Record-breaking savings of over UAH 6.7 billion on Ukrenergo’s public procurements
Ukrenergo NPC has released a report on its public procurements in the first half of 2017. According to the Company’s estimates, the total amount saved since the inception in the fall of 2015 of the public procurement transparency policy and the launch of systemic reforms at our company has exceeded UAH 6.7 billion.
Savings have been achieved for all types and areas of procurement, both foreign (paid for with loans from international financial institutions: IBRD, EBRD, EIB) and domestic, technical (reconstruction of generating facilities, construction of power transmission lines, replacement of equipment) and administrative. Partial savings have also been achieved by revising existing contracts and signing additional agreements on cost reduction.
For instance, the amount of the contract on construction of the 750 kV Rivnenska NPP – Kyivska SS overhead power line transmitting electricity from Rivnenska and Khmelnytska NPPs was reduced by UAH 241 million, including UAH 86.74 million saved on procurements of works and equipment with Ukrenergo’s own funds and further UAH 154 million on international procurements paid for with funds provided by international financial organizations.
“Only the transparency, equality of conditions for all participants and competition at tenders can guarantee fair prices for goods and services. These three conditions help save hundreds of millions of hryvnias on every facility without reducing the physical volume of work and the number of equipment units”, Ukrenergo CEO Vsevolod Kovalchuk commented on his company’s achievements.
All information regarding Ukrenergo’s procurements is publicly accessible on the special online trading platform (http://tenders.ukrenergo.energy.gov.ua). The Company was one of the first to become a volunteer and the most active participant of ProZorro (an e-procurement system), finishing top in the Win of the Week nomination on numerous occasions. Overall, ProZorro helped the Company save UAH 2.5 billion on domestic procurements, including UAH 1.55 billion saved on transformer and reactor procurements.
Our activity is closely monitored by influential international civic organizations, such as CoST Ukraine and Transparency International Ukraine.
Savings on numerous investment projects help our company free funds and expand the list of works under these projects (in particular, in cooperation with international financial institutions), and launch new initiatives concerning development of IPS of Ukraine. For instance, 43% savings off the expected cost of construction of the 750 kV Zaporizka NPP – Kakhovska SS overhead power transmission line (financed by EBRD and EIB) allowed to include to this project the construction of the new 330 kV Zakhidna substation at the estimated cost of €65 million, or UAH 1.89 billion (thus saving on an EBRD loan).
In the whole number of cases, we were able to reduce the expected project costs versus their estimated cost at the feasibility study stage. For instance, detailed analysis by Ukrenergo’s specialists of the project envisaging construction of the new 500 kV Kreminska substation helped reduce the construction cost from estimated UAH 1.72 billion to expected UAH 1.3 billion. An open tender brought the contract amount further down to UAH 1.27 billion, which meant that the aggregate savings on this project amounted not to UAH 30 million as it seems at the first glance but to UAH 450 (!) million, or over 25% of the initial figure.
“When I joined Ukrenergo, my first objective was to straighten up the company’s procurements by making them totally transparent and eliminate the effect of human factor on decision making process in this sphere. In addition, we have engaged leading international organizations to monitor our procurements. As a result, we have billions of hryvnias in savings, which haven’t been stolen and de-facto remain in the pockets of our consumers”, Vsevolod Kovalchuk said.