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3.8/5 | 49 votes

ProZorro public procurement platform spreads its wings

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5/5 | 1 votes |

ProZorro, meaning 'Transparent', is a digital platform for public procurement. Its development started after the Ukrainian revolution in February 2014 in a collaboration between the Ministry of Economic Development and Trade (MEDT) and a group of volunteers from civil society. Together they wished to help restore the country by changing the rules of public procurement. With the help of procurement specialists they managed to create a model for cooperation and trust in which civil activists, business and government collaborate in fighting corruption and restoring confidence.

After several setbacks, the ProZorro platform was presented for the first time in February 2015. It quickly gained traction, receiving support and funding for further development and promotion from several sources. In the same year, two crucial supporting laws were passed: the Law on Public Procurement, and the Law on Peculiarities of Goods, Works and Services to Provide the Needs of Defence. In 2016, use of the ProZorro platform became mandatory for all public agents and monopolists in Ukraine.

The ProZorro project has received worldwide recognition and won several awards. The team is now set to introduce ProZorro in at least one EU country, and the neighbouring country of Moldova is running a pilot. The Ukrainian system now also supports the WTO Government Procurement Agreement (GPA).

Policy context

In its 'History of ProZorro' the ProZorro team describes how until recently people in Ukraine were not used to control public spending. Officials were free to spend the country's money in their own ways, and only experts were interested in how public procurement was carried out. That made this area particularly vulnerable to corruption.

Three specific issues in this regard were:

  • Until recently, the regulatory and institutional framework for public procurement was based on outdated procedures from the paper era, making possible numerous abuses by the government. Furthermore, processes were complicated and inconvenient for suppliers, and did not allow for public and professional control.
  • Since EU directives on public procurement are mainly aimed at trade liberalisation, technical compliance between Ukrainian legislation and European practice did not guarantee a transparent, effective and fair procurement process.
  • Since the launch of the ProZorro platform, each day on average more than UAH 60 million (EUR 2.1 million) has been saved. From an annual procurement budget of UAH 300 billion (EUR 10.4 billion), potential savings are estimated at UAH 60 billion (EUR 2.1 billion). This corresponds to 20 percent of the budget. Half of the existing losses are due to corruption, with the rest down to lack of competition.

Reform

In February 2014, after the Revolution of Dignity (the conclusion of the Euromaidan), Pavlo Sheremeta was appointed Minister of Economic Development and Trade. As one of his priorities he set the reform of the Ukrainian public procurement sector. A group of volunteers who had taken an active role in the revolution decided to get involved, despite having no experience in this field. In collaboration with other activists, experts, and employees of the Ministry of Economic Development and Trade (MEDT), a new law on public procurement was developed, eliminating dozens of exclusions and corruption-prone norms.

Even though the new law, adopted in July 2014, was far better than the previous one, it was not a breakthrough reform. So after having interviewed stakeholders and experts, and studied international experience, a new group of activists took it upon themselves to work towards a digital platform that would both simplify the access to business and increase the transparency of procurement.

First concept

In spring 2014, the group created a first concept based on the joint experience of other countries. It was heavily influenced by experts from Georgia, who had carried out a similar reform in their country in 2009-2010. Experts from Georgia were also involved in a working group created within the MEDT to develop a new draft law that would allow the launch of a new e-procurement platform.

In August 2014 the concept was approved for implementation, and the draft law on public procurement was submitted to the Ukrainian parliament. With the unexpected resignation of Sheremeta and early parlementary elections, however, the team lost its political support, and the draft law was not passed. So the group decided to start with tenders that are below the legislative threshold, and to build a platform that would connect to commercial marketplaces.

The result was a new concept in which suppliers pay the marketplaces for submitting their bids, and the marketplaces in turn pay the database administrator to maintain the central system and infrastructure. Use of the platform is free for procuring entities.

Implementation

Despite an agreement on the concept and principles, it proved hard to get funding for the actual development of the platform. None of the usual big donor organisations would provide funds — firstly because they were very negative about funding IT solutions in general, and secondly because they did not want to support a project by activists to implement a function that the state had failed to perform. On the other side, the stakeholders were wary of working with NGOs, due to past bad experience with the so-called "Tender Chamber" that had previously monopolised access to public procurement. Over time, this powerful union of civil organisations had become so corrupt that it had to be liquidated by the parliament.

So in the end the marketplaces that had agreed to participate in the pilot made a first contribution of USD 35,000. That allowed Quintagroup, a German software development house, to get started on implementing the central platform. The group also managed to persuade Transparency International (TI) in Ukraine to take the project under its wing.

Below-threshold procurements

source: Ukraine Crisis Media Center

The ProZorro platform was presented for the first time in February 2015, and quickly found the wind at its back. The new Minister of Economy, Aivaras Abromavičius, made his deputy Maksym Nefyodov responsible for public procurement. Nefyodov immediately became involved in promoting and supporting the new platform.

Nefyodov also offered the volunteer team the chance to become a specialised department of the MEDT, under whose authority they could continue to work on developing the platform. It was quite a struggle to form a new joint team and remove the people who had been responsible for the existing publication platform run by the old State-Owned Enterprise (SOE). In June 2015, however, two members of the ProZorro crew became heads of the SOE. Now that policy and execution were in the same hands, the team was able to focus fully on the actual reform.

In the meantime, the National Reform Council (NRC) had decided to recommend all government entities to perform their below-threshold procurements through ProZorro. In most cases the thresholds are UAH 200,000 (EUR 7,000) per year for goods and services, and UAH 1.5 million (EUR 52,000) for works. For utilities and monopolists, the thresholds are higher: UAH 1 million (EUR 35,000) and UAH 5 million (EUR 175,000), respectively.

Funding and legislation

The installation of the new team also brought in funding for further development from donor organisations WNISEF (the Western NIS Enterprise Fund, a USAID fund focusing on Ukraine and Moldova) and GIZ. Other contributors were the European Bank for Reconstruction and Development (EBRD) and the Ukrainian government. The new funding allowed the SOE — in collaboration with the government IT Office and the commercial marketplaces — to work on the platform and infrastructure.

Meanwhile, the MEDT was developing a new legislative framework, with Nefyodov pressing for the necessary political decisions in the parliament. As a result, two crucial laws were passed: the Law on Public Procurement, and the Law on Peculiarities of Goods, Works and Services to Provide the Needs of Defence, which on behalf of the Ministry of Defense makes specific exceptions to the first law. The legal rights to the system were also transferred to the people of Ukraine.

Training and courses

At the same time, part of the team was training government entities throughout the country in the use of a fully digital platform for public procurement. All the training materials and courses have been made available on a separate educational portal, which also features a library of samples and templates.

The legislative work and a dozen of the training sessions were financially supported by the European Union through the Crown Agents consortium. This consortium is also involved in legislative harmonisation with the EU and WTO standards on government procurement.

Supported by the International Renaissance Foundation (IRF) and TI Ukraine, training sessions were organised for nearly 9,000 public agencies in just three months.

For the near future, the ProZorro team will develop more training material and courses, and provide more resources for specific stakeholders. Additionally, courses in public procurement have been developed by the Kyiv School of Economics (KSE), the Kyiv Banking University and the Kyiv National Economic University. Other universities in the country will soon follow suit.

Full speed

2016 was the year the ProZorro platform reached full speed. As a result of the new Law on Public Procurement, use of the platform became mandatory for central government organisations and monopolists from 1 April, and for all public agents from 1 August. This staged approach helped the infrastructure grow gradually to a scale that eventually had to support more than 25,000 active tender commissions and more than 25,000 procuring entities across the country.

In the same year, ProZorro won the World Procurement Award 2016. It was recognised by the National Reform Council as the best reform of 2015, and received showcase status as an exceptional example of digitalisation of public procurement from the EBRD and the Open Contracting Partnership (OCP). In December 2016, the project became the winner of the Third Annual Open Government Awards (video).

Marketing

For their marketing campaigns, the ProZorro team used the same approach as companies in the private sector, while taking into account some peculiarities of the public sector. In addition to outreach work by the leaders of the reform, the team designed a logo in the form of Bribeman, a cartoony white-collar criminal speared by a mouse pointer. Bribeman appears on mugs, bracelets and t-shirts distributed as part of the campaign.

The team also used a visual campaign developed by the RAM360 advertising agency. It was funded through the US Embassy in Ukraine and ran as a traditional commercial campaign, targeted at five specific regions of the country. Its most important message was the dramatic change from the old corruption-prone paper procurement to a transparent system that is open to everybody.

Bids per tender

The ProZorro campaigns aim to involve new suppliers who have never previously considered taking part in public-sector tenders. The main goal is to increase the average number of bids per tender — an indicator of the level of competition — which currently is fairly low (2.44). We're not able to say what number would be ideal for competition, a Prozorro spokesperson explains, because we don't know the size of the market. But we aim to reach three bids per tender before the end of this year.

Our marketing team deploys various instruments to get new businesses involved in public tenders. Unfortunately this is not that easy, due to a number of biases that exist in the market, and private companies' previous bad experiences with public tenders. We conduct regular research on these matters, and we have a good idea which biases we have to work on.

As a result of these campaigning efforts, participation in the targeted regions has grown a lot faster than in the rest of Ukraine. Competition is the best controller. The participants help us to find the tenders with corruption risks, and identify inefficient and incorrectly announced tenders.

Future functionality

According to the ProZorro team, so far over one thousand different people and companies have participated in reforming the public procurement system.

Last month, the team put the finishing touches to the harmonisation between their digital platform and the Law on Public Procurement. That meant describing the technical functionality of the system in detail on the one hand, and implementing the procedure for framework contracts on the other.

The support of Centralised Procurement Bodies (CPBs) is a work in progress. These will allow government entities to bundle their needs and have their procurements handled by specialists. According to the ProZorro team, rationalisation and centralisation of procurement can result in savings of up to 20 percent. The spokesperson says that the development of CPB support is right on schedule. Last month, the first CPB tender was conducted, to purchase paper for the central executive authorities. Later this year the team will run a pilot project, and the legal framework for this functionality will be established. The official launch is planned for 2018.

Description of the way to implement the initiative

The ProZorro project was started by Ukrainian civil society, with the desire to help restore the country by changing the rules of public procurement. Its promotors have managed to create a model for cooperation and trust in which civil activists, businesses and government collaborate to fight corruption and restore confidence.

Key values

These are the five key values of the ProZorro partners:

  1. Responsibility: we take responsibility and act, keep our promises, are diligent, and do our work efficiently and in time.
  2. Transparency: everyone can see everything, we are open and don't hide anything, we discuss difficult situations openly and search for ways to solve them together, and we share achievements.
  3. Development: development pushes us forward, we welcome new information and knowledge, and we never settle.
  4. Effectiveness: we keep up the pace of changes, and dream while keeping results in mind; small changes are more important than big thoughts, and enthusiasm and drive are more important than experience.
  5. Teamwork: one for all and all for one: we value each member of the team and believe that as a team we can achieve more, and we are comfortable to be ourselves.

Principles

These are the three principles underlying the ProZorro platform:

  1. The platform is designed as a hybrid system consisting of a Central Database (the back end) and commercial marketplaces (the front ends). The system code is completely open and freely available for download and use.
  2. The procurement process is completely open: after each tender is published, all the relevant information and documents can be seen by anyone.
  3. The system is developed in a strong collaboration between civil society, business and government.

And these are the principles that define a healthy ecosystem around the ProZorro platform:

  • for procurement:
    • the system performs its core functions;
    • the infrastructure is stable, user-friendly and low-cost for all clients;
    • the infrastructure is simple to use for all parties;
  • in general:
    • public interests are more important than governors' canons;
    • the principles of openness will increase transparency, justice and professionalism, and hence trust in the ecosystem;
    • everything can be shared with the world.

Technology solution

People looking for analytical information from the platform can start with the general overview in the ProZorro Explorer dashboard. From there they can drill down to the underlying information, including the specifics of each tender.

Monitoring portal

Last November, a monitoring portal was launched. Here any user of the ProZorro platform — suppliers, procuring entities, supervising authorities and citizens — can provide feedback, submit reviews and comments on specific public tenders, or start an official procedure.

For above-threshold tenders, any business that feels its rights have been violated can file a complaint with the Anti-Monopoly Committee of Ukraine (AMCU) via its account on the appropriate marketplace platform. For tenders below the procurement threshold, the Complaint Settlement Commission offers procedures.

Main results, benefits and impacts

Up to April 2017:

  • 25,600 procuring entities and 97,000 participants involved;
  • 754,700 tenders with a total budget of UAH 549.5 billion (EUR 19.0 billion);
  • UAH 22.4 billion (EUR 770 million) saved from corruption and needless expenses;
  • currently a total of 49,275 tenders in the system, processing up to 4,000 new tenders per day;
    system scales to processing 10,000 new tenders per day;

Key users (by number of tenders):

  • Regional administrations — 12%
  • City councils — 14%
  • Ministry of Infrastructure — 18%
  • Ministry of Economic Development and Trade — 6%
  • Kyiv City State Administration — 50%

Return on investment description

Up to now, USD 300,000 has been spent on the actual development of the ProZorro system, USD 172,000 on system administration and hosting, and USD 16,000 on promoting the platform. The bulk of these costs were funded by WNISEF and GIZ, who contributed USD 290,000 and USD 423,000, respectively. TI Ukraine is responsible for handling the funds.

Track record of sharing

Openness

The ProZorro platform is based on the Open Contracting Data Standard (OCDS), which defines a common data model for disclosing data and documents at all stages of the electronic procurement process.

The platform has been implemented in the Python programming language by Quintagroup and is now generally available on GitHub as the OpenProcurement toolkit [1, 2] under the Apache open source licence.

OpenProcurement toolkit

The core of the OpenProcurement toolkit consists of the Central Database (CDB), and an Auction module implementing reverse auctioning.

At this moment 17 so-called eMalls — web-based marketplaces for e-procurement — are available for the ProZorro platform. Six of those existed as commercial marketplaces before the development of ProZorro, but most were specifically created to work with the new platform. New eMalls can be developed at any time by programming against the open API of the toolkit.

Lessons learnt

ProZorro.Sale

July 2016 saw the start of work on a digital platform for selling state assets, created by the ProZorro team in collaboration with the MEDT, TI Ukraine, the Deposit Guarantee Fund, the National Bank of Ukraine, and the electronic marketplaces. This new system is based on the same principles and practices used for the reform of public procurement.

The ProZorro.Sale platform was relatively easy to implement because software code and architecture from the ProZorro project could be re-used, relations with key stakeholders and donors were already in place, and no new legislation was required.

The platform is now fully functional and has already hosted more than 20,000 auctions.

International

The ProZorro project has received worldwide recognition. The people behind it are very willing to share their experience, and hope to introduce ProZorro in at least one EU country. Yes, we do have this ambition, the spokesperson confirms. We are currently investigating who may be interested and a good match to implement an e-procurement system based on the ProZorro philosophy. We do have some options, but we're not ready to point out in which direction we will go.

Other than that, work on implementing ProZorro in the neighbouring country of Moldova is already under way. After many months of negotiations, implementation and training, they were able to start a test project and are now running a pilot.

WTO GPA

Another development is the support of the WTO Government Procurement Agreement (GPA), whose subscribers adhere to a public procurement process based on openness, transparency and non-discrimination. While every GPA member currently has its own system, in the future they will be able to move to a single digital platform.

Ukraine became a member of the GPA organisation one year ago, the ProZorro spokesperson explains, partly because of ProZorro and the new Law on Public Procurement. Now suppliers from any country that is part of the GPA can participate in our public tenders, having the same rights as our local participants. No additional programming was required for this extension.

Links

Case Info

Acronym:
ProZorro
Website URL:
Start date:
2014
Operational date:
01 February 2015

Information

Target Users or Group:
eGoverment
highlight:
ePractice
Case status:
Operation
Case type:
General case study
Geographic coverage:
Ukraine
Implementation cost:
€300-499,000
Themes:
Communication (infrastructure), eGovernment, eServices for Business, Politics, Procurement, Law, Economics, Business and Competition, International Organisations
Type of service:
IT Infrastructures and products
Technology choice:
Mainly (or only) open standards, Open source software
Scope:
National
Overall implementation approach:
Partnerships between administration and/or private sector and/or non-profit sector
Type of initiative:
Project or service, Promotion/awareness campaign, Strategic initiative