Development of the procurement system using budget funds

The adoption of the Law of Ukraine "On Procurement of Goods, Works and Services with State Funds" is a decisive step in creating the necessary legislative framework for building a unified system of procurement using budget funds, consistent with generally recognized rules of world trade.



To train specialists in the field of public procurement, the Cabinet of Ministers of Ukraine adopted Resolution No. 734 of June 1, 2002, "On the Organization of Training and Advanced Training of Specialists on Issues of Implementing the Procedure for Procurement of Goods, Works and Services with Public Funds," on the basis of which a large-scale program of training and advanced training was launched, primarily for specialists of contracting authorities—administrators of public funds.

The main goal of the functioning of the system of procurement with budget funds of the Lutsk City Council is the optimal and rational use of state funds, which is ensured by a competitive and transparent environment in this area.

The analysis of the public procurement system for 2003 and the monitoring of procurement of goods, works and services with state funds by the Lutsk City Council and its subordinate departments—chief administrators of state budget funds—was carried out on the basis of state statistical reporting under Form No. 1-tenders (tenders) “Report on Conducting Tenders (Tenders) for the Procurement of Goods, Works and Services with State Funds.” Reports under statistical reporting Form No. 1-tenders (tenders) are submitted by

The overall quantitative characteristic of procurement procedures for 2003 shows that the number of procurement procedures for goods, works and services using state funds applied by fund managers is 337, of which competitive procedures account for 88.7%.

In 2003, 806 participants took part in the tenders, of whom 339 were recognized as winners of the tenders.

The average number of participants in the open tender procedure was 2.4 participants per announced tender, which indicates a sufficient level of ensuring a competitive environment during open tenders; under the request for price quotations procedure, the average number is 2.5 participants per announced tender.

The total annual amount of state funds planned by customers in 2003 for the procurement of goods, works and services using state funds is UAH 7,759.6 thousand.

Based on the results of the tenders held in 2003 for the procurement of goods, works and services with state funds, 375 contracts were concluded for a total amount of UAH 6,163.2 thousand, which constitutes 79.4 percent of the total annual amount of state funds planned for the procurement of goods, works and services.

The structure of the cost characteristics of state funds for 2003 shows that the largest amount of state funds was used under the price quotation request procedure — UAH 4,266.5 thousand, accounting for 69.2% of the funds; the smallest — the procedure for procurement from a single contractor — accounts for 1.3% and amounts to UAH 80.3 thousand, which customers declared for tender for the procurement of goods, works, and services with state funds in the reporting period (Diagram 1).



The structure of public funds allocated by customers for the procurement of goods, works, and services in 2003, broken down by budget, shows that 51.4% of the total annual amount of public funds is the local budget, while the share of funds from the State Budget of Ukraine is 35.9% (Diagram 2).



An important element in the process of introducing competitive procedures in procurement is the control system, in particular by including the issue of compliance with public procurement legislation in inspections carried out by supervisory authorities.

The most common violations remain procurement without conducting procurement procedures. The inspections also established cases of procurement of goods, works and services with public funds in violation of legal requirements regarding the choice of procurement procedures, preparation of tender documentation, etc.

Heads of institutions and organizations where audits and inspections have revealed violations of current legislation on the procurement of goods, works, and services with state funds are sent mandatory requirements to eliminate them and hold the guilty persons liable.

During the said inspections, the following violations of current legislation in the field of public procurement were identified:

• Conducting tenders (competitive bidding) without publishing announcements in the information and analytical bulletin "State Procurement Bulletin";
• violation of the deadlines for submitting notices on the results of tenders to the "State Procurement Bulletin", by which the customer informs other contractors of the tender results;
• determination of the winners of procurement procedures in cases where, in accordance with part one of Article 28 of the Law of Ukraine "On Procurement of Goods, Works and Services with State Funds", tenders must be cancelled;
• procurement of goods, works and services under the procurement procedure from a single contractor without obtaining approval from the specially authorized central executive body for coordination of procurement of goods, works and services;
• violations in the preparation of tender documentation: the tender documentation contains references to a specific trademark or company, patent, design or type of procurement item, its source of origin or manufacturer; overstatement of the amount of tender security; broadening of the grounds for non-return of tender security; there is no methodology for evaluating tender proposals.

In local executive authorities - administrators of state funds, that is, in the civil service, the tender committee has been designated as responsible for organizing and conducting public procurement procedures in the structures of all administrators of state funds.

The work of tender committees is connected with the implementation of a whole range of functions that are carried out on an ongoing basis and with the preparation of a significant number of documents. In particular, the main actions of the committee include: preparing and submitting for publication announcements on tenders; collecting applications from bidders; coordinating the work of sectoral departments and directorates on the development of tender documentation; maintaining reporting on procurement procedures; coordinating the work of tender commissions; coordinating the work of experts; ensuring communication with bidders and the organizations representing them; preparing draft contracts; maintaining state statistical reporting; participating in dispute resolution, etc.

In connection with the foregoing, we consider it appropriate to point out to the heads of local executive authorities, institutions, and organizations - administrators of state funds the expediency of allocating a separate staff position to perform the functions of secretary of the tender committee.

Main problematic issues to be resolved in 2004:

• improper compliance by administrators of all levels with legal requirements for public procurement;
• lack of experience and sufficient professional qualifications among officials whose activities are related to public procurement;
• slow implementation of the mechanism of interdepartmental coordination of public procurement;
• delay in the implementation of information technologies in the field of public procurement, in particular software tools and Internet resources for automating public procurement procedures, including computerization of procurement procedures.

Main tasks for 2004:

• ensuring transparency of procurement procedures in order to prevent economic abuses in public procurement;
• ensuring control over compliance with competitive principles of public procurement in accordance with the requirements of current legislation;
• organization of training for specialists of municipal executive authorities on the organization and conduct of bidding (tenders) in public procurement;
• promoting the timely formation of the state order to meet the highest-priority state needs;
• deepening international cooperation on public procurement issues.

Risks

• constant introduction of amendments to the Law of Ukraine "On the Procurement of Goods, Works and Services with State Funds";
• suspension of active international cooperation on public procurement issues.

Main state policy measures whose implementation will make it possible to achieve the goals set for 2004.

An important step is the formation of an order for the needs of the city budget, which must be formed to ensure the fulfillment of the highest-priority needs of the city.

In accordance with existing legislation, goods, works and services procured within the local budget must meet the city's needs for products necessary for solving socio-economic problems and implementing target programs.

For 2004, the priority needs of the city include:

• ensuring the development of the material and technical base of science, medicine, and sports;
• implementation of social and humanitarian policy, including training of specialists, scientific and scientific-pedagogical personnel, qualified workers, retraining and advanced training of personnel, publication of printed products, provision of information services, carrying out restoration and repair works on immovable cultural heritage monuments, creation of national films and audiovisual programs, purchase of works of fine, dramatic and musical art, provision of medicines and immunobiological preparations, etc.;
• apply the mechanism of interdepartmental coordination in the procurement of certain groups of goods;
• training and advanced training of specialists in the field of public procurement, including at the regional level;
• improve information support for public procurement and, as a result, increase the transparency of their procedures;
• promote the introduction of information technologies in the field of public procurement, including computerization of procurement procedures (within the framework of the Informatization Program of the City of Lutsk for 2001-2003);
• form and ensure the implementation of the state order.

Criteria for the effectiveness and efficiency of implementation of public policy tasks:

• transparency of the public procurement market, an indicator of which is the increase in the number of announcements about tenders and their results published in the Ministry of Economy's bulletin "Bulletin of Public Procurement";
• timely approval of the volumes of the city's needs for the current year and its proper implementation.