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Partner, Shkrebets & Partners, Attorney Partnership
In 2010 graduated with honors from the Yaroslav Mudryi National Law University and earned his LLM at the University of Hertfordshire, UK. He began to practice in 2010, first as a lawyer, then as an attorney, and from 2014 as a partner of Attorney Partnership Shkrebets & Partners. He is the author of numerous publications in periodicals on various branches of law. In 2015 he received a Ph.D. in Law from the Yaroslav Mudryi National Law University. Specialization: criminal law, white-collar crime & corruption.
One of the most important components of measures intended to improve the investment climate in Ukraine, as well as the declared course to fight corruption, is reform of the process of procurement using public (budget) funds.
Abuses in this area have always been a systemic problem for our state in the functioning of state institutions and territorial communities, and for guilty officials they are a source of illicit enrichment. Loopholes in legislation and the absence of existing mechanisms of control and accountability have allowed the latter to act in a parasitic manner in this area for many years.
The events on Maidan of 2013-2014 became the driving force in the process of reforming the public procurement sphere by creating, in particular, a basis of experience from abroad, fundamentally new rules of the game for participants of this market segment.
It should be noted that the development and adoption of the Law of Ukraine On Public Procurement was carried out in pursuance of the Program of Activities of the Cabinet of Ministers of Ukraine, the Coalition Agreement and the Decree of the President of Ukraine On the Sustainable Development Strategy Ukraine — 2020 regarding the implementation of electronic procurement, and most importantly — Article 153 of Chapter 8 Public Procurement of Section IV of the Association Agreement signed between Ukraine, on the one hand, the European Union, the European Community with atomic energy and their member states, on the other hand, with regard to implementation of Directives 2014/24/EC and 2014/25/EC.
One cannot but agree that particular changes in this area are truly revolutionary and allow a foreign investor to come to the Ukrainian market with confidence, as systemic changes have created conditions for the existence of meaningful competition, transparency of procurement procedures and minimum tolerance for abuse in budget procurement.
These results were not least of all the consequence of enlisting a team of foreign reformers to the government with tremendous experience in setting up and running a business in a competitive market, as well as attracting foreign experts to work on projects.
Among other consequences of the adoption of the Law of Ukraine On Public Procurement the following should be noted: the transition to an electronic procurement system based on the ProZorro platform, which later received many international awards and much recognition, reducing the number of public procurement procedures to two competitive (public tender and competitive dialogue) and one non-competitive (negotiation procedure), settlement of the so-called “European trade” procedure, which, when certain thresholds are exceeded, requires the additional publication of an announcement of public procurement in English and includes a pre-qualification stage.
However, in the current Ukrainian realities, problems in the field of public procurement continue to exist. Besides, we face completely new challenges in our practice. The timely response of a competent expert to such challenges becomes the key to successful existence and prosperity in the relevant market.
We do not have any intention of criticizing legislation in the field of public procurement, but to only dwell on certain practical aspects which we faced in the process of protecting the rights and legitimate interests of our clients.
Today, the practice of criminal prosecution of officials of a customer and a participant in public procurement is quite common. The reason for this is the assumption of pre-trial investigation authorities on the overpricing of the value of the subject of procurement in comparison with market prices.
The position of the investigator in such proceedings is highly questionable, especially in the case of unquestioning execution of the formal procedures provided for by the Law of Ukraine On Public Procurement.
In fact, the procurement procedures are stipulated by the law and aimed at identifying the most economically advantageous offers on the market of relevant goods and services. That is, the auction itself is, in fact, an indicator of the price on the market.
In this context, it should be noted that the provisions of the Tax Code of Ukraine that define the regular price as the price of goods (works, services) determined by the parties of the contract, unless otherwise provided by this Code, are on the side of participants in public procurement. At the same time, if not proven otherwise, it is believed that such a regular price corresponds to the level of market prices (paragraphs 14.1.71. P. 14.1., Article 14 of the Tax Code of Ukraine).
The market price is defined as the price at which goods (works, services) are transferred to another owner, in the case when the seller wishes to transfer such goods (works, services), and the buyer wants to receive them on a voluntary basis, both parties are mutually independent legally and, have sufficient information about such goods (works, services), as well as prices that have formed on the market of identical (and in their absence, homogeneous) goods (works, services) in comparable economic (commercial) terms (paragraph 14.1.219. Clause 14.1., 14 Tax Code of Ukraine).
The lawyer’s task in such proceedings is to show the falseness of the logic of the investigator’s version and its inconsistency with the principles and objectives of the Law of Ukraine On Public Procurement.
Among other measures, one of the most effective measures is to conduct economic expertise to determine the market value of goods and services purchased. An expert study of such a plan can be used as a preventive measure for participant in a bidding process.
Such a study conducted by the participant of a bidding process or customer will enable to take into account the characteristics of a particular product or service. In addition, a study close to the date of the procurement procedure minimizes or completely eliminates the error that inevitably exists during retrospective studies, which are characteristic for expertise conducted during a pre-trial investigation of criminal proceedings.
The subject of procurement is quite often goods and services that do not have analogues or homogeneous goods and services on the market. For example, the creation of a product according to individual parameters determined by the customer, the creation (construction) of improvement objects or their individual elements, such as monuments, objects of landscape gardening and so on.
A set of tools and regulations that are used in the process of economic expertise, does not allow to determine the market value of the purchased goods and services in such cases and, therefore, the existence of any damage caused to the company or the budget. Taking into account the fact crimes like embezzlement and/or seizure, abuse of power are crimes with a financial component, criminal prosecution on such grounds can only be a consequence of incorrectly constructed defense tactics.
The anti-corruption aspirations of law-enforcement bodies sometimes move beyond reason. The issue here is cases where the latter look for corpus delicti where there is none and there cannot be any. Manipulations with the question of the basis for the rejection of tender offers have till now allowed the customer’s officials to be kept at bay. The fact is that the Law of Ukraine On Public Procurement does not contain clear criteria by which it is possible to distinguish between inconsistencies of the tender proposal with the requirements of the tender documentation for formal and substantial. Such discrepancies remain evaluative concepts and, depending on the conjuncture, can be interpreted in either of these directions.
Despite attempts by the Ministry of Economic Development and Trade of Ukraine to resolve this issue at the level of clarification, the problem continues to exist. The Ministry noted that errors related to the design of a tender offer are considered formal (insignificant) and do not affect the content of the offer. Namely, technical errors and typing errors. Such a definition once again takes us to evaluative concepts.
One argumentative issue is also the question about the possibility of bringing to responsibility the officials of the customer for formal violations of the procurement procedure in a case when the contract has been concluded and already executed. We believe that if the results of the procurement procedure and/or the contract itself are not contested by anyone, including through the authorized body, the permanently operating administrative board of the Antimonopoly Committee of Ukraine for the consideration of complaints on the violation of public procurement legislation, or the corresponding complaint is left without satisfaction, there is no reason for such officials to be held accountable.
A completely new phenomenon in the field of public procurement is the sending of letters by bodies of the police to customers at the stage of posting an announcement on the procurement procedure which, according to the opinion of the officials, the winner of the tender is already known at this stage. Between the lines of such letters we can read calls to abandon the procurement procedure. It should be noted that such actions do not correspond to the tasks and goals to be carried out by the police, as set by law.
We regard such actions as a way of putting pressure on officials of this or that body, enterprise.
From our point of view, the widespread criminal prosecution of participants in procurement procedures for public funds is the result of many gaps in current legislation and, to a greater extent, the result of the use of institutions of state coercion for purposes of political pressure and/or illegal enrichment.
An appropriate response to this problem would be principled progressive protection of the interests of participants in public procurement with zero tolerance for the corruption component.