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By Order No. 49 dated March 25, 2022, and following the published plans, the State Audit Service of Ukraine resumed its work and continued to monitor procurement. As we noted in the previous article, for purchases announced during martial law (that is, starting from February 24, 2022), auditors do not comment on the feasibility of using negotiated procurement procedures, and, just as in pre-war times, they continue to examine purchases for the presence of "classic" violations.

In this article, SmartTender lawyers will review several negotiation procedures by which the auditors concluded that there were violations, and analyze what exactly the auditors paid attention to in such purchases and what precautions they apply based on the results of monitoring.

Lack of competition for technical reasons

Purchase ID: UA-2022-04-21-002674-a

On April 21, 2022, the customer conducted a negotiated procedure for the purchase of waste disposal/disposal and waste management in the amount of UAH 2,541,400.00.

During the monitoring, the auditors found that during the procurement the customer identified the reason – the lack of competition for technical reasons. The lack of competition for technical reasons is not documented, as required by paragraph 2 of Part 2 of Art. 40 of the Law "On Public Procurement" (hereinafter – the Law).

The customer, in turn, provides an explanation that paragraph 2 of Part 2 of Art. 40 of the Law does not contain a method of documentary confirmation by the customer of the absence of competition for technical reasons. The method of documentary confirmation by the customer of the absence of competition for technical reasons is also not established by the authorized body in the field of public procurement. The customer also tried to prove the possibility of using this basis, arguing the following:

- first, in the letter of the Ministry of Economy № 3304-04_60124-06 dated 03.10.2020 it is stated that the customer independently determines the documents confirming the existence of conditions for the application of the negotiated procurement procedure;
- secondly, only the participant with whom the contract was concluded provides services at the location of the customer at the rates set by the decision of the executive committee of the city council, so there is no alternative to providing this service to other businesses.

In the course of this monitoring, there is a discrepancy between the interpretation of the provisions of the Law by the customer and the auditors. And although the customer, guided by the law, explained the reasons for the non-publication of documentary evidence during the publication of the procurement – the auditors were not convinced.

SAOU insists on violating the procedure for publishing documents confirming the grounds for applying the negotiation procedure. This is not the first time that auditors are dissatisfied with the lack of published documents, and they are in no way satisfied with the actual availability of such documents. That is, the documents should be published together with the Notice of Intention to Conclude the Agreement, because, despite the explanations of the Ministry of Economy, it is the SAOU that in this case forms the law enforcement practice.

At the moment of publication of the Conclusion, the customer canceled the purchase.

Publication of incomplete text of the contract

Purchase ID: UA-2022-03-10-000269-c

On March 10, 2022, the customer conducted a negotiation procedure for the purchase of meat in the amount of UAH 245,000.00.

During the monitoring, the auditors found violations in the absence of all relevant pages of the procurement contract, and inconsistency of the CPV code in the notice of intent to enter into a contract.

The customer explained that in some electronic fields the information on the product code was not erroneously provided and that the customer undertakes not to allow further violations. Regarding the non-publication of all pages of the contract, the customer explained that he corrected this situation by publishing the full text of the contract through the mechanism of publishing an additional agreement.

In its conclusion, SAOU notes that due to the impossibility of eliminating violations, the customer was obliged to take measures to prevent such violations in the future.

Technical error in the contract specification

Purchase ID: UA-2022-04-06-003159-b

On April 6, 2022, the customer conducted a negotiation procedure for the purchase of nursery products in the amount of UAH 1,309,950.00.

During the monitoring, the auditors found that there were discrepancies in the tender documents of the previous procedures and the signed contract under this procedure. One of the specifications does not contain one of the purchased items, while the total number is saved. That is, there is a technical error that could be corrected by making appropriate changes to the Specification.

However, given that the client did not provide any explanations for the repeated requests of the auditors, the results of this monitoring are obvious.

SAOU obliges the customer to take measures to terminate the above agreement.

Failure to publish documents confirming the existence of conditions for the application of the negotiation procedure

Purchase ID: UA-2022-04-05-000323-a

On April 5, 2022, the customer conducted a negotiated procedure for the purchase of machines for mixing gravel with bitumen in the amount of UAH 2,150,000.00.

According to the monitoring results, it was established that the customer did not upload into the electronic procurement system expert, regulatory, technical, and other documents confirming the conditions of application of the negotiated procurement procedure specified in the justification.

As a result, the auditors oblige the customer to take measures to eliminate the identified violations in the manner prescribed by law, in particular by taking measures to prevent them in the future.

So, as before, we see that the twice canceled open bidding on objective grounds is not a sufficient argument. SAOU once again insists that documents or at least information from previous procedures should be published in the justification section of the negotiation procedure.

Publication of the contract with violation of terms

Purchase ID: UA-2022-03-22-000249-c

On March 22, 2022, the customer conducted a negotiated procedure for the purchase of electricity in the amount of UAH 700,000.00.

During the monitoring, the auditors found a violation of paragraph 4 of the Cabinet of Ministers of 11.10.2016 № 710 "On the effective use of public funds", namely failure to publish a justification of technical and qualitative characteristics of the procurement, budget size, expected value of the procurement by placement on your website.

It was also found that the text of the agreement was published late and not in full, namely in violation of the deadlines specified in paragraph 10, part 1 of Article 10 of the Law.

In their conclusion, the auditors insist on the need to terminate the procurement contract. The customer agreed with this conclusion and terminated the contract.

It should be noted that this negotiation procedure was also made public in connection with the cancellation of the two previous open tenders. At the same time, the justification for this procedure does not contain information or references to previous procedures that did not take place. However, this time the auditors did not pay attention to this fact. Thus, the question arises, if in the analysis of the previous case we saw the conclusion that it is necessary to indicate in the justification of the procedure a reference to the auction that did not take place, then why in this situation SAOU avoided this issue.

Failure to sign the procurement contract within the period specified by law

Purchase ID: UA-2022-03-18-000302-c

On March 18, 2022, the customer conducted a negotiation procedure for the purchase of services related to systems and support in the amount of UAH 656,000.00.

During the monitoring, the auditors found that the customer did not publish the contract based on the results of this procedure. In this regard, the customer had to cancel this procedure but did not do so.

Interestingly, the auditors did not ask the customer questions and did not provide an opportunity to explain the reasons for non-publication and whether such an agreement exists at all, because then the violation would be different, namely the violation of the publication deadline.

In conclusion, SAOU notes the need to eliminate violations by canceling this negotiation procedure. And for us, the question remains unclear why the auditors did not pay attention to the fact of the presence or absence of a contract for this procurement.

Conclusion

So, we see again that martial law did not affect the monitoring procedure in any way. Some of the conclusions again look quite loyal to customers, but among other things, there are ambiguities and incomprehensible positions and actions on the part of the inspection body. Regarding the reaction of customers to the results of the monitoring, it should be noted that some of the customers immediately take the necessary actions, and some do not even answer questions where it would still be possible to make changes and “save” the procedure.

In general, so far we see only monitoring of the negotiation procedures, but this is mainly due to the small number of open trades at the moment.

Next time we plan to make for you a broader analysis of the work of the SAAU in recent years and identify patterns in planning and individual reactions to certain mistakes of customers. We remind you that you can seek advice on any procurement issues.

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Stay tuned and take care of yourself!