On September 14, 2020, the Cabinet of Ministers adopted a resolution on the operation of electronic catalogs. We talked with Oleksii Krasnoshchokov, Prozorro Market product manager, and found out how the Prozorro Market will work from now on and what are the plans for its further development.

What Are the Prozorro Market Electronic Catalogs Today?

Today this tool is the official marketplace for government customers. We launched it last April to make it easier for government procurement customers and help them to buy goods effortlessly. We set out to prove the following hypotheses:

- the procurement should be convenient;
- the procurement should be done quickly.

And we have successfully confirmed them. During the first year of operation, we found that customers need such a tool, and we got excellent indicators:

Prozorro Market

Now we see that there is interest in e-catalogs, especially taking into account that this tool is not obligatory for customers: they can carry out subthreshold purchases according to the report. In October, purchases worth over UAH 50,000 will be available in the Prozorro Market, and then e-catalogs can become an alternative to simplified purchases. We will see which procedure is more user-friendly.

In turn, suppliers have no such choice. Therefore, the Prozorro Market has become a successful alternative to classic tenders for them. It allows to sell goods passively to state customers with an annual volume of up to UAH 30 billion without wasting time on preparing tender documents. Also, the marketplace allows for point sales, when the customer already knows the seller and purposefully buys his goods.

Prozorro Market

What Difficulties Did You Face During the First Year of the Marketplace's Operation, and What Exactly Will Change After the Approval of the Regulation?

When a new product appears, it is important to show why the user needs it and teach him how to use it. Usually this is not easy, as people prefer the old methods just because they are used to them.

Therefore, we paid attention to informing our users. We came to various regional centers and cities, and met with local government customers. We taught them how to use the marketplace, demonstrated all its capabilities, and showed that it would not complicate their life, but, on the contrary, would make purchasing procedures easier. It turned out that the Prozorro Market is such an understandable tool that already on the second day after the presentation, customers made trial purchases.

The second difficulty was the legislative side – at the time of the launch of the marketplace, its work was not regulated by the Law. Therefore, many customers were not sure that they were entitled to procure in this way. To resolve this moment, we constantly cooperated with the heads of local administrations and cities, enlisted the support of the Ministry of Economy, and sent letters to organizations stating that they have the right to use this product.

In April 2020, a new version of the Public Procurement Law was adopted, which defined the concept of electronic catalogs and the fact that their work is regulated by the Cabinet of Ministers. But the operating procedure itself had not been approved yet at that time, so the marketplace could not work fully. And only now, after the approval of the resolution, e-catalogs will be able to function as we planned.

What Changes Will Happen in the Prozorro Market After the Resolution Adoptio?

The upper limit of the purchase amount is changed for customers. If before that it was equal to UAH 50,000, now it will be UAH 200,000 – for the majority of state customers, and UAH 1 million – for monopolists in their industry.

Customers have used and will continue to use e-catalogs free of charge. But suppliers will receive more favorable and flexible rates.

Until now, entrepreneurs paid for their stay in the marketplace only in the event of the sale of goods – in the amount of 5% of the concluded contract. With the adoption of the resolution, they will receive the following tariffs:

Prozorro Market

And one more important innovation. Purchases for more than UAH 50,000 will be possible using the new Prozorro Market tool – the quotations request procedure.

To launch it, we needed to provide two points:

1. Legislative approval, which allows the procedure work – this was done with the adoption of the resolution on September 14.
2. Technical implementation. We started preparations for launching the tool almost immediately – a month after the adoption of the Law "On Public Procurement".

From our side, everything is already ready. As of September 18, we are awaiting the completion of the preparatory work on all electronic sites and will begin testing the entire ecosystem. This will take us about 2 weeks, so we expect that the request procedure will start working in early October.

Prozorro Market

Tell Us More About the Quotations Request Procedure

If a customer wants to purchase a certain typified in catalogs product for an amount over UAH 50,000, he takes the following steps:

1. Enters the catalog and opens the profile of the desired product.
2. Forms a request by filling out a form. He notes the following data:

- product name;
- quantity;
- the time in which the goods must be delivered;
- delivery address;
- the period during which quotations will be accepted (it must be at least 2 working days).

3. The system sends an announcement of the customer's request to all suppliers present in the category of this product.

4. Interested suppliers respond to the ad and submit a quote in return. To do this, they select the required item from the list of goods they brought into the catalog and indicate the price. All proposals go to the central database of the marketplace and are stored there until the accepting applications deadline. Suppliers do not see the prices of their competitors.

5. At the end of the accepting applications deadline, the system opens to the customer an offer of the winner – the supplier with the lowest price.

There is an important point here. The customer cannot reject the selected by the system winner, and therefore does not affect the course of the procurement procedure in any way. This protects suppliers from cases where the customer disqualifies them for non-objective reasons.

After the winner is selected, the system asks the supplier again if he agrees to provide the goods on his offer terms. If the winner agrees, he is obliged to conclude an agreement with the customer on the specified conditions.

Some customers fear that through personal communication, the winner may refuse to sign the contract at the proposed price. Such cases are monitored and prevented by the catalog administrator – CPO (Centralized Purchasing Organization). In case of misconduct of the winning supplier, the customer can contact the CPO, which disqualifies the unscrupulous entrepreneur and completely prohibits him from selling goods in the Prozorro Market. Thus, we protect the marketplace from fraud and unfair competition.

The customer cannot reject the winner's proposal, but can completely cancel the purchase under the following conditions:

- if the winner's price is suspiciously low;
- if the winner begins to offer a different product that the customer wanted to purchase, or performs other manipulations;
- if the need for the purchase has disappeared.

There are no restrictions on the announced number purchases yet, so the customer can cancel the purchase, and announce a similar one the next day. We do not see this as a threat to fair competition. If this practice becomes systematic, we will look for ways to improve the quality of the quotations request procedure.

Prozorro Market

How Do You Plan to Develop E-catalogs in the Future?

Similar to experience, we will teach customers to use a new way of purchasing by explaining how to implement and report on the inquiry process. Most likely, we will cooperate with local authorities again, show them what this tool is and how to use it.

Further, we will only have to receive feedback from users and carry out the revision. I believe that we will have several more iterations of finalizing both the request tool and the entire marketplace as a whole. Over the next year, it will develop very actively, and new functionality will appear monthly. It is important for us that the Prozorro Market is the most convenient purchasing tool with exactly the functions that users need.

What Other Improvements Are Planned Shortly?

Now we need to bring the Prozorro Market system in line with the Procedure for the formation and use of an electronic catalog – for this process, the Cabinet of Ministers gave us 3 months. Only after that, the full launch of e-catalogs will take place.

Another primary goal of ours is to put the quotations request procedure tool into operation by the end of the year, make it an established practice for customers and finalize its main points.

Prozorro Market

Our next step will be to reduce the burden on CPO employees, who manually perform a huge amount of work in catalogs now: they need to fill out many different documents to enter a new supplier or a new item of goods into the system.

As a solution, we plan to allow suppliers to offer new products that are not in the e-catalogs yet. If the offered product meets the necessary criteria and fits the categories available in the Prozorro Market, CPO will take the offer for moderation, check whether this product exists on the market and whether it is suitable for the marketplace, and then add it to the catalog.

Agree, the best expert in a product is the suppliers themselves, since it is they who have been working with it for years. Therefore, I am sure, having enlisted their support, we will be able to competently and expertly fill most of the catalog.

For example, there is a high demand for a new category "Building Materials" now. Many customers are interested in it. But the number of positions in it is equal to the number of all existing positions of the Prozorro Market. You can imagine how long it will take for the CPO to fill them all. That is why we need to develop a mechanism that will allow us to accept positions of goods from their specialists. This will be a significant step in the development of the marketplace.

In addition to the above, we will continue to expand our assortment and strengthen the level of competition, inviting even more suppliers to Prozorro Market. From the very beginning, the Cabinet of Ministers was concerned about the advisability of charging a commission from entrepreneurs as a percentage of the contract amount. They believed that this would affect the price of the product in the catalogs. But let me remind you that this sales channel is passive. It does not require the supplier to hire a separate person or spend personal time on the constant preparation of documents. It is enough to put goods in the market once, sign an agreement with the customer and deliver his order. That is why we already see that prices in the market for many items are lower than prices for similar goods that are purchased using other procedures. Increased competition in catalogs will reinforce this trend.