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Deputy Economy Minister Maxym Nefyodov gives thumbs-up to members of parliament after they approved the 2016 budget on Dec. 25. ProZorro, an online system of transparent public procurement championed by Nefyodov, was approved as part of the legislation for all state purchases.
Public procurement reform is often cited as one of the most successful examples of reforms in Ukraine.
It has, therefore, become common by saying “public procurement reform” to mean ProZorro e-procurement system and its achievements.
Indeed, with ProZorro we do have something to be proud of: for two years, we have developed it and nourished it from a typical start-up to a full?-fledged system, which is obligatory for use by all the state institutions throughout the country.
But public procurement reform is far from being just ProZorro. In general, the reform has as many as 14 directions, including marketing (attracting new suppliers), training of state procurement specialists and, of course, spreading our experience abroad, including to other member states who have joined the World Trade Organization’s government procurement agreement.
Joining the WTO agreement is an important economic and political victory. It is comparable with Ukraine’s accession to the WTO itself.
In fact, nations taking part in the government procurement agreement form a separate club within the WTO, which unites countries that have opened their state procurement market for foreign suppliers.
And getting into this club was not easy.
As in the case with joining WTO, entering the general procurement agreement required the consent of all member states. It is a process of long and difficult negotiations.
In addition, Ukraine had to bring its legislative field in line with the requirements, this includes the size of the thresholds, synchronization of procedures, translation of tender requirements into English, to mention a few.
All this required considerable effort and persistence: for several years, Ukraine unsuccessfully knocked on the doors, but a tangible shift happened only in 2015, with the arrival of a new team in the Ministry of Economic Development and Trade of Ukraine. In September 2015, we introduced legislative amendments through the parliament, and in May 2016, the government procurement agreement.was ratified by the Rada, making Ukraine a full member.
What does it mean for Ukraine?
This is an important political victory: we, for example, joined this procurement club earlier than Russia and therefore got the right to set the conditions. And Crimea is one such condition. From an economic point of view, this is direct access to foreign state procurement markets worth an estimated $1.7 trillion a year.
In addition, we want to share our successful experience with nations that are part of the govenrment procurement agreement. There is a myth that the grass is always greener on the other side. In e-procurement, we are very proud to be ahead of developed countries. And we can help them to significantly improve the effectiveness of tenders.
Today, in most countries of the world, procurement still takes place in paper form and is usually decentralized.
In Germany, for example, the paper bureaucracy works quite efficiently. But they also understand the necessity to switch to an e-procurement system. And in this case, the principles and approaches of ProZorro are very useful.
The European Bank of Reconstruction and Development. for example, accepted Ukrainian e-procurement model as a showcase of the digitalization of state tenders.
We have also launched a “GPAinUA” project office with the aim to assist Ukrainian companies in international public procurement via the government procurement agreement and vice versa.
The office also assists foreign companies in their first venture into ProZorro and Ukraine’s public procurement. Office experts help foreign companies to deal with the use of the electronic system, advice on procedures and the tender requirements. All of this support is provided free of charge.
Such a transparent approach has shown to be attractive to foreign suppliers. At the end of December, ProZorro had 30 active procedures with foreign entities participating, mainly from Romania, Germany, Lithuania, Estonia, Poland, Canada and the United States.
Their chances of winning are usually very good. For example, only a single state-owned company – Energoatom has had several successful tenders with foreign companies winning.
In the tender for the supply of pump action aggregators, the winner was an Italian supplier Termomeccanica Pompe, and in the tender for the purchase of generator spare parts – the Polish Dimida Spolka z Ograniczona Odpowiedzialnoscia was the winner. Furthermore, world-renowned retailer METRO Cash & Carry takes active participation in public procurement auctions via ProZorro and has already won a number of contracts.
But we are ready to go further and use the principles of ProZorro to increase the effectiveness of interaction within the government procurement agreement.
Today, hundreds of foreign companies may participate in public procurement in Ukraine through the electronic system ProZorro. And Ukrainian companies have an opportunity to apply for participation in public procurement abroad. The main barrier to cross-border public procurement is the availability of information.
There are many sites that contain information about the requirements. However, this information is spread across many different portals. Tnders are therefore not easy to find: if the European Union has an incomplete, but nevertheless comprehensive web portal with a catalogue of tenders, in the US, for example, you will have to pass a serious quest to find a goverment procurement agreement tender. These procedures can be simplified and therefore made cheaper and more transparent by aggregating all the tenders covered by the agreement.
We have a ProZorro-style solution: create an open electronic portal that automatically collects data on tenders that match requirements. This approach will help to bring quality international tenders to the next level. The ease of access to information will significantly increase the number of suppliers, and hence the level of competition. And in our experience, fair and open competition is the main factor for public procurement efficiency.
We already announced this proposal at a meeting of the WTO Committee on Public Procurement in February.
Ukraine is ready to undertake the development and implementation of such a project. We are confident that we can successfully complete such an ambitious project, due to our successful experience of ProZorro, which is already being copied by other countries. The proposal has already received the support of EU, United States, Canada, Norway, Switzerland and other government procurement agreement member states. Now we are waiting for the committee’s decision. A positive response will mean a new level of interaction within the agreement for us and will significantly strengthen Ukraine’s international image.
In the meantime, there are already first successful cases that the “GPAinUA” office has helped Ukrainian suppliers abroad and those abroad in Ukraine. The first companies from Ukraine have already won major U.S. government tenders. And Ukrainian state-owned enterprises have found many foreign suppliers through ProZorro.
Ukraine has gradually become a full-fledged player in the international public procurement market.
And now we have every chance to become its leader.
Max Nefyodov is first deputy minister in Ukraine’s Ministry of Economic Development and Trade of Ukraine. |
