fs ukraine

Feasibility Study on Implementing e-Procurement in Ukraine Final Report

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Feasibility Study on Implementing e-Procurement in Ukraine

Final Report

December 2013


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TABLE OF CONTENTS

Introduction .......................................................................................................................... 1 I. Project Overview............................................................................................................ 3

1. Project Background ........................................................................................................ 3 2. Project Objective ............................................................................................................ 3 3. Project Scope .................................................................................................................. 4 4. Project Schedule ............................................................................................................. 4 5. Project Organization ....................................................................................................... 5 6. Expected Effects ............................................................................................................. 6

II. General Status of Ukraine ............................................................................................. 7

1. General and Social Status ............................................................................................... 7 2. Economic and Political Status, and International Relations ........................................... 8 3. Current Status of ICT .................................................................................................... 11

III. Current Status of Public Procurement ...................................................................... 19

1. Public Procurement System .......................................................................................... 19 2. Public Procurement Scale ............................................................................................. 19 3. Public Procurement Organizations and Their Roles & Responsibilities ...................... 22 4. Public Procurement Laws and Regulations .................................................................. 25 5. Processes and Procedures of Public Procurement ........................................................ 43 6. Implications of Public Procurement Status................................................................... 50

IV. Technical Analysis ....................................................................................................... 51

1. Requirement Analysis ................................................................................................... 51 2. Current System Analysis .............................................................................................. 52 3. SWOT Analysis ............................................................................................................ 55 4. Benchmarking ............................................................................................................... 59 5. Comprehensive Implications ........................................................................................ 69 6. Deriving Directions for Improvement .......................................................................... 71 7. Deriving Improvement Tasks ....................................................................................... 73

V. Implementation Plan ................................................................................................... 75

1. Establishment of Vision ................................................................................................ 75 2. Strategy ......................................................................................................................... 76 3. To-Be Model of Ukraine e-Procurement ...................................................................... 76 4. Definition of Project ..................................................................................................... 77 5. Road Map ...................................................................................................................... 90 6. Operation and Maintenance Plan .................................................................................. 92 7. Training Plan ................................................................................................................ 94


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VI. Economic Analysis ....................................................................................................... 96 1. Estimated Total Cost ..................................................................................................... 96 2. Detailed Project Cost .................................................................................................... 96 3. Estimated Cost by Year ................................................................................................ 98 4. Proposed Funding Source ............................................................................................. 99 5. Estimated Benefit .......................................................................................................... 99 6. Economic Analysis ..................................................................................................... 103

VII. Sustainability of Project Effect ................................................................................. 105

1. Expected Effects ......................................................................................................... 105 2. Risk Factors and Response Plans ............................................................................... 106 3. Sustainability of Project Effect ................................................................................... 107 4. Performance Index and its Calculation Method ......................................................... 108

VIII. Final Suggestions ....................................................................................................... 112


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TABLES

Table II-1 General Information on Ukraine .......................................................................................................... 7 Table II-2 Trend of Ukrainian GDP Growth Rates ............................................................................................... 9 Table II-3 Cabinet of Ministers in Ukraine ......................................................................................................... 10 Table II-4 Ukraine IT Development Program 20072015 ................................................................................ 12 Table II-5 Ukraine's Major ICT-related Policies ................................................................................................ 12 Table II-6 ICT-related Laws and Regulations .................................................................................................... 15 Table II-7 Dissemination Rate of Ukraine Telecommunication Infrastructure................................................... 16 Table II-8 Ukraine Information Development Index .......................................................................................... 16 Table II-9 Informatization Development Index of CIS Countries ...................................................................... 17 Table II-10 Index per Sub-Item of Ukraine e-GDI ............................................................................................... 17 Table II-11 Online Service Level of Ukraine e-Government ............................................................................... 17 Table III-1 2012 Statistics of Public Procurement Contract Value in Ukraine .................................................... 20 Table III-2 2012 Statistics of Public Procurement Contract Value in Ukraine per Procuring Entity ................... 21 Table III-3 Legal Systems related to Ukraine Public Procurement ...................................................................... 27 Table IV-1 Hardware and Network Equipments .................................................................................................. 54 Table IV-2 Composition of Software ................................................................................................................... 54 Table IV-3 SWOT Analysis (I) Internal/External Environment Analysis of Public Procurement in Ukraine .. 56 Table IV-4 SWOT Analysis(II) Strategy Derivation through SWOT Analysis ................................................ 57 Table IV-5 EU Public Procurement Directives .................................................................................................... 65 Table IV-6 Threshold Amounts for Public Contract of EU Directive(2011-2012) .............................................. 65 Table V-1 Details of Project: the 1st Phase of e-Procurement System Introduction (Introduction of Base)........ 78 Table V-2 Functions of e-Bidding System.......................................................................................................... 79 Table V-3 Function of e-Shopping Mall system ................................................................................................. 80 Table V-4 Function of Classification and Catalog System for Goods ................................................................ 81 Table V-5 Function of Users Management System ............................................................................................ 82 Table V-6 Period of e-Procurement System Establishment Phase 1 (Introduction of Base) ........................... 84 Table V-7 Budget for e-Procurement System Establishment Phase 1 (Introduction of Base) ......................... 84 Table V-8 Details of Project 2nd Phase of e-Procurement System Introduction (Vitalization) ........................ 84 Table V-9 Function of e-Contract System .......................................................................................................... 85 Table V-10 Period of e-Procurement System Establishment - Phase 2 (Vitalization) .......................................... 86 Table V-11 Budget for e-Procurement System Establishment Phase 2 (Vitalization) ....................................... 86 Table V-12 Details of Project 3rd Phase of e-Procurement System Introduction (Stabilization) ....................... 86 Table V-13 Function of e-Payment System .......................................................................................................... 87 Table V-14 Period of e-Procurement System Establishment - Phase 3 (Stabilization) ......................................... 88 Table V-15 Budget for e-Procurement System Establishment Phase 3 (Stabilization) ...................................... 88 Table V-16 Project Schedule (draft) ..................................................................................................................... 90 Table V-17 Roles of Organizations....................................................................................................................... 91 Table V-18 Operation and Maintenance Planning ................................................................................................ 93 Table V-19 Plan to Invite Executive Officers ....................................................................................................... 94 Table V-20 Plan to Invite Administrative Coordinators ....................................................................................... 94 Table V-21 Plan to Invite System Operators ........................................................................................................ 94 Table V-22 Plan for Dispatching Experts in Public Procurement Administration and System Operations Management..... 95


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Table VI-1 Estimated Total Cost.......................................................................................................................... 96 Table VI-2 Estimated Cost of Phase 1(Introduction of Base) .............................................................................. 97 Table VI-3 Estimated Cost of Phase 2(Vitalization) ............................................................................................ 97 Table VI-4 Estimated Cost of Phase 3(Stabilization) ........................................................................................... 98 Table VI-5 Estimated Cost by Year ..................................................................................................................... 98 Table VI-6 Funding Source Plan by Phase........................................................................................................... 99 Table VI-7 Effects of Increased Efficiency of MEDTU of Ukraine .................................................................. 100 Table VI-8 Effects of Increased Efficiency of Web Portal Agency ................................................................... 101 Table VI-9 Effects of Increased Efficiency of Procuring Entities ...................................................................... 101 Table VI-10 Effects of Cost Reduction of Participants ........................................................................................ 102 Table VI-11 Economic Value by 4 Indices .......................................................................................................... 103 Table VI-12 Calculation of the Present Value of Investment Costs ..................................................................... 103 Table VI-13 Calculation of the Present Value of Economic Benefits .................................................................. 104 Table VI-14 Summary of Economic Analysis ..................................................................................................... 104 Table VII-1 Response Plan by Risk Factors ........................................................................................................ 106 Table VII-2 Response Plan for Risk by Phase ..................................................................................................... 108 Table VII-3 Key Performance Index for Technology and System ...................................................................... 109 Table VII-4 Key Performance Index for Laws and Regulations, and Policy ...................................................... 110 Table VII-5 Key Performance Index for Capacity Building and Technical Transfer .......................................... 111


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FIGURES

Figure I-1 Project Promotion Schedule................................................................................................................. 5 Figure I-2 Project Organization ............................................................................................................................ 5 Figure II-1 Map of Ukraine .................................................................................................................................... 8 Figure II-2 Organization Chart of NCCIR ........................................................................................................... 14 Figure III-1 Ukraine Institutions Related to Public Procurement .......................................................................... 22 Figure III-2 Operation Organization for Public Procurement in MEDTU ............................................................ 23 Figure III-3 Organization Chart of Web Portal Agency ........................................................................................ 24 Figure III-4 Organization Chart of Antimonopoly Committee ............................................................................. 25 Figure III-5 Laws and Regulations Analysis Related to e-Procurement and Checkup Subject ............................. 26 Figure III-6 Operation Structure of Public Procurement ....................................................................................... 44 Figure III-7 General Procedure of Ukraine Public Procurement ........................................................................... 45 Figure III-8 Processes and Procedures of Ukraine Public Procurement ................................................................ 46 Figure IV-1 Public Procurement Web Portal ......................................................................................................... 53 Figure IV-2 Composition of Web Portal System for Public Procurement ............................................................. 53 Figure IV-3 Comparison between Before and After Establishment of e-Procurement System ............................. 60 Figure IV-4 Composition of Korea ON-line E-Procurement System .................................................................... 62 Figure IV-5 System Linkage according to Flow of Public Procurement Tasks of Korea ...................................... 63 Figure IV-6 Deriving Improvement Opportunities through Status Analysis ......................................................... 72 Figure IV-7 Deriving Improvement Opportunities through SWOT Analysis and Benchmarking ........................ 72 Figure IV-8 Deriving Improvement Opportunities through Interviews with Related Institutes ............................ 73 Figure IV-9 Implementation Directions, and Improvement Tasks according to Improvement Opportunities ............. 73 Figure V-1 Vision and Goal of e-Procurement System Establishment in Ukraine .............................................. 75 Figure V-2 Image of e-Procurement Service in Ukraine ...................................................................................... 77 Figure V-3 Conceptual Composition of e-Bidding System (draft)....................................................................... 78 Figure V-4 Conceptual Composition of e-Shopping Mall System (draft) ............................................................ 80 Figure V-5 Conceptual Composition of Classification and Catalog System for Goods(Draft) ............................ 81 Figure V-6 Conceptual Composition of User Management System (draft) ......................................................... 82 Figure V-7 System Architecture (Draft)............................................................................................................... 83 Figure V-8 Software Architecture (Draft) ............................................................................................................ 83 Figure V-9 Conceptual Composition of e-Contract System (draft) ...................................................................... 85 Figure V-10 Conceptual Composition of e-Payment System (draft) ..................................................................... 87 Figure V-11 Project Implementation Group ........................................................................................................... 91 Figure V-12 General Rule of System Maintenance Planning................................................................................. 92 Figure VII-1 Framework of Monitoring Plan ....................................................................................................... 107


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Abbreviations

4G the 4th(fourth) Generation BCR Benefit-Cost Ratio BPR Business Process Reengineering CIA Central Intelligence Agency CIS Commonwealth of Independent States CRM Customer Relationship Management DB Database DBMS Database Management System DMZ Demilitarized Zone EBRD European Bank for Reconstruction and Development EDCF Economic Development Cooperation Fund EDI Electronic Data Interchange e-Document Electronic Document

e-GDI Electronic Government Development Index e-Government Electronic Government

e-Guarantee Electronic Guarantee

EIU Economist Intelligence Unit e-Payment Electronic Payment

e-Platform Electronic Platform e-Shopping Electronic Shopping

e-Signature Electronic Signature

EU European Union EUR Euro FTA Free Trade Agreement FTP File Transfer Protocol G4C Government for Citizen GBP Great British Pound GDP Gross Domestic Product H/W Hardware IAEA International Atomic Energy Agency ICT Information & Communication Technology ID Identification or Identify IDB Inter-American Development Bank IDI Information and Communication Technology Development Index IDS Intrusion Detection System IMF SBA International Monetary Fund Stand-by Arrangement IMF International Monetary Fund


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ISP Information Strategy Planning IT Information Technology ITU International Telecommunication Union JSP Java Server Page KEPCO Korea Electric Power Corporation

KEXIM The Export-Import Bank of Korea KMS Knowledge Management System KISA Korea Internet & Security Agency

KOICA Korea International Cooperation Agency KONEPS Korea ON-line E-Procurement System KPI Key Performance Indicator KRW Korean Won

M/M Man Month MAS Multiple Award Schedule MEDTU Ministry of Economic Development and Trade of Ukraine

m-Gov Mobile Electronic Government N/A Not Applicable or Not Available N/W Network NBU National Bank of Ukraine NCCIR National Commission for the State Regulation of Communications and Informatization of Ukraine NPV Net Present Value ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OS Operating System PEPPOL Pan-European Public Procurement On-Line PKI Public Key Infrastructure PMO Project Management Office PQ Pre-Qualification PW Password RFID Radio Frequency Identification ROI Return On Investment RUB Russian Ruble S/W Software SAN Storage Area Network SBA Stand-By Arrangement

SWOT Strength, Weakness, Opportunity, Threat TED Tenders Electronic Daily UAH Ukrainian Hryvnia UN United Nations UN/CEFACT United Nations Center for Trade Facilitation and Electronic Business


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USAID United States Agency for International Development USD United States Dollar USQB Ukrainian Software Quality Board

VAT Value Added Tax VPN Virtual Private Network WAS Web Application Server WB World Bank WTO GPA World Trade Organization Government Procurement Agreement WTO World Trade Organization XML eXtensible Markup Language

Public Procurement Service The Republic of Korea


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Introduction The Government of the Republic of Ukraine (hereinafter referred to as Ukraine) has been

through a number of changes in terms of the legal framework of public procurement. The

project titled Harmonisation of Competition and Public Procurement Systems in Ukraine

with EU Standards conducted from April 2009 to May 2013 with the aid of EBRD was a

starting point.

There were internal and external demands to reform public procurement in Ukraine. For

instance, negotiations for FTA with EU and accession to WTO GPA were some of external

background. Taking this opportunity, Ukraine has been trying to create a competitive

environment in public procurement, while preventing corruption in this area, developing fair

competition, and promoting the rational and efficient use of public funds.

To improve the transparency and efficiency of the public procurement sector, Ukraine has

shown active interests in the introduction of an e-Procurement system. In September 2012, the

Chairman of Antimonopoly Committee of Ukraine visited the Public Procurement Service of

the Republic of Korea (hereinafter referred to as Korea), which is known for having the best

e-Procurement system in the world, to discuss possibilities for cooperation in the field of

public procurement. Since then, in March 2013, further discussions on Ukraine-Korea

cooperation for the introduction of e-Procurement system in Ukraine have been made at an e-

Procurement workshop organized by the Public Procurement Service of Korea and the

Ministry of Economic Development and Trade of Ukraine.

As a result of foregoing discussions, the Public Procurement Service of Korea decided to

finance an e-Procurement feasibility study for Ukaine. This project began in September 2013

with a view to developing a strategy for implementing an e-Procurement system in Ukraine,

and e-Procurement system experts of Korea conducted a field study in Ukraine to analyze the

current status of public procurement. This report is the outcome of the feasibility study,

containing the current status analysis and e-Procurement implementation strategy for the

Ministry of Economic Development and Trade of Ukraine to consider in preparing e-

Procurement adoption in Ukraine.



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Like many countries which want to introduce an e-Procurement system, Ukraine must first

overcome a number of different obstacles. For example, the lack of legal framework and

coordinated political efforts to overcome inertia among stakeholders could pose challenges in

implementing a government-wide e-Procurement system.

In implementing e-Procurement, technical aspects are not as challenging as the policy aspects,

cultural transformation, and knowledge transfer. The latter involves a paradigm shift into

digitalized public procurement administration, which should be accomplished over a

considerable time. It is necessary to incorporate these aspects in system development while

investing simultaneously in education and training on e-Procurement for various stakeholders.

The current status of public procurement in Ukraine is similar to what public procurement in

Korea was like 20 years ago. There was strong intent of the government to adopt e-

Procurement and has been through a number of reforms in a phased approach. As a result of

continued efforts, Korea now operates an e-Procurement system that is globally recognized as

one of the world best practices.

This report takes the implication that there is a need for a step-by-step strategy in Ukraine.

This report will propose an introduction strategy containing medium-term plans (4-year

roadmap) based on Korea's experience in implementing its own e-Procurement system. In

addition, to make this project successful, it also proposes cooperative activites for training and

experiences sharing between two countries.



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I. Project Overview

1. Project Background

Ukraine has shown an active interest in introducing an e-Procurement system to enhance the transparency and efficiency of public procurement. For this reason, it has been extensively enacting and amending the legal framework of public procurement in the past 3 years. In September 2012, Chairman of Antimonopoly Committee of Ukraine visited to the Public Procurement Service of Korea to discuss cooperation plans in the field of public procurement. Subsequently, in March 2013, detailed plans to support the introduction of an e-Procurement system for Ukraine were made, specifically through a cooperation meeting between the Public Procurement Service of Korea and the Ministry of Economic Development and Trade of Ukraine, and the Antimonopoly Committee of Ukraine.

2. Project Objective

The objective of this project is to establish a strategy for the introduction of an e-Procurement system to enhance the transparency and efficiency of public procurement administration in Ukraine. In addition, the linkage of follow-up projects in the future shall be promoted.

To establish the introduction strategy, this project includes a research of the status and environment of public procurement in Ukraine, the legal and institutional foundations supporting such systems, the issues in need of improvement, potential future models and implementation plans, potential consultation and support measures for execution, etc. In order to reach this goal, a group of experts was dispatched to conduct the field study.

In addition, through this project a stronger cooperative relationship between Ukraine and Korea will be promoted as Korea shares its experience of implementing and operating its advanced e-Procurement system.



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3. Project Scope

3.1 Analysis of Current Status for Introduction of an e-Procurement System in Ukraine

Analysis of general status of Ukraine, covering politics, economy, society, ICT and status of informatization in public procurement areas

Analysis of legal and institutional frameworks of public procurement in procurement areas of the EU and Ukraine

Benchmarking for the introduction of Korean-modelled e-Procurement system in Ukraine

3.2 Feasibility Study on the e-Procurement Project

Analysis of technical, economic feasibility of the introduction of e-Procurement system and of intent for project implementation of Ukraine

Analysis of expected qualitative, quantitative effects as a result of the introduction of an e-Procurement system in Ukraine, and establishment of response plan for risk factors

3.3 Establishment of Improvement Models and Implementation Plans for the

e-Procurement Project

Establishment of implementation plans such as project objectives and implementation strategies, organization for project execution, project schedule, definition of scope and structure of e-Procurement system, future maintenance measures, etc.

Preparation of a strategy report for taking project orders to support Ukraine as follow-up project including project implementation plans by stage, financial plans, implementation plans for order-taking sales activities, response plans for major issues, etc.

4. Project Schedule

This project has been conducted for about 3 months, with the detailed promotion plans as shown in the following figure.



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Figure I-1 Project Promotion Schedule

5. Project Organization

Project management: International Cooperation Division in Public Procurement Service of Korea

Project conduct: Intergen Consulting Co., Ltd. Managing organization of Ukraine: The Department of Public Procurement and State

Orders in the Ministry of Economic Development and Trade of Ukraine

Figure I-2 Project Organization



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6. Expected Effects

The Ministry of Economic Development and Trade of Ukraine shall establish a foundation for the implementation of an e-Procurement system that is capable of improving the transparency and efficiency of public procurement administration, by establishing strategies for the introduction of an e-Procurement system.

To design a To-Be model for an e-Procurement system suitable for the Ukrainian environment by sharing the Korean governments experience of implementing and operating an advanced e-Procurement system with Ukraine

To establish introduction strategies and implementation roadmaps for an actual Ukrainian e-Procurement system, and to present fund linkage plans for implementing the system



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II. General Status of Ukraine

1. General and Social Status

1.1 Overview

Geographically, Ukraine is located in the southeast region of Europe at a strategic position connecting Europe with Asia, while bordering Russia, Belarus, Poland, Czechoslovakia, Hungary, Rumania, Moldova, and the Black Sea.

Table II-1 General Information on Ukraine

General

Location and area East Europe 603,600 km (2.7 times of Korean peninsula) Length of state border: 4,558km, Length of coastline 1,758km

Climate Continental climate

Population 45.45 million (2013 estimate)

Capital Kiev (Estimated population of 28.4 million)

Language Ukrainian (Official language), Russian (Not an official language but widely used)

Race Ukrainian (73%), Russian (22%), Jewish (1%), Other minority races (4%)

Religion Ukraine Orthodox, Catholic

Time difference 6 hours (Time difference from Korea)

Economy

GDP GDP 183.2 billion dollars, ranked 55th globally (based on 2012 IMF )

GDP per capita GDP per capita: 4,042 dollars, ranked 107th globally (based on 2012 IMF)

Industrial structure

Steels (24.3%), Food processing industry (14.2%), Energy industry (14.5%), Machine, metal fabrication (14.0%), Mining industry (9.9%), Chemistry (6.3%), Other (16.8%)

Currency unit Hryvnia (UAH) / Exchange rate 1USD=8.16UAH (13.05.30., Official exchange rate by Central Bank)

Major export items Steel, agricultural products, animal and vegetable oil, railroad, machines, natural resources Major import

items Crude oil, natural gas, machines, electrical machines, transportation machines, plastics, medicine

Major natural resources Iron ores, coals, manganese, natural gas, timber

Politics

Independence day 1991. 8. 24 (Ukraine)

Government system

Presidential system President Viktor Yanukovych (Inaugurated on 2010.02.25)

Parliament Single parliament system (450 seats)

Major political parties

Regional Party (208 seats), Ukraine Fatherland Federation (99 seats), Ukraine Democratic Reform Federation (42 seats), Liberty Party (36 seats), Communist Party (32 seats), Unaffiliated (28 seats)

Interstate institutions joined UN, World Bank, IMF, IAEA, EBRD, WTO, etc.

* Source: CIA-The world fact book, Statistics Ukraine, National Bank of Ukraine (NBU), EIU, WTO, etc.



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Occupying 603,550km2, which is about 2.7 times the size of the Korean Peninsula, Ukraine is ranked as the second largest country in Europe, being slightly larger than France.

Figure II-1 Map of Ukraine

* Source: CIA, The world fact book The total population of the country is estimated to be approximately 45.45 million people in 2013, of which the economically active population ranging from 20 to 59 years old accounts for about 58.9%. More than half of the total population lives in the capital city, Kiev. About 73% of the population are Ukrainian, with about 22% being Russians. While Ukraine language is used as an official language, the Russian language is also widely used.

2. Economic and Political Status, and International Relations

2.1 Economic Status

Ukraine has been supported by IMF bailout (SBA) since October 2008, however, they are in the process of striving to overcome an economic crisis by enforcing reductions in financial deficits, adjusting the foreign exchange rate policy, restructuring the banks, reforming the pension system, increasing gas prices, and more. According to the IMF, the GDP of the country in 2012 was about 183.2 billion dollars, making it 55th among all nations. On the other hand, average GDP per capita was about 4,042 dollars, which is 107th globally. This gap exposes a significant discrepancy with the national ranking of the GDP. While an economic growth rate of 3.2% (measured by EIU) was originally expected for 2012 with an expectation of increased investment due to Euro Cup invitation, the growth was limited to 0.2% due to the after-effects of the European and US economic crises.



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Table II-2 Trend of Ukrainian GDP Growth Rates Year 2007 2008 2009 2010 2011 2012 2013*

Rate of Change (%) 7.9 2.4 -14.8 4.1 5.2 0.2 1.1

* Note: * represents an EIU forecast Ukraine is the world's 10th largest steel producer, and steel accounts for more than 1/4 of secondary industry production and serves as one of the major channels for acquiring foreign currencies, at about 40% of total exports. The amount of export changes dramatically with changes in global business cycles, and thus the dependency of its economy on the steel industry alone presents a risk factor to stable growth. Due to the influence of the former Soviet Union, not just the steel industry but also science and technology have been developed and are showing strengths in petrochemical industry, shipbuilding industry, aviation industry, general machine industry, space industry, energy industry, automotive industry, etc. with a great effect on the state economy as well. Major export items include ferrous and nonferrous metals, fuels and petroleum products, chemical products, machine and transportation equipment, foods, and more, which are exported to Russia (27.9%), Turkey (4.7%), Egypt (3.6%), Poland (3.3%), Kazakhstan (3.2%), and Italy (3.2%). Major import items include energy, machines and equipment, and chemical products, and these are imported from Russia (31.1%), China (8.7%), Germany (8.0%), Belarus (5.6%), and Poland (4.1%). 2.2 Political Status

Ukraine, which became independent from the Soviet Union in August 1991, formed a new government in a short period of time through a state referendum. In 1996, they amended the constitutional law based on the key principles of singular nationality as republic, separation of the three powers and constitutionalism, to grow into a sound democracy. Currently, there is a presidential system in Ukraine, and a dual directorial system was temporarily maintained for a while due to a constitutional amendment in 2006 resulting from the orange revolution. Now, the country has been restored to the presidential system, with the president holding powerful authority, such as the right of appointing premier and state council members, thanks to a ruling by Supreme Court that declared the political changes unconstitutional and nullified them in 2010. The current head of the nation is President Viktor Yanukovych, who was inaugurated in February 2010. The government is composed of a total of 17 ministries under the Prime Minister.



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Table II-3 Cabinet of Ministers in Ukraine Ministries

Ministry of Agrarian Policy and Food Ministry of Internal Affairs Ministry of Justice

Ministry of Incomes and Fees of Ukraine

Ministry of Ecology and Natural Resources

Ministry of Economic Development and Trade

Ministry of Energy and Coal Industry Ministry of Finance

Ministry of Foreign Affairs Ministry of Infrastructure Ministry of Culture Ministry of Defence

Ministry of Education and Science Ministry of Health

Ministry for Regional Development, Building and

Housing Ministry of Social Policy

Ministry of Youth and Sport

* Source: Ukrainian government portal (http://www.kmu.gov.ua) 2.3 National Development Policy

After the inauguration of current President Viktor Yanukovych in 2010, the economic development plan entitled The program of Economic Reforms 2010-2014 was announced to improve the competitiveness of Ukraine. With a vision of Wealthy Society, Competitive Economy, Efficient State, the program covers extensive policy reforms with the aim of implementing a contemporary, sustainable, open and competitive economy in the global environment, an efficient government, improving citizens' welfare, etc. The economic policy reform plans in the The program of Economic Reforms 2010-2014 can be broadly divided into 5 areas, which are as follows.

Preparation of foundational circumstances for economic growth through low rate of inflation, stabilization of public finance, construction of a stable finance system

Minimization of government intervention to form favourable environments for business, minimization of administrative barriers to business development, modernization of the tax system, reinforcement of international participation by Ukraine economy

Conversion into sustainable growth of state production and social service through reinforcement of infrastructure by resolving structural problems in the energy industry, mining industry, gas industry, public industry, transportation infrastructure, real estate, etc.

Securing and development of human and social capital through improvement of the efficiency and sustainability of social protection systems, qualitative improvement of accessibility to education and health services

Improvement of public service and reinforcement of governance through public service reforms



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2.4 International Relations

As a member country of CIS, which was founded to strengthen cooperation among 10 former Soviet Union countries, Ukraine has built a close cooperative relationship with Russia in diverse areas, including military, politics, industries, etc. since the inauguration of the incumbent president and premier. However, it has recently disagreed with Russia in areas such as customs union and has been pressured to abandon its drive for EU membership, renegotiation of gas agreement, etc. With the country at a crossroads between a customs union with Russia and joining the EU, President Viktor Yanukovych has decided on the policy direction of joining the EU. As a first step toward joining the EU, the Ukraine government has promoted signing a Free Trade Agreement (FTA) with EU. In October 2012, promotion of FTA signing was postponed until after a general election to ensure the fairness of the general election, but it has been continuously promoted since then. For reference, thanks to opening its financial market such as banking, insurance, etc. and passing a bill to reinforce the protection of intellectual property in 2006, Ukraine succeeded in officially joining the WTO, becoming the 125th global member in May 2008. Recently, there have been discussions on joining the Government Procurement Agreement (GPA) of the WTO.

3. Current Status of ICT

3.1 ICT Policy and Strategy Ukraines government proposed and established a national program Development of Information Society and Informatization in Ukraine 2007-2015 as the national major strategy for IT development by passing the national assembly of the related bills.

Most ICT policies are overseen by the Ministry of Infrastructure in charge of social foundation management such as science, innovation, information, etc. and the National Commission for the State Regulation of Communications and Informatization of Ukraine (NCCIR) in charge of Ukraine ICT project management.

In Ukraine, there are about 50 project tasks being promoted by IT-related government institutions through Development of Information Society and Informatization In Ukraine 2007-2015. Major tasks include construction of electronic document systems and homepages for all government departments and committees, setting up of computer learning hours per individual school, etc.



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Table II-4 Ukraine IT Development Program 20072015 Objective Ukraine IT development

Main task department National Commission for the State Regulation of Communications and Informatization of Ukraine (NCCIR)

Vision Improvement of dissemination of ICT skills

Detailed objectives

Informatization development for law, organization, science, technology, economy, finance, education

Development of contemporary information technology Government's generation of state networks Generation of state systems for government and local autonomous

groups Increase in efficiency of information technology Production of information and maintenance of formats for service

market Integration into Ukraine, a global information space

Expected effects

Recent integrated systems based on robots Radical changes in the entire social system Efficient information exchange and satisfaction of social/individual

needs through information service * Source: National Commission for the State Regulation of Communications and Informatization (NCCIR) In terms of other major ICT-related policies, there are diverse ICT development strategies, including the state informatization program, 2015 electronic government policy, Open World project, etc.

Table II-5 Ukraine's Major ICT-related Policies Policy Major contents

State informatization program Determination of nation's major ICT projects 2010-2020 Ukraine innovation development strategy

Establishment of innovation development strategies for the globalization of Ukraine

2015 electronic government Establishment of concepts for Ukraine e-Government by 2015

Open World project Generation of state information and

telecommunication networks based on 4G technology for educational purposes at schools

Ukraine IT development program 2007-2015

Strategies for development of informatization of information society

* Source: ICT COUNTRY PROFILE UKRAINE 2013, USAID



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3.2 e-Government Policy and Strategy

Ukraine e-Government policies are being managed by the State Agency on Science, Innovations and Informatization of Ukraine, and the development project initiatives for e-Government have been approved by cabinet to proceed in a total of 3 stages by 2015.

At the first stage, review and amend legal frameworks for informatization of administration by 2012 (electronic documents, electronic signatures, etc.)

At the second stage, provide public life services in an electronic form by 2014

At the third stage, build an integrated ICT infrastructure at all public institutions by 2015

As major e-Government projects, Ukraine has carried out a multitude of projects related to informatization and e-Government by utilizing international institutions such as the World Bank, EBRD, etc., and most of these have been realized with focus on construction of information infrastructures or introduction of systems. Thus far, websites of individual ministries have been constructed, centered around a state information portal (http://www.kmu.gov.ua). However, while state information in each area such as economy, administration, health, land, industry, etc. is being provided through the website, the provision of public services to the people remains insufficient. As a part of the state informatization policy, activities such as composition of organizations, infrastructure development, manpower cultivation, etc. for the implementation of e-Government are being conducted continuously until 2017. 3.3 ICT Organization

3.3.1 Organizations to Promote ICT Policy

The Organizations to promote ICT policy, 15 departments and 1 state agency such as regulatory institution for broadcasting and telecommunication and agency promoting informatization, are under NCCIR, which was established in July 2012 through an amendment to the Law on Policy of Broadcasting and Telecommunication. NCCIR performs functions such as telecommunication regulation, enactment of telecommunication-related regulations and standards, issuing licenses, frequency assignment, promotion of market competition, etc.



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Figure II-2 Organization Chart of NCCIR

* Source: National Commission for the State Regulation of Communications and Informatization of Ukraine In terms of other organizations and institutions involved with the government's ICT-related initiatives, there are several institutions as follows, which are separately pursuing projects to match their individual objectives.

Ministry of Infrastructure, State Agency on Science, Innovations and Information Ministry of Education and Science The State Agency of Ukraine for Investment and Development State Agency for Investment and state Projects of Ukraine Kharkov Technologies Center of Small Business Development The Lviv Center of Science, Innovations and Informatization Ukrainian Software Quality Board (USQB)

3.3.2 Organizations to Promote e-Government

Ukraine has no independent organization to promote the nation's overall e-Government project, but it is in the process of continuously promoting various activities until 2017, such as composing organizations, infrastructure development, manpower cultivation, etc. to implement e-Government as a part of state informatization policy. Currently some organizations such as the State Agency on Science, Innovations and Information and the State Agency on Civil Service are promoting e-Government projects that reflect their individual objectives. While the State Agency on Science, Innovations and Information is focused on projects to construct infrastructures for government public institutions, the State Agency on Civil Service is aimed at implementing e-Government to improve services to the public.



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3.4 ICT Legal Framework 3.4.1 Laws and Regulations for ICT

The Law of Ukraine on Telecommunications, which includes contents such as opening the telecommunication market, promoting competiveness, establishing a new regulatory organization, etc. became effective as of December 2003 and was amended in June 2004. Simultaneously to the law of Ukraine on telecommunications taking effect, the 1995 law on telecommunications was automatically abolished.

Additionally, NCCIR was established in 2005 to reinforce regulation authority over the telecommunications area, and to protect consumers' rights and interests through the adjustment of telecommunication charges.

Table II-6 ICT-related Laws and Regulations

Law Established year Law title Major contents

ICT telecommunication

act 2004 Telecommunication regulation

Opening the telecommunication market and promoting telecommunication market competition, establishing new regulatory institutions, reinforcing infrastructure investment, protecting consumer rights and interests

Electronic government related

act

2003 Electronic documents Regulations on the use of electronic

documents in public administration and effectiveness of documents

2003 Electronic signatures Enactment of electronic signature act to

give legal effect to electronic documents

* Source: KISA-Ukraine broadcast telecommunication status 2012

3.4.2 Laws and Regulations for e-Government

1) Electronic document act

As a prior step to the computerization of public administration, the Ukraine government enacted the electronic document act in 2003, and is currently utilizing electronic documents through the internal systems of each public institution.

2) Electronic signature act

Although legal basis has been prepared by enacting the electronic signature act for administrative effectiveness and security of electronic documents together with the electronic document act, it has only been partially realized. (Currently, there are 15 institutions for e-Signature certification.)



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3.5 ICT Dissemination

3.5.1 Dissemination of Telecommunication Infrastructure

While the level of informatization in 2013 is similar to the situation in 2012, with not so high dissemination rate of computers and an internet dissemination rate of about 40% per household, but the dissemination rate with most public institutions and businesses is high, to the extent that a great deal of work absolutely requires computer and internet.

Table II-7 Dissemination Rate of Ukraine Telecommunication Infrastructure

Categories Contents 2012 2013

Access Indicator

Dissemination of wired telephones per population of 100 people (%)

28.1 28.1

Dissemination of mobile telephones per population of 100 people (%)

123.0 123.1

Internet use rate per internet user (Bit/s) 10,483 14,328

Dissemination of computers per household (%) 33.7 40.5

Dissemination of internet per household (%) 29.3 36.5

Use Indicator

Population using internet (%) 28.7 33.7

Dissemination rate of wired internet broadband per population of 100 people (%)

7.0 8.1

Dissemination rate of mobile phone broadband per population of 100 people (%)

4.4 5.5

* Source: ITU, Measuring the Information Society 2013

3.5.2 Informatization Development Index (IDI)

According to an 2013 Informatization Development Index(IDI) announced by ITU, Ukraine shows a high score in skill(11th), indicating the education level, compared with the information access(68th) and the information use(92nd) indicators.

Table II-8 Ukraine Information Development Index

year IDI index Access Use Skill

Rank Index Rank Index Rank Index Rank Index 2011 69 4.38 71 4.88 91 1.49 11 9.17 2012 68 4.64 68 5.27 92 1.76 11 9.17

* Source: ITU, Measuring the Information Society 2012

Also, the IDI of Ukraine was 6th among CIS countries after Russia(40th), Belarus(41st), Kazakhstan(48th), Moldova(65th).



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Table II-9 Informatization Development Index of CIS Countries

Country IDI index Rank(CIS)

IDI index rank(Global) IDI index 2011 2012 2011 2012

Russia 1 38 40 5.94 6.49 Belarus 2 46 41 5.57 6.11

Kazakhstan 3 49 48 5.41 5.74 Azerbaijan 4 60 61 4.62 5.01 Moldova 5 67 65 4.46 4.74 Ukraine 6 69 68 4.38 4.64 Georgia 7 73 71 4.24 4.59 Armenia 8 75 74 4.18 4.45

Uzbekistan 9 104 104 3.02 3.12 * Source: ITU, Measuring the Information Society 2013

In the 2012 UN e-Government Development Index(e-GDI) evaluation, Ukraine was ranked 68th among 190 surveyed countries, showing a high level of human capital, although the levels of online service, telecommunication infrastructure were average.

Table II-10 Index per Sub-Item of Ukraine e-GDI

Country Rank Index Online service Telecommunications infrastructure Human capital

Ukraine 68 0.5653 0.4248 0.3535 0.9176 * Source: UN, e-gov survey 2012

Online service index: a measure of general capacity of providing people with public services in relation to state portal site, health, education, social welfare, labor, finance, etc.

Information and telecommunication infrastructure index: survey with weighted values for 5 index items (numbers of internet users, telephone lines, subscription to mobile phones, wired internet subscribers per population of 100 people)

Human capital index: reflects an extent of accommodation by people for e-Government services with weighted values given to 2 indices (adult literacy rate, school attendance rate)

3.5.3 e-Government Online Service Development Index

According to the UN e-GDI index, the online service level of Ukraine e-Government is advancing toward a development stage from a level capable of providing policy, ordinances, documents, etc. to people in a one-way communication. And indices for online electronic transactions, integrated information processing were recorded as relatively low.

Table II-11 Online Service Level of Ukraine e-Government (Index: indicates extent of development per stage on a 0~100 scale)

Country Stage 1 Stage 2 Stage 3 Stage 4

Overall Initiation Development e-Transaction Integrated processing

Ukraine 83 57 8 39 37 * Source: UN, e-gov survey 2012



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3.6 Readiness of ICT project

Ukraine is one of a few countries showing outcomes in contemporary engineering areas such as satellite telecommunication systems, aircraft, nuclear submarines, surface vessels, and nuclear power plants, and retains many human resources at a relatively high ICT technology level.

Over the last few years, Ukraine has swiftly secured specialists in the software engineering and IT industry service areas through manpower education in most recent technologies. Software engineers, scientists and programmers have executed large-scale projects in diverse technology areas over more than 40 years.

As Ukraine has recently secured skilled human resources and large-scale markets thanks to its low wage level, it is evaluated as excellent in Europe by many outsourcing businesses. Most outsourcing businesses of Ukraine have excellent competitiveness, in terms of both cost and quality. 3.7 Implications of Current Status of ICT

While Ukraine has a strong desire to implement ICT-related projects, like other development plans implemented by the government its approach has not been specific and systematic, and due to the state financial crisis, it is judged that the budget will be insufficient when the e-Procurement system is introduced.

While legal frameworks on e-Documents and e-Signatures for the introduction of e-Government have already been enacted, they are not sufficiently specific and are evaluated to have an inadequate executive faculty, and thus it is considered that an improvement of the legal frameworks will be required when it comes to introducing an e-Procurement system.

A lack of integrated ICT and an organization dedicated to the promotion of e-Government may lead to a lack of leadership equipped with powerful decision-making authority to introduce e-Procurement systems in Ukraine.

Retaining many excellent ICT human resources is the largest advantage at such a level that independent system development may be possible, and a great deal of expense for education and training required for development and operation upon system introduction may be thereby saved.

Considering its outstanding ICT environment (Communication infrastructure, Informatization index), it is judged that procuring entities (demanding organizations) and participants (suppliers) would have no problem using the e-Procurement system.



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III. Current Status of Public Procurement

1. Public Procurement System

Ukraine is a country that executes decentralized procurement, in which the Department of Public Procurement and State Orders in the Ministry of Economic Development and Trade takes charge of the establishment of policy and administrative tasks for state public procurement, while there are no independent management institutions for public procurement services. Each procuring entity in charge of decentralized procurement independently enforces public procurement planning, bidding notices and selection results of successful bidders through the contract and follow-up management.

Although each procuring entity conducts independent public procurement tasks, it is required to report approvals by the State Treasury Service and implementation status (bidding notices, selection results of successful bidder) to the Department of Public Procurement and State Orders in the Ministry of Economic Development and Trade upon fund execution about within the threshold of demanding material1.

2. Public Procurement Scale

The total number of biddings announced through the web portal of the Authorized Agency in 2012 was 250,000 cases, the total number of signed contracts was 144,219 cases, and total contract signing amount for public procurement was about 513.0 billion UAH (about 56.7 billion USD).

Of the 144,219 public procurement contracts, open biddings represented 58.31%, the largest portion, followed by single-source procurement at 35.4%, and requests for `quotations at 6%.

Compared with 110,728 cases of public procurement contracts in 2011, the number of contracts increased by 23% in 2012, as well as an increase in total contract signing amount by about 20%.

In terms of total public procurement contract value, 70.4% was for goods, 22.2% was for services, and 7.5% was for construction, with public procurement of goods accounting for more than half of the public procurement.

1 Law of On Public Procurement - the Threshold of Demanding Material: Stipulates the definition that demanded goods are more than 100,000 UAH (approx. 11,627 USD) for goods and services, more than 300,000 UAH (approx. 34,883 USD) for construction, and more than 1,000,000 UAH (approx. 116,279 USD) for works respectively.



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According to a statistics report, the contracts from one participant account for a high ratio of 35.4% due to procurement of public facilities, while procuring entities generally prefer competitive bidding (the method of lowest cost bidding) to achieve cost savings in the state budget.

Table III-1 2012 Statistics of Public Procurement Contract Value in Ukraine (Unit: thousand, 1 USD = 8.6 UAH)

Contract method

Number of contract cases

Contract Value (per fund) UAH RUB USD GBP EUR

Open bidding 84,091 (58.31%) 201,061,253 1,966,402 2,066,777 - 196,245

Two-stage bidding 59 (0.04%) 250,102 - - - 3,045

Request for price

quotation 8,746 (6.06%) 1,127,309 - - - -

Pre-qualification 270 (0.19%) 3,493,976 - - - -

Single-Source Procurement 51,053 (35.4%) 249,889,408 1,970,109 4,473,294 14.2 40,355

Total 144,219 (100%) 455,822,050 3,936,512 6,540,071 14.2 239,645

* Source: Report on the functioning of the public procurement system in 2012 * Currencies except UAH are for procurement subject to international bidding or funded by international aid

For procurement by public utilities such as gas, heating, waterworks, electricity, etc., it should be procured with the single-source procurements procedure as specified by law, and it account for more than 35% of all public procurement.

Although the number of open bidding cases (58.1%) is larger than that of single-source procurement (35.4%). The total contract money of single-source procurement is higher than with general competitive bidding as accounting for about 249.8 billion UAH (about 29.0 billion USD) of the total bidding contract amount in Ukraine funds of about 455.8 billion UAH (about 53.0 billion USD).

The largest contract amount among single-source procurement is the bidding by government-run petroleum and gas corporation (Naftogaz) under the Ministry of Energy and Coal Industry, at 32.3%, while public facility purchases such as gas, heating, waterworks, electricity account for 36.3%.

According to an interview conducted with a representative of the web portal of the Authorized Agency (State Company [Zovnishtorgvydav Ukrainy]) during field study, about 20,000 procuring entities use the public procurement web portal for bidding notices and selection results of successful bidder.

The body with the most public procurement is the Ministry of Energy and Coal Industry (23,648 cases), followed by the Ministry of Infrastructure (10,015 cases), the Forest Resources Corporation (5,745 cases), the Dnepropetrovsk Regional State Administration (5,300 cases) and the Kiev City State Administration (3,588 cases).



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The body with the largest public procurement execution budget is also the Ministry of Energy and Coal Industry, accounting for 60% of the total, followed by the Ministry of Agrarian Policy and Food at 9.1%. This shows the phenomenon of concentration of public procurement funds in a few institutions.

Table III-2 2012 Statistics of Public Procurement Contract Value in Ukraine per Procuring Entity

Institutions (including affiliated institutions and businesses of each department) Total Contract Value (thousand UAH)

Ministry of Energy and Coal Industry 257,029,638 (60%)

Ministry of Agrarian Policy and Food 39,140,021 (9.1%)

State Road Service of Ukraine 19,611,605 (4.6%)

Ministry of Infrastructure 17,611,895 (4.1%)

Kiev City State Administration 9,619,921 (2.3%)

Donetsk Regional State Administration 5,907,056 (1.4%)

Others 79,408,923 (18.5%)

Total2 428,329,059 (100%) * Source: Report on the functioning of the public procurement system in 2012 The number of procurement businesses participating in public procurement in 2012 was about 186,667, with a continuous increase every year, and most procurement is participated in by local businesses in Ukraine.

Of the total of 186,667 procurement businesses in 2012, the number of businesses participating in competitive bidding was 126,582 (67.81%), and a total of 89,533 businesses (51.38%) were selected as successful bidders.

Of the procurement businesses participating in public procurement, 99.69% were Ukraine businesses while 0.31% were foreign businesses, showing that the participation of foreign businesses in public procurement market does not account for a significant weight.

2 The total amount of Table III-1 is a value reported from procuring entities to the Web Portal Agency at the initial time on contracts. And the total amount of Table III-2 is a value published by State Statistical Office of Ukraine. The value difference of both amounts came from some contract adjustment of each.



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3. Public Procurement Organizations and Their Roles & Responsibilities

3.1 Overview

In terms of the government institutions related to public procurement administration in Ukraine, there are the Department of Public Procurement and State Orders in the Ministry of Economic Development and Trade of Ukraine (hereinafter referred to as MEDTU), the Antimonopoly Committee of Ukraine, the State Treasury Service of Ukraine, along with the web portal agency operating the public procurement web portals under the MEDTU.

Figure III-1 Ukraine Institutions Related to Public Procurement

3.2 The Department of Public Procurement and State Orders in MEDTU

The Department of Public Procurement and State Orders in the MEDTU has a staff of 28 people among the total Ministry manpower of about 1,200 people, and takes charge of decision making, monitoring, and research related to public procurement as a key department that plans, manages and operates all public procurement administration of the country.

Major tasks of the public procurement bureau include administrative planning, management and operation, study of norms for public procurement procedures, interpretation and recommendation of regulations in laws and systems, monitoring of regulation observance status, analysis and research of public procurement, etc.

Administrative planning, management and operation related to public procurement: planning, management and operation of all administration related to public procurement in Ukraine.

Approval of annual public procurement plans by procuring entities: Approval within 5 days of annual public procurement budget plans of procuring entities with approval and amendment request from State Treasury Service

Research on norms for public procurement procedure: Research on procedure and methods complying with public procurement standards, and for the introduction of standard public procurement legal frameworks and regulations



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Clarification and recommendation of legal framework regulations: Presentation of an interpretation of legal frameworks and directives and recommendation for each demand institution when confusion on public procurement procedure regulations is caused by unclear public procurement legal frameworks, where an interpretation of legal frameworks constitutes a recommendation rather than an obligation

Monitoring of regulation observance status, etc.: Monitoring whether 2-stage bidding, single-source procurement, request for price quotation, pre-qualification conducted by each procuring entities are implemented fairly according to a procedure

Analysis and research of public procurement: Preparation of study report on public procurement after gathering statistics and performing an analysis of public procurement

Figure III-2 Operation Organization for Public Procurement in MEDTU

* Source: Ministry of Economic Development and Trade of Ukraine homepage(http://www.me.gov.ua)

3.3 Web Portal Agency (State Company [Zovnishtorgvydav Ukrainy])

State Company [Zovnishtorgvydav Ukrainy](hereinafter referred to as Web Portal Agency) is an affiliated institution under MEDTU, and has a personnel of about 150 people conducting public procurement-related and internal administrative tasks, mainly taking charge of services of posting bidding notices and results of selection of successful bidders by each procuring entity through web portals.

Registration of bidding notice and selection results for successful bidders along with issuance of publications: Services of producing, issuing and posting through web portals the bidding notice and selection results for successful bidders by demand institutions

Legal consulting service related to public procurement: Public procurement consulting service for procuring entities and procurement participants



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Price survey for procuring entities: Support of prior price survey service for procuring entities

Procurement-related education: Public procurement-related education by procuring entities and procurement participants

Statistics analysis for public procurement: Quarterly public procurement statistics analysis and reporting

Information management for goods, construction and services purchased through public funds: Management of other bidding information and data

Figure III-3 Organization Chart of Web Portal Agency

* Source: Zovnishtorgvydav Ukrainy homepage(http://vdz.ua)

3.4 Antimonopoly Committee of Ukraine

The Antimonopoly committee was established by presidential decree in 1993 to guarantee fair competition in Ukraines economy, and plays the diverse roles of monitoring and supervising to prevent unfair competition in various areas of the economy. Following a significant amendment of the public procurement-related acts in 2010, it came to take charge of tasks of reviewing and monitoring an authorized authority-related public procurement on major decision-making and citizens' complaints and objections concerning public procurement, as well as monitoring monopoly status related to public procurement.

Monitoring of monopoly status related to public procurement: Monitoring and supervising of business monopolies occurring in public procurement



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Receiving and processing of complaints: Taking charge of receiving and processing complaints related to public procurement3

Monitoring of unfair bidding and unfair contract status: Monitoring of unfair bidding and unfair contracts occurring before and after bidding, along with receipt of reports.

Figure III-4 Organization Chart of Antimonopoly Committee

* Source: Antimonopoly Committee of Ukraine homepage(http://www.amc.gov.ua) 3.5 State Treasury Service of Ukraine

The State Treasury Service takes charge of approving annual public procurement execution plans prepared by a bidding committee of each procuring entities, approving fund payment for executed public procurements and performing monitoring and supervision.

4. Public Procurement Laws and Regulations

4.1 Overview

4.1.1 Analysis of Subject and Scope related to Public Procurement

Review of public procurement-related laws and regulations Review of laws and regulations for public procurement management organizations Review of laws and regulations for public procurement tasks (processes) Review of laws and regulations related to the informatization of public procurement tasks

3 Total number of complaints received by the antimonopoly committee in 2012 was 787 cases, of which 712 cases were approved.



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Figure III-5 Laws and Regulations Analysis Related to e-Procurement and Checkup Subject

4.1.2 Laws and Regulations Review Criteria

Specificity status of ordinance: Review as to whether or not specific ordinances allow room for a procuring entity to make arbitrary decisions deviating from fairness

Status of conformance with objectives of procurement acts (Validity and rationality of ordinance contents): Status of conformance of public procurement with objectives related to the pursuit of transparency and efficiency

Formation status of an informatization foundation for public procurement tasks: Whether or not a foundation for introducing an e-Procurement system has been formed by introduction of legal frameworks for informatization of public procurement tasks.

4.2 Analysis of Laws and Regulations Structure related to Public Procurement

General laws concerning overall organization, authority, and tasks for public procurement in Ukraine were enacted by a new amendment in 2010 on laws and rules in The Law of Ukraine On State Orders.

In The Law of Ukraine On Public Procurement, a basic law for public procurement, goods related to overall public procurement are described.

As regulations related to informatization, On Amendments to the Law of Ukraine On public procurement, details related to the introduction of an electronic reversible auction procedure enforced in January 2013 are being enforced.

Regulations for electronic enforcement of public procurement are described in detail in Article 39 of a general law for public procurement entitled The Laws of Ukraine On Public Procurement



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Additionally, the needed details of law are as follows in accordance with regulations and orders of the Cabinet of Ministers.

The Department of Public Procurement and State Orders in MEDTU issues an order, which includes detailed directives and guidelines that enable the procuring entity to easily conduct public procurement.

Ordinances on e-Documents and e-Signatures constituting a basis in computerization of public procurement have already been in enforcement since its enactment in 2003.

For an e-Document act, there is "The Laws of Ukraine On electronic documents and electronic document circulation," while "The Laws of Ukraine On electronic digital signature" exist for an e-Signature act.

Table III-3 Legal Systems related to Ukraine Public Procurement

Categories Type Year Enacted Law Title Contents

Ordinances related to organization

and public procurement tasks

Law 2010 The Law of Ukraine "On Public Procurement"

Ordinance concerning general public procurement

Law 2000 The Law of Ukraine "On Natural Monopolies" Law on monopoly

Law 2013 The Law of Ukraine "On Peculiarities of the Procurement in separate sectors of economic activity"

Special law of public procurement on special regions

Regulation 2012

Cabinet of Ministers of Ukraine of 04.07.2012 602 "On approval of the Procedure for determining the master procuring entity interaction and entities with general procuring entity for framework agreements"

Definition of procuring entity

participating in public procurement and regulations upon

contract

Regulation 2012

Cabinet of Ministers of Ukraine of 04.07.2012 603 "On the performance characteristics of framework agreements"

Special regulations on enforcement of public procurement contracts

Order 2012

Order Minekonom-development of 24.04.2012 504 "On peculiarities of framework contracts" registered with the Ministry of Justice of 26.06.2012, 1059/21371

Definition of special items for contract

frames

Order 2012

Order Minekonom-development of 24.04.2012 503 "On approval of the list of goods and services that may zakupovuva for framework agreements" registered with the Ministry of Justice, 17.05.2012, 785/21098

Order for article lists with application of public procurement

laws

Order 2012

Order Minekonom-development of 19.12.2012 1449 "On Amendments to the Procedure for determination of the procurement" registered with the Ministry of Justice, 01.11.2013, 101/22633

Redefinition of terms for deciding public

procurement registration



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Categories Type Year Enacted Law Title Contents

Informatization -related ordinance

Law amendment 2013

The Law of Ukraine "On Amendments to the Law of Ukraine "On public procurement" on the introduction of an electronic reversible auction procedure"

Law on electronic enforcement of public

procurement

Law 2003 The Law of Ukraine "On electronic digital signature" e-Signature act

Law 2003 The Law of Ukraine "On electronic documents and electronic document circulation"

e-document act

Law 2010 The Law of Ukraine "On Protection of Personal Data" Act for personal

information protection



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4.3 Analysis of Key Laws & Regulations related to Public Procurement

4.3.1 Review of Laws & Regulations in The Law of Ukraine On Public Procurement for Public Procurement Management Organizations

Categories Related Articles Issues

The Department of Public Procurement

and State Orders in MEDTU

Articles 7, 8

Article 7-2) Authorized Agency is the central body of the executive authority responsible for implementing the state policy in the field of public procurement ~ (Remainder omitted)

-

- Article 7-2 (Definition of R&R of the Department of Public Procurement and State Orders) defines the roles & responsibilities of the Department of Public Procurement and State Orders in MEDTU.

* Refer to Chapter III-3. Organizations and Their

Roles & Responsibilities in detail

State Treasury Service of Ukraine

Articles 7, 8

Article 7-4) The central executive body that implements the state policy in the field of treasury budget: to payment under contracts of purchase checks availability ~ (Remainder omitted)

- Article 7-4 (Definition of R&R of the State Treasury Service of Ukraine) stipulates the roles & responsibilities of the State Treasury Service of Ukraine in the public procurement by act and regulation.

* Refer to Chapter III-3. Organizations and Their Roles & Responsibilities in detail

Antimonopoly committee of

Ukraine Articles 7, 8

Article 8-3) Antimonopoly Committee of Ukraine, as a body of appeal to an impartial and effective protection of the rights and legal interests of persons involved in proceedings related to public procurement, creates a permanent administrative board with complaints about violations of the law on public procurement ~ (Remainder omitted)

- Article 8-3 (Definition of R&R of Antimonopoly committee of Ukraine) stipulates the roles & responsibilities of the antimonopoly committee, an authority that raises objections in terms of public procurement.

* Refer to Chapter III-3. Organizations and Their Roles & Responsibilities in detail



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4.3.2 Review of Legal Frameworks in The Law of Ukraine On Public Procurement for Processes and Procedures of Public Procurement


Scope and Designation of

Procuring entity

Articles 1-10, 1-21, 4

Article 1-10) Procuring entities - spending public funds, engaged in the public procurement procedure established by this Act ~(Remainder omitted)

- Article 1-10 (Definition of Procuring Entity) A demanding authority, who is referred to as a "Procuring entity," is defined as an organization that participates in the public procurement process using the public funds

Purchase basis for Procuring entity Article 2-1

Article 2-1) This law applies to all procuring entities and purchasers of goods and services completely or partially from public funds ~ (Remainder omitted)

Order of the Ministry of 26.07.2010 921 "On approval of the determination of the procurement"

II. Determination of the procurement of goods and services III. Determination of the procurement activities

Ex) 2.1. Subject of procurement of goods and services is determined by the procuring entity in accordance with paragraphs 23 and 30 of Article 1 of the Law of Ukraine "On Public Procurement~(Remainder omitted)

- Article 2-1 (Public Procurement Act Application of Procuring Entity) Stipulates that this act shall be applied to all procuring entity which implement the public procurement using the public fund, together with the definition regarding the range of demanded goods.

- Order of the Ministry of 26.07.2010 No. 921

"On approval of the determination of the procurement stipulates the process and the basis the procuring entity shall follow to implement the procurement of goods, services and constructions; stipulates the basis on which the public procurement act shall be applied to the procuring entity; and, provides the detailed specific instruction to be presented for goods, services and construction.



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Threshold of Demanding

Material Article 2

Article 1-23) Services - any article of purchase (except for goods

and works), including transport services, technology development, research, design development, health and public services, leasing, lease (rent) and financial and consulting services, current repairs; ~ (Remainder omitted)

Article 1-30) Goods - goods, objects of any type and purpose, including raw materials, products, equipment, technology, objects in solid, liquid and gaseous state, as well as services related to the supply of goods where the value of such services does not exceed the cost of the goods; (Remainder omitted)

Article 2-1) (The above omitted) The value of purchases of good(s), service(s) is equal to or exceeds 100,000 UAH (in construction 300,000 UAH), and work 1 million UAH 1 UAH 130 KRW

Article 2-3) ex) This Law shall not apply to cases in which the subjects of procurement are: Products sold under the Law of Ukraine On State Material Reserve (51/97-VR) procured by procuring entities ~ (Remainder omitted)

- Article 1-23, (Definition of Demanded Service Goods to which public procurement process shall be applied) The public procurement which includes transportation service, technology, design research, medical and public service, consulting, maintenance, etc. is defined as "Service".

- Article 1-30, (Definition of Demanded

Service Goods to which the public procurement process shall be applied) Public procurement which includes materials, goods, equipment, solid, liquid, etc.

- Article 2-1, (Threshold of Demanding

Material) Stipulates the definition that demanded goods are 100,000 UAH (approx. 11,627 USD) and higher for goods and services and 300,000 UAH (approx. 34,883 USD) higher for construction, 1,000,000 UAH (approx. 116,279 USD) higher for works respectively.

- Article 2-3, (Exceptions) Includes more

than 36 exceptions to public procurement application



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Procurement Plan Article 4-1, 2

Article 4) The procurement shall be carried out in accordance with an annual plan. The annual plan and changes thereto shall be sent to the State Treasury Service of Ukraine, an annual plan, a cost estimate (a provisional cost estimate), a financial

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