President Acts to Guarantee Openness in Defense Ministry's Procurement Process

Since the beginning of the year, a corruption scandal in the Ministry of Defense has been raging in the space. The publication of articles, by the investigative journalist Yuriy Nikolov, led to the dismissal of senior officials and the start of anti-corruption investigations. He managed to obtain a copy of one of the contracts worth more than UAH 13 billion, for food supplied to the Ukrainian army, between a private company and the Ministry of Defense. It was only one of 8 contracts for food that the Ministry of Defense signed in December 2022 for the whole of 2023.

In an exclusive interview with KyivPost, Nikolov explained that his source had links to the military and was one of the first to see this contract which was signed at the end of December and came into force in February. 

"After the holidays, my source received it, looked at it and saw the numbers involved. He handed me a copy with the words: "Look at the food prices in the contract, and then at the contract volume."

I printed out the prices in the contract which include potatoes for UAH 22, eggs for UAH 17 and cabbage for UAH 30. I took a copy of the contracts with me to the nearest Varus store and began to compare prices. I soon realized they the contract prices were three times more expensive than the same products in the store; UAH 22 for potatoes compared with seven in the store.

“We began to think that we should do something about it; this was just one of eight contracts worth UAH 13 billion ($350 million)." Nikolov explained.

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 A special anti-corruption council had been set up in the Ministry of Defense to address this problem of non-transparent procurement. In the two months that have passed since then and, while the Ministry has lowered many procurement prices, the prices for some items are still much higher than market prices - the Ukrainian media has published a number of reports on this.

According to published information the December contracts included prices for potatoes ranging from UAH 17.7 to UAH 27 per kilo. After the scandal, some lowered the price to UAH 12.6, while others kept it at UAH 17.7.

In terms of quantity, potatoes are at the top of the Ministry of Defense's procurement for army rations and so represents the single most expensive item - solely because of its large volumes.

The Minister of Defense, Oleksiy Reznikov,  explained that the price difference was partly a result of the additional expense in transporting items to the frontline. 

"The delivery cost to the front line is more expensive than usual, but how much more expensive? Should it cost the same as delivering Glovo from Miami to San Jose?" commented Nikolov. 

Yaroslav Yurchyshyn, Deputy Chairman of the Anti-Corruption Policy Committee, commented to KyivPost, that one of the reasons for high prices to the Ministry is that supplier competition is limited because contracts are closed to the public for commercial secrecy and security reasons. 

"Of course, many big retailers on the market can participate in the tenders for supplying products to the army. But many are not interested because the purchasing process is not transparent, and some corrupt mechanisms are involved. This is the result of secrecy in this area," he explained.

According to Nikolov, before the full-scale invasion, the Ministry of Defense published the contracts on the electronic system Prozorro. 

“During the war, we were prevented from publishing procurement information - that's how it became secret. But the only secret information should be the location of military units, which we removed from the published documents," he said.

On Mar. 21, President Volodymyr Zelensky signed a law introducing transparency in defense procurement, which requires defense contracting authorities to publish prices for goods and services in the Prozorro electronic system. The law is meant to attract more suppliers and improve the MoD procurement process.