In November 2013, Crown Agents started work on a major reform programme of Ukraine’s public procurement system, with the goal of harmonising the system with EU standards. The project – operated in consortium with BDO LLP and the Chartered Institute of Procurement and Supply (CIPS) – will run until November 2016. Having passed the halfway point of the programme, we put some questions to the Project Director, Crown Agents’ Noel Setters, on what the project is about, what’s been done so far, and what the project is looking to achieve in the coming year or so.
What exactly is the mission?
The consortium’s work focuses on two primary aims: supporting the development of a solid and consistent public finance management system in Ukraine via reforms in the public procurement system; and the commencement of a state aid regulatory system, which will provide oversight of the country’s system of trade subsidies, tax breaks and government support to business.
Who’s this going to help in Ukraine?
The ultimate beneficiaries are the people of Ukraine, who will gain greater value for money in public services through anti-corruption measures, increased competition, the application of best practices in line with international commitments and a fully functioning market economy. More immediately, though, the main beneficiary is the Ministry of Economic Development and Trade (MEDT) due to its primary responsibility for the public procurement system of Ukraine. The Anti-Monopoly Committee of Ukraine (AMCU) is also a major beneficiary as it is responsible for the appeals system in public procurement and for the development of the Ukrainian state aid supervisory system.
What exactly are you doing?
The consortium’s project team, working under team leader, Dr Eugene Stuart, planned and installed the project ready for full implementation by February 2014, deftly working through the difficulties posed by the national protests and changes in government. Since then we’ve been providing expert advice on policies, legislation and institutional structures and operations, while also carrying out a range of training programmes and awareness raising and public outreach activities and initiatives.
Anything in particular that you can tell us about?
One of our achievements saw project experts guide the development of the revised Public Procurement Law of April 2014. It contains substantive changes that improve the degree of legal alignment with relevant EU standards, notably a sizeable reduction in exemptions from the procurement rules, and has created a new environment for public procurement practitioners and public authorities.
Even more detailed work will be needed in the coming years to fully align Ukrainian legislation with EU Directives, including the reforms adopted by the EU in 2014. In this respect, the project has developed a gap analysis of the legal situation between Ukrainian and EU public procurement legislation, and supported the formulation of a strategic road map for public procurement reform.
What about the challenges of the work?
We’re making good progress but there are lots of considerations and challenges to tackle. Public procurement needs to be supported by collateral improvements such as transparent and efficient public financial management, clear allocation of control and enforcement functions between the public authorities, full accountability for decisions by civil servants for their decisions and efficient and reliable judicial and law enforcement processes.
The Ukrainian market will steadily open up to European bidders and, reciprocally, Ukrainian suppliers will offer own goods and services in the EU Member States. There does need to be further elaboration of the Ukrainian legislation, though, while avoiding any retrograde dilution of the rules, modernising systems such as the Public Procurement Web-Portal, finding an optimal approach to e-procurement, for which there is strong enthusiasm and political will in Ukraine, and improving the training and capacities of procuring entities throughout the country.
What is this state aid regulatory system you mention?
State aid is about the impact on competition and trade of subsidies, tax breaks and other forms of government support which benefit some firms and can hinder those that do not receive support. The European Commission has regulated state aid in EU Member States since the 1950s. It now requires similar national systems to operate, for reasons of trade and competition, in all association countries, including Ukraine where the Association Agreement was concluded last year and is already in force. For Ukraine, state aid regulation is a whole new system, so our work is about creation rather than reform.
While state aid legislation has been under discussion since 2002, the Law on State Aid to Undertakings was only adopted in July 2014 and will only enter into force in August 2017. In the meantime, detailed secondary legislation must be developed, institutional capacity needs to be established at AMCU, which will regulate state aid, and in many government ministries and other public organisations whose activities will be regulated under the new law. The project has been working on all aspects of this new system.
What have you done so far on this part of the project?
We directly assisted the preparation of the new law and subsequently completed an intensive training programme for AMCU and other ministry officials. We’re advising on the establishment of the AMCU as the state aid regulator and the development of detailed rules to be elaborated via secondary legislation. We have also completed a seminal study on state supports to business undertakings in Ukraine over the last five years, as a guide to future State aid regulation, and we are working on a pilot review of state aid in the Energy sector in Ukraine.
Overall, how is all the work going?
It’s progressing well and quickly. The project team has delivered more than 100 major outputs – exceeding the EU stipulations – and organised and facilitated some 45 specific events. Most material is available from the project website in both English and Ukrainian. When the project ends in November 2016, it certainly won’t be the end of the process of tackling major reforms in the procurement and State aid fields. However, in the words of Churchill, we expect to at least reach the point of “the end of the beginning”.
Content on this page is paid for and provided by Crown Agents, a sponsor of the Guardian Global Development Professionals Network.
