On November 12, 2022, the Cabinet of Ministers approved the Specifics of the Procurement Procedure for Defense Needs, which determine who and how can make such purchases during martial law. They will concern:

- organizers in the field of defense;
- organizations, institutions authorized by the relevant decision of the state customer in the field of defense;
- government customer services;
- military units.

Decree No. 1275 expands the list of organizers who are allowed to conduct such purchases and introduces "framework agreements" for the purchase of a separate group of military goods.

We talked with Yan Tomashuk, SmartTender's legal adviser, and found out what the defense procurement procedure will be like from now on and how their customers should act.

Who should organize and conduct defense tenders?

Responsible for these processes may do:

- authorized or any other person of the state customer;
- and/or a collegial body of at least three persons of the state customer, organized by this customer. At the same time, the state customer independently determines the order in which the activities of such a body will be organized.

Unlike Decree No. 169, which, by the way, has lost its force by paragraph 6 of Decree No. 1275, the legislator revives the "tender committees" and makes it possible to create collegial bodies for defense procurement.

How should government customers now make purchases for defense needs?

For a simpler understanding, it is necessary to divide defense tenders into two groups.

Until the end of the year (31.12.2022):

- it is allowed to purchase any goods, works, and services without applying the types (procedures) of procurement defined by the Laws of Ukraine “On Defense Procurement” and “On Public Procurement”, including the goods specified in the Appendix to the Specifics (hereinafter referred to as the Appendix).

After 31.12.2022:

- procurement of goods (other than specified in the Appendix), works, and services for defense needs is allowed without using the types (procedures) of procurement specified in the Laws of Ukraine “On Defense Procurement” and “On Public Procurement”;
- the purchase of goods specified in the Appendix, with a value of UAH 200,000 or more, is carried out under framework agreements.

It is possible not to apply the framework agreements for the purchase of goods from the Appendix worth more than UAH 200,000, in the following cases:

- when it is necessary to carry out purchases due to the occurrence of objective circumstances that do not allow the state customer to meet the deadlines stipulated by the framework agreement;
- when it is not technically possible to use an electronic system for procurement.

I draw your attention to the fact that the state customer will be required to document each of the listed cases, however, the legislator does not note in what form the documentary evidence should be.

What is the mechanism of procurement under the framework agreement?

First of all, I want to emphasize that under defense framework agreements, it is possible to purchase only a limited list of goods specified in the Appendix, the cost of which is 200,000 UAH or more. The corresponding list of goods marked in the picture:

Prozorro

Regarding the mechanics of procurement under the framework agreement:

1. The state customer is obliged to publish in free access an announcement on the conclusion of a framework agreement in Prozorro.
2. During the validity period (no more than one year) of the framework agreement or a period specified by the customer, any supplier can join the agreement if they meet the criteria.
3. At stage 1 of the tender, the public customer analyzes whether the supplier's proposal meets the requirements in the procurement announcement.
4. At stage 2 of the tender, a selection takes place among the suppliers admitted to the auction. At the same stage, the state customer signs an agreement with the winners on the supply of goods.

No less important things that you should also pay attention to:

- if, when considering the supplier's proposal, the state customer finds inconsistencies, he/she notifies the participant that they must be eliminated, in the manner and within the period specified in the announcement;
- there is a separate list of reasons for supplier deviations by clause 32 of the Features;
- appeal to the AMCU is NOT available.

It is impossible to change the essential terms of the contract before its full execution. An exception can only be an increase or decrease in the cost of goods due to changes of:

- exchange rate;
- consumer price index;
- the amount of taxes and fees;
- locations for the delivery of goods, etc.

Does the customer need to publish an annual plan?

It depends on how the state customer carries out defense procurement.

Not attached to the annual plan: tenders defined in clause 8 and par. 2-4 p.9 of Features.

Attached to the annual plan: tenders for framework agreements for defense needs (defined in paragraph 1, clause 9 of the Features).

However, I draw your attention to the fact that to plan purchases and report on them by the Features, the state customer, by their decision, determines the lists and volumes of purchases. Similar lists and volumes were created by customers when organizing tenders under Decree No. 169.

Do agreements need to be reported?

Yes, within 180 days from the end of martial law in Ukraine or some of its areas, the state customer must publish on Prozorro a report on the procurement agreement that was concluded outside the electronic system. This requirement applies to the results of the procurement defined in clause 8 and par. 2-4 p. 9 of Features, if the purchase price is from 200,000 UAH.

The requirement for publication does not apply only if the state contract (agreement) contains information with restricted access.

Conclusion

The emergence of the Features of the organization of defense procurement is an important step that will improve the defense procurement procedure during martial law. I want to highlight a few important points:

1. Military units, and organizations (institutions) are attached to state customers who can carry out defense purchases. However, I draw your attention to an important point: such military units and organizations must be authorized by the decision of the state customer in the field of defense to conduct tenders and conclude relevant state agreements/contracts.
2. Almost all defense purchases (except for goods that are defined by the Appendix) will be carried out as quickly as possible, without any procurement procedures, which, of course, is vital for protecting our state and quickly resolving issues in a war.
3. To support domestic manufacturers and save jobs, framework agreements for defense procurement have been added. Even though the list of goods covered by the framework agreements is limited to the light industry, there is confidence that this list will expand over time.

In the end, an important detail should also be emphasized: The specifics under Decree No. 1275 apply exclusively to defense procurement.

For the implementation of other types of public tenders, one should be guided by the Law of Ukraine “On Public Procurement”, taking into account the Specifics that were determined by Decree No. 1178.