Out of control: how millions are laundered via schemes during tenders and why the State Audit Service does not work

During 2017 activists appealed about 300 dishonest procurements worth over 6 billion UAH (around 230 million USD). Anti-Corruption Action Center presented the analysis of public procurement for 2017 and first half of 2018.

During the period from January 2017 till July 2018 AntAC has achieved abolition of procurements and cancellation of contracts for a total amount of 290.2 million UAH (almost 11.2 million USD), as well as imposition of fines by Antimonopoly Committee of Ukraine on participants for conspiracy bidding for a total amount of 1.36 million UAH (around 52,000 USD).

Prozorro’s electronic procurement system is not a 100% protector against abuses during tenders, but it allows to detect them quickly.

Unfortunately, only public currently uses this tool, while the most important controlling authority does not use the possibility of system to control procurements.

First of all, inactivity of the State Audit Service allows dishonest customers and participants to break the law and earn millions during tenders.

AntAC’s lawyers have highlighted TOP 7 schemes of abuses during public procurement.

“Among schemes there are anti-competitive agreed actions between participants, winnings of companies from the “black list” of Antimonopoly Committee, as well as “distribution” of procurements into smaller ones in order not to conduct “European tenders”, commented Denys Svyrydenko, AntAC’s lawyer. – All these things allow to provide state funds to dishonest or even fictitious companies. There is virtually no punishment for such actions”.

One of the bodies that should have to conduct procurements examination, the State Audit Service, does not see obvious abuses, and also slows down launch of monitoring procurements.

“The key aim of monitoring should be early detection of fallacies and procurement risks. Instead, the State Audit Service of Ukraine has not yet switched to electronic system and works extremely slowly, said Oleksii Boyko, AntAC’s lawyer. – Since the beginning of 2017, Anti-Corruption Action Center has appealed 300 dishonest procurements. 177 appeals were forwarded to the State Audit Service of Ukraine. The body started to check only 53 of them.”

AntAC’s lawyers analyzed 288 court decisions regarding administrative responsibility of violations during bidding.

From January 2017 till June 2018 court imposed fine on offenders only in every fourth case.

In other cases, offenders either received verbal warnings, or did not receive punishment because of deadlines for prosecution, or poorly prepared materials by controllers.

“Analysis of mentioned court decisions gives general idea about state of prosecution of offenders. Frankly speaking, the situation is disappointing. Almost in every fifth case the guilty person is punished in form of fine and unfortunately, only every sixth protocol on administrative responsibility is effective”, – commented Oleksandr Lytvyn, AntAC lawyer.

The situation with criminal responsibility for violations is more demonstrative regarding inactivity of law enforcement system in the field of procurement.

From the beginning of 2017 till July 2018, there are only 33 decisions regarding committing crimes during tenders. Every fourth decision is acquittal and every eighth offender is amnestied.


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