GOVERNMENT PROCUREMENT REGULATIONS IN UKRAINE.

GOVERNMENT PROCUREMENT REGULATIONS IN UKRAINE.

2 fEBRUARY 2000

SOURCE: US COMMERCIAL SERVICE, KYIV

-----------------------------------------------------

1. SUMMARY: THIS REPORT PROVIDES INFORMATION ON GOU PROCUREMENT REGULATIONS AND PRACTICES. IT IS SUBMITTED TO ASSIST U.S. COMPANIES IN SELLING TO THE UKRAINIAN GOVERNMENT. END SUMMARY.

---------------------------

OVERVIEW OF GOU PROCUREMENT

---------------------------

2. GOVERNMENT PROCUREMENT IN UKRAINE IS DIVIDED INTO TWO MAIN TYPES:

TYPE A: GOVERNMENT PURCHASING.

TYPE B: GOVERNMENT ORDERING.

3. THE GOALS OF TYPE A PROCUREMENT (GOVERNMENT PURCHASING) ARE:

- FILLING THE GENERAL NEEDS OF THE GOVERNMENT AND PUBLIC AGENCIES FOR GOODS AND SERVICES;

- PROVIDING AN INCENTIVE FOR DOMESTIC COMPANIES AND CREATING ADDITIONAL JOBS; AND

- ADJUSTING MARKET STRUCTURE.

4. TYPE B PROCUREMENT (GOVERNMENT ORDERING) IS AIMED AT OBTAINING SPECIAL PRODUCTS FOR:

- NATIONAL SECURITY AND DEFENSE; and

- THE DEVELOPMENT OF SCIENCE, TECHNOLOGY, EDUCATION, AND CULTURE.

5. THE PARLIAMENT AND THE CABINET OF MINISTERS REGULATE GOVERNMENT PROCUREMENT IN UKRAINE. GOVERNMENT PROCUREMENT IS DIRECTED AND MONITORED BY THE MINISTRY OF ECONOMY AND MANAGED BY CORRESPONDING GOVERNMENT ORGANIZATIONS.

6. RELIABLE STATISTICS ON GOVERNMENT PURCHASING MADE BY THE GOVERNMENT IN UKRAINE WERE NOT AVAILABLE. HOWEVER, THE MINISTRY OF ECONOMY ESTIMATED THE VALUE OF GOVERNMENT ORDERING IN 1998 AT USD 700 MILLION.

-----------------------------------------

TYPE A PROCUREMENT: GOVERNMENT PURCHASING

-----------------------------------------

7. THE CABINET OF MINISTERS' RESOLUTION ON "ORGANIZATION AND CONDUCTING OF GOVERNMENT PROCUREMENT TENDERS" WAS TARGETED AT INCREASING THE EFFICIENCY OF PURCHASES AT THE EXPENSE OF THE STATE BUDGET, OBTAINING QUALITY GOODS AND SERVICES, AND ELIMINATING CORRUPT PRACTICES IN GOVERNMENT PROCUREMENT. THE RESOLUTION STATED THAT THE PURCHASE OF GOODS AND SERVICES WORTH MORE THAN USD 10,000 WITH GOVERNMENT FUNDS WERE SUBJECT TO PROCUREMENT REGULATIONS. FOR TENDERS FOR PURCHASES OVER USD 100,000, IT IS COMPULSORY TO PUBLISH INFORMATION ON THE REQUIREMENTS IN THE UKRAINIAN OFFICIAL PRESS AND INTERNATIONAL SPECIALIZED PUBLICATIONS.

8. CURRENTLY, VISNYK DERZHAVNYKH ZAKUPIVEL (GOVERNMENT PROCUREMENT BULLETIN) IS THE OFFICIAL PUBLICATION OF THE MINISTRY OF ECONOMY OF UKRAINE, WHICH PROVIDES INFORMATION ON GOVERNMENT TENDERS. THE CONTACT INFORMATION AND WEB-SITE ADDRESS IS AVAILABLE BELOW.

------------------------------------------------------

DESCRIPTION OF GOVERNMENT PURCHASING TENDER PROCEDURES

------------------------------------------------------

9. ACCORDING TO CURRENT REGULATIONS, GOVERNMENT TENDERS ARE TO BE NON-DISCRIMINATORY AGAINST FOREIGN BIDDERS, WITH SOME EXCEPTIONS granted on a tender-by-tender basis. THESE EXCEPTIONS GIVE PRIORITY TO DOMESTIC SUPPLIERS. WHEN APPLIED, THE PREFERENTIAL EXCEPTION ADDS 15 PERCENT TO THE VALUE OF A FOREIGN INVESTOR’S BID. GOVERNMENTAL AGENCIES CAN ALSO APPLY ADDITIONAL CRITERIA TO FAVOR DOMESTIC SUPPLIERS.

10. A CONTRACTING ORGANIZATION CAN USE ONE OF THE FOLLOWING TENDER PROCEDURES:

- OPEN TENDER;

- OPEN TENDER WITH A PRELIMINARY QUALIFICATION;

- COMPETITIVE NEGOTIATIONS; OR

- REQUESTS FOR QUOTES.

11. "OPEN TENDER WITH A PRELIMINARY QUALIFICATION" IS DIVIDED IN TWO STAGES. FOR THE FIRST STAGE, A CONTRACTING ORGANIZATION SOLICITS BIDS, QUALIFIES, AND INVITES QUALIFIED BIDDERS TO PARTICIPATE IN THE SECOND STAGE. ONLY PROPOSALS FROM INVITED BIDDERS WOULD BE CONSIDERED IN THE SECOND STAGE OF THIS PROCEDURE.

12. IN "COMPETITIVE NEGOTIATIONS," THE CONTRACTING ORGANIZATION CONTACTS AT LEAST THREE POTENTIAL SUPPLIERS FOR FURTHER NEGOTIATIONS REGARDING THE SPECIFICATIONS OF THE ORDER.

13. BY MAKING "A REQUEST FOR QUOTES ~~REQUESTS~~," THE CONTRACTING ORGANIZATION SOLICITS ONLY PRICE QUOTES FROM POTENTIAL SUPPLIERS OF REQUESTED PRODUCTS.

14. IF THE VALUE OF THE CONTRACT EXCEEDS USD 100,000, THE CONTRACTING ORGANIZATION MAY ONLY USE ONE OF THE FOLLOWING PROCEDURES:

- OPEN TENDER;

- OPEN TENDER WITH A PRELIMINARY QUALIFICATION; OR

- COMPETITIVE NEGOTIATIONS.

15. IF THE VALUE OF THE CONTRACT IS BETWEEN USD 70,000 AND USD 100,000, THE FOLLOWING PROCEDURES MUST BE USED:

- COMPETITIVE NEGOTIATIONS, or~~AND~~

- REQUEST FOR QUOTES.

16. CONTRACTS FOR USD 10,000 TO USD 70,000 MAY USE A QUOTING PROCEDURE. HOWEVER, WHEN FEASIBLE, A CONTRACTING ORGANIZATION REQUESTING GOODS OR SERVICES OF BETWEEN USD 10,000 AND USD 70,000 MAY USE EITHER AN OPEN TENDER OR AN OPEN TENDER WITH A PRELIMINARY QUALIFICATION.

17. THE INFORMATION ABOUT GOVERNMENT TENDERS PROVIDED BY GOU WILL TYPICALLY INCLUDE THE:

- NAME AND ADDRESS OF THE CONTRACTING ORGANIZATION;

- TYPE OF TENDER PROCEDURE TO BE USED, QUANTITY AND PLACE OF DELIVERY OF GOODS OR SERVICES REQUESTED;

- DELIVERY TERMS;

- PROCEDURE AND DEADLINE FOR OBTAINING TENDER APPLICATION FORMS;

- VALUE OF THE TENDER DOCUMENT PROCESSING FEE;

- PAYMENT TERMS;

- LANGUAGE OF BIDS;

- PLACE AND DEADLINE FOR SUBMISSION OF TENDER BIDS; AND

- SOURCE OF FINANCING FOR A PURCHASE.

18. THE DEADLINE FOR SUBMISSION OF BIDS MUST BE AT LEAST 45 DAYS AFTER THE DATE INDICATED IN THE TENDER ANNOUNCEMENT.

19. BIDDERS MAY REQUEST TENDER DOCUMENTS FROM THE CONTRACTING ORGANIZATION. TENDER DOCUMENTS ARE DETAILED DESCRIPTIONS OF PROCEDURES AND CONDITIONS IN EFFECT TO A PARTICULAR TENDER AND ARE NECESSARY FOR PREPARING A BID.

20. BIDDERS MAY BE REQUIRED TO DEPOSIT TENDER COLLATERAL, WHICH SHOULD NOT EXCEED FIVE PERCENT OF THE VALUE OF THE CONTRACT.

21. BIDS SHOULD BE FILED IN THE LANGUAGE OF THE TENDER DOCUMENTS OR THE LANGUAGE INDICATED IN THE TENDER DOCUMENTS.

22. THERE ARE TWO SETS OF CRITERIA FOR SELECTING BEST BIDS THAT THE CONTRACTING ORGANIZATION MAY USE:

A) BEST PRICE. THE CONTRACTING ORGANIZATION MAY USE A 15 PERCENT PREFERENTIAL AMENDMENT FOR DOMESTIC BIDDERS.

B) OTHER CRITERIA:

- DELIVERY TERMS;

- DELIVERY COST;

- QUALITY;

- FUNCTIONAL CHARACTERISTICS;

- ENVIRONMENTAL FRIENDLINESS;

- WARRANTIES AND AFTER-SALE SERVICES;

- PAYMENT TERMS;

- TECHNOLOGY TRANSFER; AND

- USER TRAINING.

---------------------------------------

TYPE B PROCUREMENT: GOVERNMENT ORDERING

---------------------------------------

23. GOVERNMENT ORDERING IS REGULATED BY THE LAW ON "SUPPLY OF GOODS FOR GOVERNMENT NEEDS" AND THE RESOLUTION OF THE CABINET OF MINISTERS NO. 266 OF FEBRUARY 29, 1996 "ON RULES FOR PREPARATION, PLACEMENT, AND CONTROL OF GOVERNMENT ORDERS FOR THE SUPPLY OF GOODS FOR THE GOVERNMENT."

24. SUPPLIERS OF GOVERNMENT ORDERS ARE MAINLY GOVERNMENT AGENCIES AND A LIMITED SET OF PRE-QUALIFIED DOMESTIC ORGANIZATIONS. SUCH PROCUREMENT IS NOT OPEN TO INTERNATIONAL COMPETITIVE BIDDING.

---------------------------------------

LAWS AND REGULATIONS ON GOU PROCUREMENT

---------------------------------------

25. THE CABINET OF MINISTERS' RESOLUTION NO. 694 OF JUNE 29, 1997, "ON THE ORGANIZATION AND OPERATION OF GOVERNMENT PROCUREMENT TENDERS," WITH CORRESPONDING AMENDMENTS, CURRENTLY REGULATES GOVERNMENT PURCHASES IN UKRAINE. DRAFT LEGISLATION ON PROCUREMENT OF GOODS, WORKS, AND SERVICES FOR GOVERNMENT NEEDS IS CURRENTLY BEING CONSIDERED BY THE PARLIAMENT, AND WHEN ENACTED INTO LAW WILL REPLACE THE CABMIN RESOLUTION.

26. OTHER REGULATIONS ON GOVERNMENT PROCUREMENT IN UKRAINE INCLUDE:

- THE RESOLUTION OF THE CABINET OF MINISTERS NO. 1369 OF SEPTEMBER 1, 1998 "FOR ORGANIZATION AND CONDUCTING OF GOVERNMENT PROCUREMENT TENDERS IN CONSTRUCTION;"

- THE DECREE OF THE PRESIDENT ON "THE RULES OF PROCUREMENT OF PHARMACEUTICAL PRODUCTS AT THE EXPENSE OF THE STATE BUDGET;" AND

- THE DECREE OF THE PRESIDENT ON "THE RULES OF PROCUREMENT OF MEDICAL EQUIPMENT AT EXPENSE OF THE STATE BUDGET."

----------------------

ADDITIONAL INFORMATION

----------------------

27. DETAILED INFORMATION ABOUT GOVERNMENT PURCHASING MAY BE OBTAINED FROM THE GOU PROCUREMENT BULLETIN (SEE CONTACT INFORMATION BELOW). TENDER ANNOUNCEMENTS ARE ALSO ACCESSIBLE ON THE WEB-SITE: WWW.VDZ.UKRNET.NET. ADDITIONALLY, LEGISLATION ON GOVERNMENT PROCUREMENT IN THE UKRAINIAN LANGUAGE CAN BE FOUND ON WWW.RADA.KIEV.UA; WWW.CMU.GOV.UA; AND WWW.LIGA.KIEV.UA.

28. KEY CONTACTS:

MINISTRY OF ECONOMICS

DEPARTMENT OF GOVERNMENT PROCUREMENT

VOLODYMYR TRETIAK, HEAD OF DEPARTMENT

NADIA OBUSHKO, DEPUTY HEAD OF DEPARTMENT

12/2, HRUSHEVSKOHO VUL. KIEV 252008, UKRAINE

TEL: (380-44) 293-9394, 226-2315

FAX: (380-44) 226-3181

URL: WWW.ME.GOV.UA

STATE PROPERTY FUND OF UKRAINE

OLEKSANDR BONDAR, CHAIRMAN

18/9 KUTUZOVA VUL. KIEV 252133, UKRAINE

TEL: (380-44) 295-1274, 296-6401

FAX: (380-44) 295-1274

URL: WWW.SPFU.KIEV.UA; www.spfukraine.com

VISNYK DERZHAVNYKH ZAKUPIVEL (GOVERNMENT PROCUREMENT BULLETIN)

12/2, HRUSHEVSKOHO VUL.

KIEV 01008, UKRAINE

TEL: +380 (44) 293-9415

FAX: +380 (44) 293-4445

E-MAIL: VDZTENDER@ME.GOV.UA

URL: WWW.VDZ.UKRNET.NET

JULIANA KINAL, INTERNATIONAL TRADE SPECIALIST

BUSINESS INFORMATION SERVICE FOR THE NEWLY INDEPENDENT STATES (BISNIS)

U.S. DEPARTMENT OF COMMERCE

USA TRADE CENTER

STOP R-BISNIS

1401 CONSTITUTIONAL AVE., NW

WASHINGTON, DC 20230

TEL: (202) 482-4655

FAX: (202) 482-2293

1-800/USA-TRADE

E-MAIL: BISNIS@ITA.DOC.GOV

HTTP://WWW.BISNIS.DOC.GOV

29. HOWEVER, U.S. SUPPLIERS ARE URGED TO EXERCISE CAUTION BEFORE CONCLUDING CONTRACTS IN UKRAINE. POST SUGGESTS CONSULTING THE COUNTRY COMMERCIAL GUIDE FOR UKRAINE AVAILABLE AT HTTP://WWW.STAT-USA.GOV AND DISCUSSING PROSPECTIVE CONTRACTS WITH EMBASSY STAFF, AMCHAM, ACCOUNTING FIRMS, LEGAL COUNSEL AND OTHER SOURCES.