Rada drafts limited access of non-residents to state procurement

Ukraine’s parliament approved on Dec. 7 in first
reading a bill that grants enormous privileges for Ukrainian-made products and
services at state procurement tenders. The bill “Buy Ukrainian, Pay Ukrainians”
introduces the notion of a “given price” at state tenders, which is a
tender price adjusted for a localization multiplier that is a function of
multiple factors. Effectively, this allows “local” providers of goods and
services to win state procurement tenders even if their bid is much higher (up
to 1.4x more) than a “non-local” bidder.

To prove the “localization” of a good or service, a
bidder will have to provide over 20 certificates that, according to the
opponents of the new regulation, will increase the costs of participation in
state procurement tenders and limit access to them for smaller business.

Alexander Paraschiy: The bill
not only discriminates against foreign-based bidders, but it also adds a lot of
uncertainty to locally based players and makes the state tender process much
more complicated, and therefore less transparent and more prone to corruption.

In our view, it will not only increase procurement
costs for the state and state companies, but it also may significantly expand
the time of the procurement process, which may result in the disruption of the
supply of goods and services to state companies. We expect Western business
organizations and even governments will lobby parliament to amend the bill in
the second reading, if not derail it altogether.