Procurement for the army

18.07.2022

As a result of the martial law regime, the operation of business under such conditions raised certain questions, namely, regarding the procurement and the critical import of the goods.

Resolution of the Cabinet of Ministers of Ukraine No. 169 of 28 February 2022 "Certain aspects of defense and public procurement of goods, works and services under martial law" amended the procurement procedure for the period of the martial law. In particular, it was allowed to carry out defense and public procurement of goods, works and services without the use of procurement procedures or simplified procurement.

The aforementioned Resolution has been already amended few times: by Resolution No. 176 dated 2 March 2022, by Resolution No. 195 dated 4 March 2022, by Resolution No. 201 dated 5 March 2022, by Resolution No. 290 dated 16 March 2022 and by Resolution No. 335 dated 20 March 2022, , by Resolution No. 437 dated 12 April 2022, by Resolution No. 723 dated 24 June 2022 and by Resolution No. 777 dated 7 July 2022.

Certain clarifications thereto were published in the Letter of the State Treasury Service of Ukraine No. 18-07-08/4497 dated 7 March 2022 and in the Letters of the Ministry of Economy of Ukraine No. 3304-04/9225-06 dated 4 March 2022, No. 3304-04/9472-06 dated 9 March 2022, No. 3304-04/16796-06 dated 22 April 2022, No. 3323-04/40967-06 dated 23 June 2022, No. 3323-04/42505-06 dated 27 June 2022.

The Letter of the Ministry of Economy No. 3304-04/9472-06 dated 9 March 2022 also clarified that Resolution No. 169 applies to purchases with a value exceeding or equal to 50,000 UAH.

In its essence, Resolution No. 169 enshrines the following provisions.

In the procurement process the contractors must comply with the principles of promptness and compliance with the decisions taken on the protection of the national interests of Ukraine, ensuring the needs of security and defense and efficient use of funds, productivity.

All purchases made during the war period are not included in the annual procurement plan. Nevertheless, the purchaser/state purchaser shall publish in the electronic procurement system a report regarding the procurement contract, concluded without the use of the electronic procurement system, including the contract of purchase and all its addendums within 70 days from the day of termination or cancellation of the martial law in Ukraine or in its separate regions. It should be noted that the request for disclosure does not apply to agreements containing restricted information.

Procurement of goods, works and services with the value exceeding or equal to 50,000 UAH may be carried out without use of simplified procurement and/or electronic catalogs in the following cases:

the information required to be published is restricted information, or its disclosure during the martial law regime may pose a threat to national security and/or public safety and order;
the purchaser is located in the area of military activities at the time the decision to purchase (or its implementation) is made;
lack of technical feasibility of using the electronic procurement system, which must be evidenced in writing by the purchaser;
there are exceptional circumstances that make it impossible for the Contractor to meet the deadlines for the implementation of simplified procurement or use of an electronic catalog;
the works, goods or services may be performed, delivered or provided exclusively by a certain business entity in case of (1) the purchase of artwork or artistic works; or (2) the signing of a purchase agreement with the organizer of the architectural or art competition; or (3) lack of competition for technical reasons, which must be evidenced in writing by the customer; or (4) the need to protect intellectual property rights; or (5) conclusion of a purchase contract with a supplier of "last resort" or with a supplier of universal service for supply of electric power or natural gas;
the simplified purchase was cancelled due to the absence of participants, including for the lot;
the purchase of additional volume of goods from the same supplier is carried out within three years after the conclusion of the purchase contract, if the total value of such supplies does not exceed 50 per cent of the purchase contract price;
the procurement of additional similar works or services from the same participant shall be carried out within three years after the conclusion of the procurement contract, as long as the total value of such works or services does not exceed 50 per cent of the price of the main procurement contract, as a result of the tender/acceptance procedure;
purchase of services of attorneys;
procurement of legal services related to protection of rights and interests of Ukraine, including for the purpose of protection of national security and defense, during settlement of disputes abroad involving a foreign subject and Ukraine;
procurement of goods, works and services to ensure the functioning of critical infrastructure facilities.

An equally important part of the business operation during the martial law became the identification of the goods of the critical import. The executive authorities adopted a number of acts to facilitate the continuation of business operations even in such conditions.

By Resolution No. 153 of 24 February 2022 the Cabinet of Ministers of Ukraine also significantly expanded the list of critical imports. Resolution No. 289 of March 16, 2022 introduced certain amendments and consolidated the criteria for defining critical imports.

Since February 2022, a number of clarifications have been issued, including amendments introduced by the Resolution of the Cabinet of Ministers No. 761 dated 7 July 2022.

As an addendum thereto, the List of services, works, intellectual property rights, other intangible rights, intended for sale (pay transfer), for import operations of which the National Bank is recommended to ensure the execution of transfers.

In general, the list included the following categories of goods, rights and services related to:

transportation of cargo and passengers by cars, railway and sea transport;
satellite data;
software products;
electronic communication;
medical laboratories;
registration of medical supplies;
advertisement;
legal, audit and tax consultancy;
postal services.

To find the full and updated list of the goods of the critical import, please follow the links below.

Besides, in case of additional questions regarding procurement or the goods of critical import it is advised to contact the Business ombudsman council via business support line.

Useful references:

Olena Perepelynska

Partner, Head of International Arbitration

Olena.Perepelynska@integrites.com