The monitoring information is up-to-date as of January 31, 2024. 

During the period from January 1 to January 31, 2024, the procurement agency of the Ministry of Defence of Ukraine, the State Logistics Operator (DOT), published 68 procurement procedures with a total number of 118 lots with an expected value of at least UAH 5.6 B ($146.2 M)^[1]through Prozorro e-system. The tenders for fuel, oil, uniforms and ammunition, and household items for the military were announced. However, no tenders for food were initiated in January. A total of 98 companies participated in the DOT procurement process, while the average number of bids was over 6 participants per 1 tender. 83% of procurement are held under a simplified procedure, i.e. with the possibility of engaging only one participant (48 out of 68 announced tenders).

StateWatch think tank analysed the biggest DOT contracts and outlined the main challenges in the agency’s procurement process.

In January, the DOT concluded a total of 22 agreements, including those that were signed as a result of proceedings announced before January 2024. The biggest contract worth UAH 3.25 B ($84.9 M) was signed for the procurement of nearly 74 tons of diesel fuel. 2 tenders were cancelled and another 2 were recognized as such that did not take place.

Taking into account that some of the DOT procurements are closed or conducted under a procedure that does not involve the use of an e-platform (defence procurement), information about which is limited on Prozorro, only those procurements that are publicly available were included in the monitoring.

Top contracts signed by DOT

Of all the contracts concluded by DOT in January 2024, the largest amount of funds was spent on fuel procurement. In particular, the agency procured 74 tons of DP-Arc-Euro5 diesel fuel for UAH 3.25 B ($84.9 M), and 15.4 tons of A-80-Euro3 gasoline for UAH 669.15 M ($17.3 M). Both tenders were won by PAT Ukrnafta. The top January deals also include a contract for 240 thousand summer boots worth over UAH 567 M ($14.7 M). Also, 20 thousand ballistic helmets were procured for UAH 154.9 M ($4 M), 1000 barracks tents for UAH 120 M ($3.1 M), and 200 thousand sleeping mats for UAH 75.5 million($1.9 M). The conclusion of these 6 biggest contracts allowed DOT to save UAH 295.4 M ($76.7 M). This amount is the difference between the expected cost and the actual price under the signed contracts.

In addition, the agency procured another 50,000 rubber boots (UAH 459/ $12 per 1 item) and 179 tons of AdBlue diesel engine cleaner (UAH 16.35 thousand/ $425 per 1 ton). The rest of the contracts were signed for amounts below UAH 3 million, or the data on these defence procurements are not available to the public.

68 tenders announced in January include (total number of lots–118):

• 48 procurement procedures (98 lots) are held under a simplified procedure, i.e. with the possibility of engaging only one participant;

• 9 procurement procedures (9 lots) – at the tenderer’s request ;

• 5 procurement procedures (5 lots) – by concluding direct contracts;

• 5 procurement procedures (5 lots) – under the “defence procurement” procedure, the data is partially limited;

• 1 procurement procedure (1 lot) – through open bidding with special features (at least 1 bidder is allowed to submit an offer higher than the expected value).

2 procedures with a total expected value of UAH 45.8 million were cancelled, and 2 more for UAH 117.3 million were recognized as such that had not taken place.

The main reasons why procurements by DOT did not take place or were cancelled are as follows:

• lack of offers from participants;
• short contract execution time;
• incorrect technical documentation;
• mistakes of the procuring entity or participants.

StateWatch analysts have identified the following challenges in January’s procurements by DOT:

• Setting extremely short deadlines for the execution of contracts led to the cancellation of tenders and the risk of disruption in the supply of critical goods for the Armed Forces of Ukraine.
• Some contracts were concluded by signing direct contracts, which eliminates competition.
• When analysing tender procedures, significant savings (the difference between the expected value and the actual price in the contract) were made in procedures where the number of participants was 3+.
• Due to the fact that some procurements were not divided into lots, new participants had fewer opportunities to join the DOT procurement process, which resulted in the participation of a limited number of players in the bidding process.
• Participants faced the problem of submitting internal authorization documents from the General Staff of the Armed Forces of Ukraine in too short time frames.

Based on the results of the monitoring, StateWatch recommends that the DOT provide participants and the public with justification for the need to conduct procurement in the short term, under a simplified procedure or without using the e-platform.

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). Procurement is carried out through the e-system Prozorro.

The monitoring information is up-to-date as of January 31, 2024.

This monitoring has been supported by the British Embassy’s Office of the Special Defence Advisor, and delivered by EDGE Foundation and StateWatch.

^[1] The amount does not include procurement contracts conducted under the procedure which does not involve the use of the e-system (defence procurement or closed tenders), information on which is classified.