier. The largest contract worth UAH 2.02 billion (UAH 107.94 per ration pack) was signed with Trade Granite Invest LLC, which will supply food for military units in the Donetsk region. 

StateWatch think tank analysed the largest contracts concluded by the DOT and outlined the main challenges in the DOT procurement process in July 2024.

Considering that part of the 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

Of the 43 procurements announced in July:

• 26 procurements (61 lots) were held under a simplified procedure, i.e. with the possibility of attracting at least one tenderer;
• 2 procurements (2 lots) – at the request of the tenderer;
• 6 procurements (6 lots) – by concluding direct contracts;
• 5 procurements (5 lots) – under the defence procurement procedure, the data on which is partially limited;
• 4 procurements (4 lots) – through open tenders with special conditions (at least one tenderer can submit an offer above the expected value). 

Cancelled and failed procurements

In July, 7 procurements (17 lots) worth UAH 1.69 billion were declared unsuccessful. In particular, two procurements for the supply of 35.3 thousand sets of modular body armour totalling UAH 968.6 million (UAH 411.6 million and UAH 557 million) were cancelled due to lack of bids. For another month in a row, procurement of body armour has not been carried out due to the low expected value, which in these procurements is set at UAH 27,441.50 per set. According to StateWatch, this price corresponds to the price offered only by TEMP-3000 LLC. The prices of the other four certified suppliers are at least 20% higher. The reason why the expected cost suggested by the DOT is too low is based on the estimated cost set by the MoD in 2024 at UAH 27,772 per set.  Also, the procurement of 20,000 plate carriers for body armour worth UAH 265.6 million was cancelled due to the lack of bids. More details about the estimated and expected cost and their impact on procurement are available in the StateWatch policy brief.  

In addition, in July, the procurement of catering services worth UAH 5.9 million for cadets of the Military Training Department of the National Aviation University failed. Despite numerous questions from potential bidders during the tender, no company submitted a proposal due to the failure to provide the service at the addresses specified in the tender documentation. 

Challenges

Once again, DOT faced the inability of a number of food suppliers to fulfil their contracts. In particular, one of the companies contracted for the second half of the year, GRANPRI LTD LLC, which was supposed to supply ration packs to the Kirovohrad, Odesa and Donetsk regions, failed the agency’s inspection. According to the results of the second audit, the company’s warehouses did not meet the requirements for supplying food to military units in the Donetsk region, so the DOT re-announced a tender for UAH 2.6 billion for this region. Finally, Trade Granite Invest LLC won the tender and will supply ration packs worth UAH 2.02 billion (UAH 107.94 per pack). It is noteworthy that in January-February, the same company filed a lawsuit against the DOT to remove the new supply requirements regarding high penalties and principles of logistics organisation, which led to disruptions in food procurement for the second quarter. 

Recommendations

MoD:

• Introduce a methodology for establishing and revising the estimated cost of goods based on market consultations with suppliers and determining the average market price;
• develop a procedure for redistributing funds saved on non-lethal procurements to cover the difference between the estimated cost of goods and the market value during other procurements, as well as to purchase additional non-lethal goods;
• conduct a comprehensive assessment of the market and production capacities of current and potential suppliers (manufacturers) when compiling the List and procurement volumes and on a quarterly basis to ensure the sustainability of the procurement process.