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  • OECD for the first time presented a review of the effectiveness of public procurement in the energy sector on the example of Ukrenergo

    For the first time, the Organization for Economic Cooperation and Development (OECD) presented a review of public procurement in the energy sector of Ukraine on the example of Ukrenergo. The project was initiated by Ukrenergo and lasted for a year and a half.

    The review was presented online on June 15 with the participation of representatives of the Office of the President of Ukraine, the Cabinet of Ministers of Ukraine, the Ministry of Energy, the Ministry of Finance, the Antimonopoly Committee of Ukraine (AMCU), people’s deputies, NEURC, representatives of OECD member countries and international financial institutions, journalists and other participants.

    The document provides an assessment of the effectiveness and transparency of Ukrainian procurement legislation, an assessment of the effectiveness of NPC Ukrenergo’s procurement system, as well as OECD conclusions and recommendations on combating conspiracy in public procurement in Ukraine’s energy sector and progress in improving competitive practices.

    “A thorough analysis of Ukrenergo’s procurement practice shows that the Company is making great efforts to improve its procurement system and has already made significant progress in professionalizing this practice. Ukrenergo’s efforts were focused on creating an efficient and professional procurement structure with strict safeguards against fraud and corruption. This is a real progress, however, Ukrenergo has room for perfection”, the OECD states.

    The review states that the principle of innovation and adoption of best practices applies to the procurement of Ukrenergo, which is vital for its mission – to ensure the functioning of a competitive electricity market and joining the ENTSO-E. The OECD experts note that Ukrenergo was one of the first state-owned companies to transfer all purchases to the ProZorro platform, introduced the institution of authorized persons responsible for procurement, established the Directorate for Supply Chain Management with specialized procurement managers, auxiliary internal audit functions and compliance. Recently, the Company has initiated informing the AMCU for investigation of illegal conspiracy suspicions during the bidding and received a certificate of compliance of the procurement system with the standards of Chartered Institute of Procurement and Supply (CIPS).

    “After a successful thorough reform of the procurement function within Ukrenergo, we realized that in order to achieve maximum efficiency in this area, we need to change the system of relations with Ukrenergo’s external contractors. The prevention of possible collusion among bidders is one of the key elements of these changes. While preparing this report, we tried to be as open as possible and provide them with all necessary information. I am convinced that the results of the report and generated recommendations will be useful not only for Ukrenergo as a direct participant in the study, but also for other state-owned companies seeking to achieve maximum efficiency of the procurement function. We are sincerely grateful to the OECD experts for this project and cooperation!”, said Volodymyr Kudrytskyi, Chairman of the Management Board of NPC Ukrenergo, during his speech at the presentation of the document.

    The OECD recommendations on combating conspiracy during bidding provide a normative indicator for public procurers that can be adapted to the needs of each institution and the relevant national legal context. In particular, the OECD notes that Ukrenergo should develop appropriate solutions that are best adapted to the specifics of the company’s activities.

    Using OECD recommendations, Ukrenergo will continue the successful transformation of the procurement system. In particular, measures will be taken to prevent conspiracies of bidders: conducting thorough and comprehensive market research, strengthening the competitiveness of biddings, developing unified tender documents and using indicative methods of detecting conspiracy between bidders, etc.

    An additional section, addressed to the Government of Ukraine, offers recommendations for amending Ukrainian procurement legislation, in particular to eliminate risks that may facilitate conspiracy between bidders.

    “Our Company’s procurement is one of the drivers of development and an integral element of Ukrenergo’s strategy on the way to integration into the European energy space. It means that our procurement system must meet the high standards of competitiveness and accountability that our European colleagues adhere to. One of the key tools to achieve this goal is ongoing cooperation with the OECD”, emphasized member of the Management Board of NPC Ukrenergo Maryna Bezrukova.

    “The study of public procurement on the example of Ukrenergo is another example of our cooperation with the OECD, which brings incentives for the development of the Company. Prior to that, we cooperated in creating a review of corporate governance practices in state-owned enterprises, which included an in-depth analysis of corporate reform in Ukrenergo. We are very grateful to the partners for the fruitful cooperation and hope to continue effective cooperation in the implementation of world best practices in the work of Ukrenergo and the power industry in general”, said member of the Management Board of NPC Ukrenergo Maksym Yurkov.

    The OECD review was created within the “Supporting Energy Sector Reform in Ukraine” project in accordance with the Memorandum of Understanding between the Government of Ukraine and the OECD with the financial support of the Government of Norway.

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