Ukraine

Business

Journal

11:21 AM Saturday, February 25, 2017
Law
​ProZorro: Ukrainian Transparency Site Takes Top Europe Prize
Editor
Prozorro has saved taxpayers $315 million in less than a year and as a result was awarded 1st prize at the Open Government Awards in Paris
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

KHARKIV -- In the long fight against corruption, Ukraine’s clean government advocates have reason to celebrate: Ukraine’s ProZorro took top honors Wednesday at the Open Government Awards 2016, held in Paris.

ProZorro is a public e-procurement system designed to replace Ukraine's old paper tenders. According to the system’s analytics, ProZorro has saved taxpayers $315 million in over 200,000 closed tenders since its launch in February, 2015.

The name is a play on the Ukrainian word for ‘transparently’ and the 19th century Mexican masked crusader for justice.

The country's public procurement sector has long been a goldmine for corrupt officials and businessmen. ProZorro’s head Vasyl Zadvornyy estimates that Ukraine loses $2.4 billion annually through fixed tenders.

ProZorro aims to shut down this illicit goldmine. All state purchases above UAH 200,000 ($7,400) for goods, and above UAH 1.5 million ($55,500) for services must now be held online via Prozorro. This requirement started Aug. 1, when a law on public procurements (№ 922-VIII) came into effect.

Opening Tenders to Sunshine

"Everyone sees everything" is the system’s slogan. This means that any person can visit the website and observe in real time all the tenders’ participants, the money spent on projects, and the seller’s logic in selecting a winning bid. Information on past bids is saved and available through the archive. The site is in Ukrainian, with a large amount of information translated into English.

Clean government advocates say ProZorro is a practical and effective path for Ukraine to emerge from its status as one of Europe's most corrupt countries. In 2015, the Corruption Perceptions Index, conducted by global anti-corruption agency Transparency International, assigned Ukraine a score of 27 out of 100 possible points.

"Efforts in the fight against corruption and judicial reform are the keys in creating an environment where a company can not only survive, but thrive...The world is looking at you," US Secretary of Commerce Penny Pritzker said last September at an anti-corruption forum in Kyiv.

Corruption Tricks

A job in Ukraine's government often is seen as a means to collect bribes, or misallocate taxpayer money to political allies and relatives. This perception turns off foreign investors looking to do business in Ukraine. ProZorro aims to bring this activity into the light. People in government may promise friends contracts and kickbacks, but ProZorro makes the entire transaction traceable and measurable.

Ukraine’s Prime Minister Volodymyr Groysman said during a government meeting that state body heads who fail to move to ProZorro system should be fired.

While ProZorro cannot stop corruption, it makes corruption more difficult and raises the stakes for those seeking to engage in the practice. The US Department of Defense uses an open procurement system and still managed to waste $125 billion, according to a recent Washington Post investigation.

Government officials still will search for loopholes to award associates with contracts. A common route to this type of corruption is to set intricate requirements in a tender’s documentation before posting it on ProZor. Essentially, this allows a government official to steer a contract to a friend’s company.

"When creating ProZorro we saw that open systems win,” said Nikolay Zhandorov, head of trading platform Zakupki.Prom.ua. “When business trusts the State, the system succeeds and grows like a snowball rolling downhill."

Moldova to Launch its Own ProZorro

A country with similar corruption problems, Moldova, plans to implement its own Prozorro next year, according to Sevki Acuner, Ukraine director for the European Bank of Reconstruction and Development. Initially, Moldova expects to save up to $30,000 annually.

"The fact that other countries have expressed their interest in ProZorro inspires our team to further changes,” Prime Minister Groysman said at its debut last summer. “This once again confirms that we are moving in the right direction."

The idea of transparency driving competition and innovation is expanding in Ukraine, giving birth to similar projects in commercial fields.

ProZorro.sale was created to efficiently sell the assets of insolvent banks. A similar project is planned to focus on making clearer the privatization of state companies..

In October, trading platforms connected to ProZorro launched Rialto, a pilot online service for commercial tenders. The trading system for the business circle is based on similar principles: uniform rules, publicity, transparent selection of a winner, and fair competition.

Two poll about corruption by the American Chamber of Commerce in Ukraine found a positive trend among member companies. The number of companies considering that it is not necessary to resort to corrupt practices to improve their chances of success grew from 39% in 2014 to 65% in 2015.


For comments and story tips, please email UBJ Kharkiv Correspondent Kate Zaika at kate.zaika@theubj.com

Photo 1: Vasyl Zadvornyy, Acting General Director of Prozorro, speaks Monday in Washington at the Benchmarking Public Procurement Conference 2017.(Credit for all photos: Ukraine’s Ministry of Economic Development and Trade)

Photo 2: A Prozorro’s brand T-shirt

Photo 3: A slide from Prozorro report at the Benchmarking Public Procurement Conference 2017 December 5 in Washington.

All Comments (1)
Eli_Hirschfeld
It is unfair to give ProZorro so much positive press without acknowledging the negative aspects of Ukrainian tenders. Although ProZorro has stopped many unfair tenders from going through, it's nothing compared to the magnitude of the problem.
We recommend
We reach out to Ukraine expert Timothy Ash to hear...
Timothy Ash Feb 24, 2017
Ukraine still faces an uphill battle in attracting...
Andrew Feb 23, 2017
In a shock move, oligarch and ally of ex-president...
Andrew Feb 22, 2017