SmartTender lawyers

By Order No. 49 of March 25, 2022, and by the published plans, the State Audit Office of Ukraine resumed its work and continued to monitor procurement. Thus, the auditors have already started 12 monitoring of procurements and announcements during the martial law (ie starting from February 24, 2022) – six of them have been published so far.

In this article, SmartTender lawyers will consider what exactly the auditors paid attention to in such purchases and what precautionary measures they take based on the results of monitoring.

Failure to publish the contract within the prescribed period

Purchase ID: UA-2022-03-08-000069-c

On March 8, 2022, the customer conducted an abbreviated negotiation procedure for the purchase of drugs for UAH 344,019.61.

During the monitoring, the auditors asked the customer questions, in particular about the reasons for the non-publication of the signed contract within the period specified by the Law on Public Procurement (hereinafter – the Law). In response, the customer explained that he found a technical error in entering data in the column "Information about the participant", namely: entered the wrong amount of the contract, so he decided to publish a new purchase.

As a result, the customer canceled the procedure under which the monitoring was started due to the impossibility of eliminating violations of the law in the field of public procurement.

Three violations against which the customer objects

Purchase ID: UA-2022-03-03-001880-a

On March 3, 2022, the customer started an open tender for the overhaul of the road for UAH 4,796,368.00.

The auditors found the following violations:

1. The tender documentation (hereinafter – TD) is not by the requirements of the Law: the TD does not specify the email of the official of the customer, who is authorized to contact the participants.
2. Tender proposals that were subject to rejection by the Law were not rejected. Following the terms of the TD, the bidder had to provide confirmatory calculations on the cost items of the contract price by the estimated norms "Guidelines for determining the cost of construction". In particular, it is about the calculation of overhead costs, as well as the calculation of funds to cover administrative costs. According to Guideline 1 281, overhead costs as part of the bid price of the participant in the procurement procedure (contract price) are calculated based on the structure of these costs, which has been developed in the contractor for the previous period. At the same time, the participant provided appropriate calculations on average, thus violating the requirements of the TD.
3. There is a discrepancy between the schedule of works provided by the participant and the schedule of works in the draft contract published by the customer.

SAOU insists on the termination of the contract and obliges the customer to take measures to prevent further violations. In particular, bring to justice those who committed violations, conduct outreach, economic training, etc.

In turn, the customer objects to this conclusion, arguing the following:

1. The e-mail address of the customer is specified in the tender announcement.
2. In terms of TD, participants are not required to provide as part of the tender proposals the structure of overhead costs, administrative costs incurred by the contractor for the previous period, taking into account the provisions of the Guidelines for forming the cost of construction works approved by the Ministry of Regional Development from 31.12.2010 № 573, and the list of general production costs, administrative costs listed in Annexes 10 and 26 of this Instruction. Therefore, there is no reason to believe that the participant calculated the general production and administrative costs in accordance with the requirements of Guideline 281.
3. According to the customer, the difference in the terms of the draft contract can not be grounds for declaring the contract null and void.

The customer did not publish the contract and canceled the purchase due to non-compliance with deadlines

Purchase ID: UA-2022-03-03-001208-c

On March 3, 2022, the customer conducted a negotiation procedure for the overhaul of the premises for UAH 5,682,370.00.

The customer did not publish the contract in due time. At the same time, by the provisions of the Law, the customer must cancel the negotiated procurement procedure if the procurement contract is not signed.

The customer canceled the procurement because the contract was not signed within 35 days from the date of publication in the electronic procurement system (hereinafter – EPS) notice of intent to enter into a procurement contract.

In its conclusion, in the part “Obligations to eliminate violations (violations) of the legislation in the field of public procurement” SAOU notes that during the monitoring the customer canceled the bidding, about which the relevant information was published in the EPS.

The customer did not publish the contract and canceled the purchase after the conclusion of the SAOU

Purchase ID: UA-2022-02-24-001080-b

On February 24, 2022, the customer conducted an abbreviated negotiation procedure for the purchase of diesel fuel for UAH 4,000,000.00.

SAOU identified violations in the procedure in the part that does not concern the cancellation of the procurement by the customer.

The customer canceled the purchase after the publication of the monitoring report.

The grounds for conducting the negotiated procurement procedure are incorrect

Purchase ID: UA-2022-03-28-003674-b

On March 28, 2022, the customer conducted a negotiation procedure for the purchase of a motor grader for UAH 2,800,000.00.

In the announcement, in the notice of intention to conclude the contract and in the protocol of the authorized person, published in the EPS, the basis for application of the negotiated procurement procedure is incorrectly determined – item 2 part 2 of Art. 40 of the Law, which provides for the absence of competition for technical reasons, which must be documented by the customer. However, according to the information published by the customer, previous tenders for this procurement item were canceled twice due to a lack of sufficient tender offers. Thus, the customer applied the negotiated procurement procedure in the presence of the conditions set out in paragraph 1 of Part 2 of Art. 40 of the Law, however with violation of norms of paragraph 8 of Part 6 Art. 40 of the Law in terms of its justification.

As there is currently no mechanism for eliminating the identified violations, the customer was obliged to take measures to prevent further violations.

Incorrectly compiled TD and selected procurement winner

Purchase ID: UA-2022-03-03-002122-a

On March 3, 2022, the customer held an open tender for the new construction of shore protection structures for UAH 2,218,683.00.

The auditors note that the customer in compiling the TD did not comply with the requirements of paragraph 5 and paragraph 6 of Part 1 of Art. 17 of the Law. The conditions require information that the natural/official (official) person of the participant/winner was convicted of a crime and not of a criminal offense, as defined in paragraphs 5 and 6 of Part 1 of Art. 17 of the Law.

The auditors also found violations in terms of improper determination of the bidder as the winner of the procurement, as this supplier does not meet the qualification criteria set out in Art. 16 of the Law, and its tender offer does not meet the requirements of the technical specification and other requirements for the subject of procurement of TD.

In the conditions of TD, it was required to provide a certificate of MTB, to confirm the availability of vehicles and construction equipment, as well as a lease/leasing/provision of services of vehicles and construction equipment to be involved in the work, data which must match the data in the form. In this case, these agreements must be valid for the duration of the work and be provided for each unit specified by the participant in the certificate. The winning bidder has submitted a lease agreement, the term of which is set until 31.12.2021, while the term of the works is until 31.12.2023 or until the parties fully fulfill their contractual obligations.

SAOU also noted in the conclusion that the participant included depreciation deductions for leased machines and mechanisms in violation of paragraph 23 of the National Regulation (Standard) of Accounting 7 "Fixed Assets", approved by Order of the Ministry of Finance of Ukraine 27.04.2000 N 92, which defines the following: depreciation is charged during the useful life (operation) of the object, which is established by the enterprise (in the administrative act) when recognizing this object as an asset (credited to the balance sheet), and suspended for the period of reconstruction, modernization, completion, additional equipment, and conservation.

SAOU insists on the termination of the contract, to which the customer responded in the EPS, terminating the agreement, which, by Part 2 of Art. 215 of the Civil Code of Ukraine, is invalid because it was concluded in violation of the Law.

Conclusion

In general, the procedure of monitoring remains unchanged, some conclusions seem quite loyal to customers, but among other things, there are quite strict conclusions with the requirement to terminate the contract and bring to justice those involved in the erroneous analysis of the tender offer. The general impression is that the auditors are in no hurry to apply to the court to impose fines and bring the authorized persons to administrative responsibility, and the clients honestly and timely comply with the requirements set out in the monitoring conclusions.

It should be noted that none of the analyzed monitoring mentions the expediency of conducting procedures in wartime, nor the expediency of using the provisions of the Law instead of the Resolution of the Cabinet of Ministers №169, according to which customers now buy most often. That is, so far in its conclusions on wartime procurement SAOU in no way comments on the situation in the country and the recent procurement sector.

It is also seen that SAOU does not have priority to work on a territorial basis. At the same time, we would like to draw your attention to the fact that most of the monitoring is carried out on purchases announced by the organizers from the western regions of Ukraine. Auditors are more meticulous about them, focusing on customers who procure in regions where there are no active hostilities.

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