Despite the state's constant claims of trying to make public procurement procedures as transparent as possible and closing all loopholes for potential abuse, we occasionally hear about someone lining their pockets through tenders. Most often, this involves inflating prices for goods or services ordered by state or municipal institutions. However, in reality, there are far more opportunities for abuse and manipulation in tenders. Read about the most typical ones in this UNN report.
Inflation of the estimated value
This is the most common manipulation scheme. It occurs in almost all areas of procurement for goods and services, but perhaps most frequently in the construction sector. As DOZORRO analysts noted back in 2024, effectively every thirteenth hryvnia in the contracts they monitored was an overpayment. They point out that inflation usually occurs in the cost of construction materials.
Prices for construction materials are inflated by tender participants — construction companies. However, they inflate them because they can — because the estimated procurement value allows it. Ultimately, businesses look for opportunities to earn, so they offer their price within the limits of the estimated value. After all, the estimated value determined by the customer is the maximum amount they are willing to pay
Inflation specifically on construction materials occurs due to the over-regulation of the cost of work, labor compensation, and the use of equipment. However, the situation with the cost of materials is somewhat different, and price adjustments are possible here.
Also, suppliers sometimes inflate the volume of work, for example, by indicating more man-hours than are actually required to complete the assigned task.
"Tailoring" tender documentation
Another common scheme is tailoring tenders for a specific supplier. This usually refers to discriminatory terms in the tender documentation. For example, requiring a site inspection report signed by both parties — the customer and the supplier. Or, the customer may go beyond the requirements provided by the licensing conditions for a particular type of activity. Such manipulations are quite common in the field of medical procurement.
For example, in 2024, a hospital in Kryvyi Rih was purchasing an MRI machine. It turned out that the medical and technical requirements matched a machine from a specific manufacturer, Philips. Furthermore, suppliers of this equipment were required to provide an original letter from the manufacturer, representative, office, dealer, or distributor.
Medical drugs can also become the object of such manipulations. To achieve this, one or two items that can only be supplied by a limited circle of providers may be added to a lot containing several positions.
Information leaks
Among the common schemes is the "leaking" of information to participants (prices, contract terms). Sometimes information about participants' tender proposals is also leaked. For instance, journalists pointed to the possibility of such practices in tenders conducted by the Cherkasy Regional Oncology Center. Attention was drawn to the fact that the company "Onkomedyka" frequently emerges as the winner in procurements there. Mostly, this company was the sole participant in the procurement, and in cases where competitors appeared at the tender, it still won, sometimes with a proposal that could be higher in price than others. Such actions may indicate that closed information about a competitor's tender proposal was passed to "Onkomedyka" representatives so that the firm could submit a higher bid to win the competition.
Twin procedures
Customers announce several identical tenders simultaneously: same name, estimated value, technical specifications, number of units of goods, or volume of services. The goal is to move to a negotiated procurement procedure as quickly as possible, which is possible if the bidding has been canceled twice. The negotiated procedure itself allows bypassing the tender process and selecting a predetermined supplier.
Collusion between participants
The Antimonopoly Committee strictly monitors such schemes. It freely obtains information regarding the IP addresses used when uploading tender proposals — an IP match is one of the key pieces of evidence of collusion. But tender participants, of course, bypass this safeguard. In such cases, one should look for the participation of related parties in a single tender; similarities in the participants' tender documentation; the existence of links between the customer and the participant prior to the tender; and coordinated actions by participants. There are many examples of detecting coordinated actions, and sometimes companies have to pay millions in fines; for example, "Prodmet" and "Stils Ukraine" were fined 9.2 million UAH by the AMCU for coordinated actions during the procurement of alloys and pipes.
Manipulations with contracts after the tender
This scheme involves the terms of the contract signed with the winner not matching the technical requirements announced during the tender. Or, sometimes the customer enters into additional agreements that significantly increase the cost of services.
The Verkhovna Rada recently passed a new law on public procurement, which is intended to bring tender procedures and their oversight closer to European Union requirements. It is expected that this document will help the State Audit Service more actively and quickly identify new manipulations resorted to by procurement participants.