Procurement in Ukraine: getting the basics. All about tendering
Tenders: legislation, procedures, documentation, the order of carrying out and participation.
Prozorro public procurement
Public procurement. Prozorro electronic procurement system — functionality, platforms, rules. New: procurement through electronic catalogs — Prozorro Market marketplace.
Commercial tenders and auctions: APS SMART bidding automation
Electronic bidding as part of a single procurement system: automation from a request to the delivery
Tenders and auctions automation
Procurement with APS SMART is the automation of tenders and all electronic bidding procedures, which ensures the best choice among the tender proposals received, the maximum credibility of procurement actions and the full process transparency for the management and monitoring organizations.
Benefits for buyers
Benefits for sellers
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Topical issues of tendering in Ukraine
What is a tender and where is tender bidding applied
A tender is a supplier selection process (of goods, works and services) on a competitive basis. As a rule, a tender is considered as bidding with reduction or a reverse auction, where the winner is the participant who has offered the lowest delivery price. Such procurement arrangement allows the buyer (organizer of tenders) to optimize costs, monitor market price fluctuations and expand the supplier base. Suppliers (bidders and winners) can thus build a long-term relationship with the buyer of their goods (by signing a supply contract) and expand their customer base.
Automated information system APS SMART will not only considerably simplify the tender procedures and reduce the sensitivity of the result to the qualifications of procurement managers, but also consolidate all procurement along with processes into a single framework for monitoring and cost saving purposes. Get more information about the system capabilities on our website.
The legislation of Ukraine obliges state-owned enterprises to make their purchases exclusively publicly and in compliance with fair competition among suppliers, therefore the term “tender” often implies government or, in the definition of law, public procurement. PROZORRO electronic information system was created to publish information on public procurement carrying out and for announcement of the results.
How the tendering is regulated
The main legislative act that regulates tendering procedures is Law of Ukraine “On Public Procurement” No. 922-VIII as of December 25, 2015, as amended and supplemented. The law entered into force for all state buyers on August 1, 2016. The law regulates the procurement for the needs of the state and territorial communities and does not apply to the so-called corporate or commercial tenders, i.e. commercial enterprises and organizations procurement, however e-platforms of commercial tendering adopt the same general principles of carrying out.
New tendering rules starting from 2020
On October 16, 2019 the President of Ukraine signed Law No. 114-IX amending the current Law «On Public Procurement». The changes are so significant that in fact the actual law is set out in the new version. They come into force 6 months after the publication of Law No. 114-IX, from April 19, 2020.
Classification (types of procurement)
Depending on the amount, procurement is divided into “below the threshold” (less than 200 thousand UAH for goods and services and 1.5 million UAH for works) and “above the threshold” (the purchase amount is equal to or greater than the specified amounts). The terminology is commonly used, but not directly specified in the law. Below-the-threshold procurement is carried out in accordance with general principles specified by the law, but the process of its carrying out was not separately regulated, at that such purchases could be carried out without using Prozorro system.
How simplified procurement is carried out
“Simplified procurement” is a term, that was introduced by law No. 114-IX, and it implies purchases in the range from 50 to 200 thousand UAH for goods and services, and up to 1.5 million UAH for works. Such procurement will have to be carried out through e-tendering on accredited Prozorro platforms or by buying from sellers through PROZORRO MARKET.
How procurement is carried out
The whole process of public procurement, from planning to the conclusion of a supply contract, is public. The annual procurement plan and all the changes to it must be published on Prozorro portal. After the announcement of the start of the procurement procedure in the system and the publication of the corresponding tender documentation, the procedure is considered open. After the identification of the winner, the reports on the results, on the contract conclusion and performance are being published. The entire procurement decision-making process is carried out through a tender committee specially set up by the buyer.
What tender procurement procedures do we have
The main procurement procedure is public tendering, i.e. bidding in which any interested potential supplier can take part. The new procurement rules (valid from 19.10.2020) introduce restricted tendering, in which participants will go through the qualification process. All bids are handled through an electronic auction (the second stage of bidding after receiving/selecting of proposals), which determines the winner. The competitive dialogue procedure can be applied to procurement of complex services or works, at the stage of requirements formulation. The negotiating procurement procedure is carried out as an exception in cases specified by law and, in essence, is not a tender procedure, since it does not imply a competitive selection of proposals.
How to set up tender documentation
Tender documentation is a complete list of requirements for a potential supplier announced by the buyer. The documentation should include comprehensive information about the subject of procurement, delivery terms, selection criteria for participants and the winner, requirements for the tender proposal and the deadline for its submission. In case of requests from participants, the buyer provides additional clarifications or makes amendments to the published tender documents with an automatic extension of the deadline for proposal submission.
What is a tender guarantee
The buyer has the right to request tender securities, as well as the fulfilment of a supply contract. As a rule, funds to ensure compliance are provided to the participant by the bank in the form of a bank guarantee. In this case, the tenderer simultaneously with the proposal submission or when the contract is concluded provides a tender guarantee in the required amount. If a participant does not win the tender, the amount of the tender security shall be returned. Cases of security non-return, as well as its maximum allowable size are determined by law.
Prozorro Public Procurement System
What is Prozorro electronic procurement system for?
PROZORRO information system was created to tackle corruption through the transparency of procurement information for the state needs (procurement of state-owned enterprises and corporations) and territorial communities. The system performs the following core functions:
- State (public) procurement database storage;
- E-tendering (auctions) based on the principles of fair competition, transparency and economic efficiency.
The e-procurement system provides equal and open access to any information on public (state) procurement, from planning and announcing about the procurement procedure opening to its completion (fulfilment of the concluded supply contract). This gives an opportunity to appeal against the procurement decision if it discriminates against other participants, as well as to monitor the procurement in accordance with the legislatively established procedure. Prozorro electronic tendering provides an independent (automatic) selection of the most cost-effective selling proposition for the supply of goods (services, works).
The system structure and participants
Prozorro electronic procurement system consists of Prozorro.gov.ua portal, which publishes each issued tender and official clarifications on tender carrying out, and a network of electronic platforms through which buyers and suppliers access the information system: tenders’ issuance and realization. Electronic marketplaces need authorization to join the system (they undergo the verification of compliance with the system requirements).
APS SMART procurement management system is designed to integrate with Prozorro, as well as with internal corporate ERP systems, which contributes to the needs consolidation throughout the corporation and the approval process acceleration. With APS SMART public procurement will become faster and economical. Learn more about the benefits of the system for public sector organizations on our website.
How Prozorro public procurement is realized
The tender organizers are required to publish the information on public procurement in the system. The terms for participation are determined by the buyer, however, they should not contain discriminatory requirements – i.e. such special conditions, that give the opportunity to participate in the tender only to a limited number of persons, regardless of the availability of similar required goods (works, services) and the delivery terms offered by other participants.
A participant who wants to offer the buyer the goods (works, services) registers in the system and submits a tender proposal. A participant can submit only one proposal within one and the same lot. On e-platforms a fee is charged for the submission of tender proposals. The tender proposal is automatically evaluated (if the customer has also established some other criteria, except for the price, the present value price is calculated according to the method specified by this customer). The proposal may be rejected regardless of the declared price if the potential supplier does not meet the criteria established in the tender documentation. If the proposal is accepted, the next step is an electronic auction. Before its carrying out each participant can see all the prices proposed. During the auction, the bidder may reduce the price initially proposed by him or her by at least one step at each stage of the auction (the step size is set by the auction organizer in compliance with legal restrictions). Once the winner is identified, the information about submitted proposals is automatically disclosed and a notification about the winner of the auction is sent to the participants.
Prozorro Market: electronic catalogs (e-catalog)
Prozorro Market is part of Prozorro public procurement system, which operates based on the online store principle. Buyers can exercise here below-the-threshold or simplified procurement. Suppliers go through the selection process, performed by the e-catalog administrator (verification for compliance with the published criteria), and place their goods in the catalog with current prices. The customer publishes the order and selects goods. During the selection process, he/she has access to the propositions (items description and price information), but not to the supplier profile. After selecting and receiving confirmation from the supplier, the information is automatically disclosed and the parties enter into a supply agreement, and the buyer publishes a purchase report. The process, built on the principle of a marketplace, is convenient for “standard” regular purchases, for example, stationery and office supplies, and significantly simplifies and speeds up the procurement process. The principles and procedures for public procurement through an electronic catalog (what is an e-catalog and how it operates) are regulated by Law of Ukraine No. 114-IX as of September 19, 2019.