chevron-down Created with Sketch Beta.
October 03, 2023 Feature

Corruption and Conflict: Public Procurement Reform and International Integration in Ukraine and Georgia

Michael R. Tregle, Jr.

Abstract

This paper examines the development of government procurement systems in Ukraine and the Republic of Georgia since the fall of the Soviet Union through the reform efforts of the 2010s. While Ukraine and Georgia have made impressive strides toward becoming models of openness, transparency, and competition for government procurement in the developing world, some challenges remain. Reform efforts are largely driven by internal desires to shed their respective histories of corruption and the vestiges of the Soviet system, though efforts to integrate into the European Union’s single market have also facilitated positive development. The crowning achievements of procurement reform in post-Soviet Georgia and Ukraine thus far have been their 2010 domestic Public Procurement Laws, which established advanced tendering systems and model electronic procurement platforms. However, the practical application of numerous exemptions to the tendering rules, and important gaps in the legislation, creates significant risk of abuse and corruption. Additionally, frozen regional conflicts and lingering corruption issues impede further internal development and efforts toward greater international integration, especially with respect to the European Union.

“[W]e should count ourselves very lucky that in the U.S. government procurement is so boring.”1

I. Introduction

Ukraine and the Republic of Georgia present valuable insights and contrasts regarding efforts toward procurement reform following their shared Soviet past.2 Since the fall of the Soviet Union, both countries have followed separate but parallel paths in their efforts to overcome significant legacies of corruption3 and gain greater assimilation into their respective regional and global international communities.4 One of many such avenues of political and economic reform has been the development of modern, robust, and effective public procurement systems in both countries.5 While both countries have struggled to shake off deeply ingrained legacies of corruption, they each have followed similar paths marked by both internal and external drivers of reform.

The external pressures exerted by a move toward greater integration into the European Union (EU) have complemented internal efforts seeking to address corruption and improve integrity and transparency. As Georgia and Ukraine updated their domestic procurement laws to conform with EU and international requirements, they simultaneously drove internal shifts toward greater domestic support for reform.6 Though security concerns and overt conflicts with Russia and Russian-backed separatists ultimately slowed full EU integration in the short term, there has nonetheless been significant progress made toward more effective and transparent procurement systems.7 In Ukraine’s case, the landscape changed dramatically with the Russian invasion of Ukrainian territory in February 2022.8 The resilience of the reformed Ukrainian procurement system, along with public faith in the government’s commitment to anticorruption, was put to the ultimate test.9 However, these achievements are not without some remaining challenges and concerns.

Despite precarious security situations and separate histories of deeply ingrained corruption, Ukraine and the Republic of Georgia have made great strides in modernizing and improving their government procurement systems. Since the collapse of the Soviet Union, and subsequent independence, Georgia and Ukraine have made impressive progress in shedding their histories of corrupt government practices, modernizing their public administration systems and institutions, and establishing open and transparent public procurement systems.10 Many of these reforms have been supported and complemented by each country’s desire to integrate itself more deeply into the EU’s single market and adapt its systems and practices to meet EU standards.11

This paper will examine how internal and external pressures have driven procurement reform efforts in Georgia and Ukraine to better integrate into the international community, improve efficiency, and fight corruption. Additionally, it will trace the evolution of public procurement in Ukraine and Georgia through the decades following Soviet dissolution, assess efforts to modernize procurement systems into a model for the developing world, and address some of the remaining challenges to further development and international integration. In doing so, it will further identify potential solutions that might facilitate more effective, transparent, and integrated systems. While both Georgia and Ukraine have made significant progress in improving transparency, increasing efficiency, and fighting corruption in public procurement, issues remain with broad exemptions to tendering rules, frozen conflicts, and lingering corruption issues that risk undermining further progress and hampering greater international acceptance.

Section II will begin by examining the Soviet legacy of neopatrimonialism, wherein informal networks displaced or supplemented formal institutions in all areas of governance and public administration, often leading to the abuse of public position for private gain. This legacy strongly influenced the post-Soviet transition in both Ukraine and Georgia, and its effects are still felt today, often forming the most significant obstacles to reform, especially in Ukraine.

Section II will then turn to the evolution of Georgia’s anticorruption mechanisms and practices from the collapse of the Soviet Union, through early post-Soviet leadership, the Rose Revolution of 2003, and the sweeping reform efforts of the mid to late 2000s. With respect to public procurement, these efforts culminated in the 2010 Law of Georgia on State Procurement (hereinafter State Procurement Law) and recognition of Georgian anticorruption excellence by the World Bank in 2012.12 Section II will then turn to Georgia’s progress in EU integration since the late 1990s; examine the various legal agreements, plans, and arrangements Georgia and the EU have negotiated during that time; and analyze these instruments as drivers of reform in Georgian public procurement. The examination then turns to the separatist conflicts in Abkhazia and South Ossetia and how those events have shaped Georgia’s efforts toward greater international integration, both politically and economically, focusing on impacts to public procurement. Finally, it will discuss international corruption metrics in Georgia as measured by Transparency International and the World Bank.

Section II’s focus will then shift to similar developments in Ukraine, including post-Soviet leadership through 2014, the Euromaidan movement, EU, and World Trade Organization (WTO) accession efforts, the security situations in Crimea and the Donbass, ultimately leading to open war with Russia, and international anticorruption metrics. The analysis will focus on the differing character of corruption in Ukraine as compared to Georgia, assessing persistent neopatrimonial tendencies and grand, state capture corruption. With respect to international integration, Ukraine notably differs from Georgia in its full accession to the WTO’s Agreement on Government Procurement (GPA), where Georgia continues to work toward full accession. Ukraine’s reform efforts also led to landmark public procurement legislation in 2010, greater progress toward EU integration, and the establishment of a radically transparent and open electronic procurement system.

Section III focuses on the merits of the landmark 2010 procurement legislation in both Ukraine and Georgia, including improvements to public tendering, electronic procurement, and procurement dispute fora, and addresses the vast exemptions and shortcomings to the laws that potentially hinder the development of a more open, transparent, and competitive system. Section III will further compare and contrast Ukraine’s and Georgia’s handling of tendering exemptions to the U.S. and EU procurement systems. This analysis will focus on best practices that might be well suited for transplant into the Georgian and Ukrainian systems in order to combat potential weaknesses in their implementation.

Section IV will examine the way ahead for both countries. In addition to the other areas of concern noted in this paper, the Georgians themselves have addressed their perceived weaknesses internally. Specifically, in 2013, the Georgian public procurement authority, the Competition and State Procurement Agency (CSPA), identified several strategic goals in the further development of its public procurement program.13 The agency identified organizational development, increased public awareness, business development, and education as areas deserving of focus during the ensuing decade.14 Ukraine, in turn, could benefit from a focus on better identification and prevention mechanisms for conflicts of interest, more forcefully addressing corruption risk through debarment procedures, and empowering the new government agencies and organizations developed to combat corruption and assure procurement integrity.

Ultimately, this paper will demonstrate that Georgia’s and Ukraine’s efforts at reform, driven by internal and external pressures, have created important benchmarks for procurement reform in the developing world, but significant potential implementation and enforcement issues remain. However, these issues can be overcome with proper oversight, management, and legislative reform, where appropriate.

II. Background

A. Soviet Legacy of Neopatrimonialism

One of the most significant social, cultural, and economic impacts of decades of Soviet rule was the legacy of corruption that it left behind. Perhaps the most important facet of this legacy was the reliance of the communist Soviet, and later Georgian and Ukrainian, state on informal networks of actors that often displaced or subverted formal government institutions.15 It has been noted that “[t]he legacy of communism often came with a ‘centrally planned economy, close-knit elitism, and even hypocrisy.’”16 As the Soviet system became more bureaucratic and inefficient, getting results out of formal institutional processes became all but impossible.17 As a result, working within the formal institution became knowing who in the government could circumvent the bureaucracy to get results.18 Those who were well connected reaped the benefits, while those who were not struggled with the inefficient and ineffective bureaucracy. Such a situation invites, if not encourages, corruption. For some, corruption is the “ingrained legacy” that communism leaves behind, resulting in lax attitudes toward reform by post-communist governments that further perpetuates corruption in the post-communist space.19

The term given to such reliance on dominant informal networks in lieu of formal institutions is “neopatrimonialism.”20 “In most cases where neopatrimonialism is at work, a system of patronage develops, which ‘defines a mode of governance and function of intra-elite relations, and concerns mostly the transfer of public goods to private persons.’”21 The transfer of public goods to private persons is one of the most significant corruption risks faced by post-Soviet states.22 Indeed, corruption is commonly understood as the practice of government officials enriching themselves through official activities, usually to the detriment of the public good.23 The neopatrimonial legacy of the Soviet Union further reinforces this risk in Ukraine and Georgia.

In the context of public procurement specifically, co-opting public expenditures for personal gain by diverting public contracts to well-connected firms, often in exchange for bribes and kickbacks, presents one of the most significant corruption risks and directly undermines a procurement system’s efforts to achieve integrity and transparency.24 Regarding reform, especially in the context of greater international integration, “the importance of informal interactions means that many developments are not transparent, making it difficult for external actors to comprehend and do justice to the complexity of the relationships involved when devising their approach to a given situation.”25 In particular, in Ukraine, as described in Section III (B) below, the area of public procurement reflects some of the key elements of the neopatrimonialist legacy of corruption, especially “a shifting mixture of formal and informal elements which creates a degree of uncertainty for the players involved.”26

B. Georgia

1. Post-Soviet Development and Corruption

The modern Georgian government procurement system necessarily developed as an evolution of, and reaction to, its Soviet roots.27 With the fall of the Soviet Union in 1991, Georgia faced significant decisions on how it wanted to engage in public procurement as an independent country.28 Not surprisingly, it took time for the country to adjust from its heritage of authoritarianism, state-owned industry, tight bureaucratic control, and rampant corruption. The various Georgian leaders that followed the Soviet collapse took vastly different approaches to governance, with inconsistent emphasis on reform throughout.29

Perhaps nowhere was the prevalence of neopatrimonial informal networks more apparent than in Georgia, where the concept of the “thief-in-law” came to dominate the post-Soviet environment.30 “[Thieves] are initiated made men who essentially provide, and attempt to monopolize, governance functions such as protection and dispute resolution services over a given territory.”31 This practice evolved the informal networks of the past into a quasi-official, quasi-institutional shadow government run by organized crime.32

As the name implies, thieves-in-law controlled many of the levers of power under the cover of quasi-official recognition and authority.33 They “were more than just normal criminals, they were high-ranking criminal professionals that acted with the direct understanding of the government and police.”34 Working with these individuals became the accepted method of doing business for more than a decade as Georgia climbed out of its Soviet past and forged its independent identity.35 Though effectively extending to all facets of governance, the thief-in-law system posed significant risk of corruption and abuse in government procurement. Similar to organized crime elsewhere, the thief-in-law could easily steer government contracts and funds into the hands of favored firms and individuals, resulting in a system that was often the exact opposite of open, transparent, and competitive.36

The thief-in-law system, with all its attendant corruption and abuse, thrived under some of the early post-Soviet Georgian leaders.37 Zviad Gamsakhurdia became Georgia’s first post-Soviet president when the Soviet Union collapsed in 1991, though his rule technically began while Georgia was still a Soviet Socialist Republic.38 His authoritarian, and even fascist, tendencies did little to alter the seemingly authoritarian practices of the Soviet era.39 His successor, the former Soviet Foreign Minister Eduard Shevardnadze, became largely a figurehead after being installed as president by warlords in a military coup the following year.40 Though more stable than that of his predecessor, Shevardnadze’s tenure saw the same warlords who organized the military coup continue their control over the Georgian state.41 “According to the International Center for Transitional Justice, ‘systematic corruption and nepotism penetrated almost every sphere of public life. State institutions were weak and fragile and there was no political will to reform them.’”42

2. The Rose Revolution of 2003 and Reform

The Rose Revolution of 2003 marked an inflection point for Georgia’s departure from its corrupt Soviet roots. The popular uprising toppled the Shevardnadze regime, resulting in the election of reformer Mikheil Saakashvili to the presidency.43 Saakashvili immediately embarked on a sweeping reform agenda to combat corruption in all aspects of Georgian governance, including public procurement.44 Perhaps most significant, Georgia implemented a zero-tolerance policy for organized crime in 2006.

[The policy] outlawed the existence of thieves[-in-law], prohibited any relationships with crime and introduced prison sentences. This changed the social norms of corruption within Georgia drastically. While in the era of the Soviet Union and the more chaotic decade of the 1990s, corruption was seen widely as normal and culturally traditional in Georgia, this policy . . . had an intense impact on how corruption was perceived.45

However, it is noteworthy that the organized crime policy may not have addressed the problem of Georgian corruption as fully as it might appear. While Saakashvili’s reforms went a long way toward eradicating “criminal and institutional corruption, ‘elite corruption’ still exists, [and a]ccusations of corruption aimed towards high-ranking government officials are rarely, if ever, investigated.”46 Thus, however well-intentioned Georgia’s anticorruption efforts may not have been “aimed at the same group of people [among which] . . . it would seem, corruption is the most prevalent.”47

It was in this context of vast and sweeping anticorruption efforts across the whole of Georgian government that Saakashvili also turned his attention to reforming government procurement practices. His tenure saw the introduction and passage of the 2010 State Procurement Law, which vastly improved the transparency and competitiveness of the Georgian procurement system and garnered praise from international institutions as a model for the developing world.48 In fact, the World Bank recognized Georgia as a leader in anticorruption in 2012.49 Saakashvili thus accomplished a great deal of reform in a relatively short time, no small feat given the history and culture he was working against.

Saakashvili’s work resulted in significant improvements in the perceptions of corruption in Georgia, as measured by two key indices. There are two common, internationally accepted measures of corruption. First, Transparency International (TI) defines corruption as “the abuse of entrusted power for private gain,” and measures corruption perceptions using the Corruption Perceptions Index (CPI).50 Second, the World Bank’s Control of Corruption Indicator (CCI) uses “the measure ‘of the extent to which public power is exercised for private gain, including state capture, the elites’ private interests, and the strength of a country’s institutional framework to combat corruption.’”51 Notably, Georgia’s scores and ranking along both measures steadily improved from 2007 to 2012, with significant increases in 2011 when lustration measures aimed at holding prior corrupt officials accountable took effect.52 During that time, Georgia moved from 79th to 51st on TI’s CPI Rank and accomplished a change from -0.13 to +0.40 in its World Bank CCI scores.53

3. European Union Integration

Saakashvili’s reform efforts were complemented and enhanced by growing trends toward greater Georgian integration into EU systems, including the single market.54 EU requirements for openness, transparency,non-discrimination, and competition were likely significant drivers of the reforms resulting in the 2010 State Procurement Law.55 Though full EU integration was largely derailed by the deteriorating security situation with Russia and the separatist territories of Abkhazia and South Ossetia, Georgia and the EU have been moving toward greater integration for decades.56

The first significant attempts to bring Georgia into the EU economic sphere came under the auspices of the European Neighborhood Policy in 1999 with the European Union-Georgia Partnership and Cooperation Agreement (PCA).57 The PCA created a framework for further integration of Georgia and the EU and specifically called for open and competitive public contracting through tendering.58 This framework was further refined and developed by the EU-Georgia Action Plan, signed in May 2004.59 The Action Plan expanded the PCA to specifically include provisions promoting increased transparency and competition, as well as specific commitments by Georgia to implement EU public procurement legislation, “[d]evelop conditions for open and competitive award of contracts between the parties, particularly through calls for tenders,” and “[i]mprove the functioning of the current system through increased transparency, information provision, access to legal recourse, awareness and training among contracting authorities and business community, as well as the limited use of exceptions.”60

These efforts culminated in the EU-Georgia Association Agreement, which includes a Deep and Comprehensive Free Trade Area (DCFTA) Agreement.61 Both agreements were signed in 2014 and entered into force in 2016.62 Chapter Eight and Annex XVI of the Association Agreement contain extensive discussions of public procurement principles and convergence of Georgian legislation and procurement systems with the EU Directives. The parties further agreed to three-to-eight-year timetables from entry into force of the agreements to implement specific procurement reforms, open reciprocal access to markets, and approximate and implement key provisions of the EU Directives on procurement.63

Thus, while Georgia’s internal desire for anticorruption reform drove significant changes across the whole of government,64 those efforts supported and reinforced the growing trend toward greater EU integration, especially as they relate to public procurement.65 Georgia benefitted from these driving forces both for its own sake and for the sake of gaining the substantial benefits associated with EU market access,66 as well as the enhanced value and competition attendant with opening its own internal procurement markets to EU suppliers.67

4. Abkhazia and South Ossetia Conflicts

As the wave of reform efforts and further international integration in Georgia built momentum under Saakashvili, outside forces intervened to slow progress.68 Specifically, the geo-political security situation in the region changed drastically at the behest of Russia.69 Threatened by the North Atlantic Treaty Organization’s (NATO’s) progressively more eastward expansion since the end of the Cold War, and fearing its own further isolation, Russia used the pretext of separatist violence in the Georgian provinces of Abkhazia and South Ossetia to intervene militarily.70 Once the dominant force in the region, Russia saw Georgia’s turn toward the est and greater integration with the EU and NATO as a threat to its security and prosperity.71

This conflict between Russia and Georgia served as the initial test of a strategy that would be repeated later in Ukraine.72 “That is, Russia used separatist violence as a convenient pretext to launch a full-scale, multi-domain invasion to annex territory, a type of aggression that many analysts in the West thought was a relic of the twentieth century.”73 By capitalizing on civil unrest and creating territorial integrity issues for Georgia with respect to Abkhazia and South Ossetia, Russia inhibited progress toward full integration and membership in the EU.

Though preceded by Georgian skirmishes with separatists in South Ossetia, the conflict between states began in August 2008 when Russian forces crossed Georgia’s northern border into Abkhazia and South Ossetia under the guise of a peacekeeping force.74 Purportedly there to end separatist violence along its southern border, Russia quickly seized a wide swath of territory near the Georgian capital, Tbilisi, and later recognized Abkhazia and South Ossetia as independent from Georgia.75 This seizure marked the “first invasion by Russian ground forces into a sovereign nation since the Cold War” and “provided a stark preview of what was to come in Ukraine in 2014.”76

“The five-day conflict in Georgia in August 2008 represented for the region, from the EU’s point of view, precisely an instance of the instabilities that the EU policy towards the region—the ‘European Neighborhood Policy’ (ENP)—was ideally supposed to prevent or limit.”77 The ENP consists of six Eastern European countries that the EU considers to be within its “neighborhood,” and for which it seeks to enhance political and economic relations: Armenia, Azerbaijan, Belarus, Georgia, Moldova, and Ukraine.78 While the program began before 2008, the events of the Russo-Georgian war spurred greater emphasis on the EU’s part and brought security and stability to the center of the project.79

The security situation in Georgia also sped up the creation of the EU’s Eastern Partnership (EaP), which officially launched on May 7, 2009.80 The EaP framework was the initial spark that ultimately led to the EU-Georgia Accession Agreement and the DCFTA.81 While both the ENP and EaP envision greater cooperation and integration between the EU and its eastern European neighbors, neither program makes any reference to full membership in the EU.82

Ultimately, due to EU reticence over internal stability and territorial integrity, Russia has effectively hampered Georgia’s ability to achieve greater integration, much less full membership, in the EU or NATO by perpetuating the conflicts in Abkhazia and South Ossetia. Despite several EU statements to the contrary, few members seem willing to risk provoking Russia or committing to defend Georgia in order to further the process of Georgian integration into the EU.83 Furthermore, under the so-called Copenhagen criteria, states seeking membership in the EU must achieve “stability of institutions guaranteeing democracy, the rule of law, human rights, and respect for and protection of minorities. . . .”84 These criteria are necessarily undercut by virtue of Georgia’s lack of control over the Russian-backed breakaway provinces.

While Georgia can still work toward greater compliance and domestic application of EU Directives, including those related to public procurement, it will be difficult to achieve full integration as a result of the security situation imposed by Russia. The conflict thus creates a significant impediment to EU integration as a driver of reform. Ultimately, Georgia can and should continue its reform efforts in order to benefit from the advantages of greater EU association, but, until the security situation is resolved, the full force of EU compliance mechanisms may not be brought to bear.

Recent developments have re-ignited the popular will for greater EU integration in Georgia. In March 2022, shortly after Russia’s invasion of Ukraine,85 Georgia, Ukraine, and Moldova officially applied for EU membership.86 On June 17, 2022, the European Commission recommended that the European Council grant candidate status to Ukraine and Moldova, but identified several impediments to Georgia gaining candidate status.87 Specifically, the EU determined that Georgia must address lingering issues to meet candidacy requirements, such as addressing the influence of oligarchs, political polarization, press freedoms, and the judicial system.88 While the EU’s decision sparked popular outrage and mass demonstrations in the Georgian capital of Tbilisi, there remains a glimmer of hope for Georgia’s eventual EU candidacy. While declining to grant candidate status immediately, by providing clear stipulations by which Georgia can achieve candidate status, the European Commission gave Georgia the perspective to become a member of the European Union once those issues have been addressed, which some call a “huge step forward.”89 Thus, Georgia now has clearly defined areas that it must address, and the path to full EU accession, and its attendant reforms, is becoming clearer.

C. Ukraine

1. Post-Soviet Development and Corruption

When Ukraine gained independence from the Soviet Union in 1991, it faced many of the same challenges as Georgia. The same neopatrimonialist legacy, as described above, pervaded Ukraine’s public institutions.90 In some cases, Ukraine’s challenges were even more pronounced, especially with respect to corruption.91 As with thieves-in-law in Georgia, corruption took on an institutional and systemic character in post-Soviet Ukraine.92 Informal networks remained common as the drivers of government activity, and the use of public goods for private gain, especially public contracts, remained widespread.93 In fact, “[s]ince the country achieved independence in 1991, the problem is not that a well-functioning state has been corrupted by illegal practices; rather, those corrupt practices have constituted the rules by which the state has been run.”94

Indeed, Ukraine stands out among post-Soviet nations as particularly affected by corruption in the developmental years following the fall of the Soviet Union. One assessment regarding the persistent prevalence of neopatrimonial tendencies in Ukraine noted:

For years, Ukraine has had more in common with states in Africa or Latin America than with other parts of Europe. Business and politics have been fused, the rule of law has been weak, and almost all transactions, from visiting the doctor to managing a business to running a political campaign have incurred informal taxes or rents. Formal political and bureaucratic offices are held on a basis of dependence on powerful masters, who exact rents and pay incomes to members of their networks—thereby robbing the state of revenue at every stage. . . . Ukrainians . . . see the state more as a predator than as a supplier of public goods. . . . Many Ukrainians accept that everyday bribery is a way to get things done.95

“In short, corruption in Ukraine was endemic.”96

Despite the apparent similarities, the particular form of corruption that took root in Ukraine is categorically different than that experienced by the Georgians. While the corruption Georgia faced focused primarily on organized crime, and the police forces charged with countering it, “Ukraine’s political system is best described as state capture.”97 State capture refers to a system of corruption wherein every level of the state is involved.98 Put another way, Ukraine’s corruption may be described as oligarchic and grand where Georgia’s is petty and dominated by elite cartels.99 “Ukraine’s norms around corruption were namely that it was a part of living and governance. It was a strategy of survival for the everyday citizen and a way of life for the businessman.”100 Unlike Georgia, Ukraine has seen little movement in its CCI and CPI scores and rankings over the past decade, lagging well behind Georgia and suggesting that significant challenges remain.101

2. European Union Accession Efforts

Ukraine’s relationship with the EU also began in earnest with the establishment of the European Neighborhood Policy (ENP) and followed a similar path as that of Georgia.102 As discussed above, the ENP provides the framework for ensuing partnership and cooperation agreements with specified European neighbor countries and focuses on “political cooperation and deeper economic integration.”103 The ENP is further implemented by several regional partnership arrangements, including the Eastern Partnership framework, discussed above, which was established in 2009 and includes Ukraine and Georgia.104 Most relevant here, the Eastern Partnership’s emphasis on stronger economies and governance among partner nations directly implicates the effectiveness and transparency of public procurement systems.105

Also like Georgia, Ukraine entered into an Association Agreement, including its own DCFTA, with the EU in 2014.106 However, as discussed below, this agreement would prove much more controversial and divisive than similar arrangements in Georgia.107 Indeed, as the exemplar of further Ukrainian alignment with the West, the Agreement would precipitate internal political upheaval, Russian aggression toward Ukraine, and ultimately a war between the neighboring countries.108 Furthermore, it appears that internal barriers to reform in Ukraine are significantly stronger than those seen in Georgia. External pressure, mainly from the EU, has often failed to overcome engrained neopatrimonial networks, and successes are frequently undermined or reversed later by Ukrainian government leadership.109 “In the area of public procurement, domestic vested interests tend to trump not only national interest, but also the concerns of external actors, even when there are clear negative foreign policy implications.”110

3. World Trade Organization Government Procurement Agreement

One notable difference between Ukraine and Georgia with respect to external drivers of reform is the state of their respective relationships with the WTO’s Agreement on Government Procurement (GPA).111 Complementary and consistent with the EU system, the WTO represents another international standard by which the health of public procurement systems can be measured; the WTO GPA is the most commonly followed international public procurement instrument in existence, with forty-eight WTO member countries falling under its umbrella.112 It is “arguably the most important binding international agreement on public procurement worldwide.”113 As with EU standards, WTO GPA accession requires states to conform their domestic procurement laws to the requirements of the agreement, which incorporate common public procurement principles like competition, transparency, and openness.114

Thus, GPA accession functions in much the same way and provides similar benefits as the EU’s regional system as an incentive for, and external driver of, reform. Reciprocal market access to all GPA members’ procurement systems represents a massive economic opportunity for a developing economy such as Georgia’s or Ukraine’s. Much like EU integration, GPA accession also offers domestic benefits such as enhanced competition and lower prices as the pool of potential vendors for public contracts expands.

Both Ukraine and Georgia have utilized WTO GPA accession as another driver of public procurement reform. However, they notably diverge with respect to their status under the agreement. Specifically, Ukraine fully acceded to the WTO GPA in 2016, but Georgia has not yet done so despite ongoing efforts to achieve the reforms required for accession.115 As of 2021, the WTO lists Georgia as one of several countries currently in the process of accession to the GPA.116

4. Euromaidan, the Revolution in Dignity

Beginning in 2013, a popular uprising took hold in Ukraine in response to former-president Viktor Yanukovych’s announcement that he would abandon the association agreement that Ukraine had been pursuing with the EU up to that point.117 Student activists took to the streets and occupied Kiev’s Independence (or “Maidan”) Square, protesting Yanukovych’s decision and demanding that Ukraine embrace European integration.118 Following violent reprisal by the government, these students were eventually replaced with more radical activists demanding not only EU integration but also broader discontent with the Yanukovych regime and a crackdown on corruption in Ukraine’s government.119

Anticorruption reform thus took on a central role in Ukrainian social and political life, bringing the problem to the forefront of the nation’s consciousness. In the end, directly resulting from apparent corruption at the highest levels of government, Yanukovych fled the country, and, while in exile, Parliament removed him from office.120 The preceding government inherited a clear, popular mandate to reduce corruption and continue efforts toward greater European integration.121 Indeed, the new government of President Petro Poroshenko signed the parliament-ratified EU Association Agreement in November 2014, less than one month after taking power.122

By focusing public attention on endemic corruption, Euromaidan not only led to “a new and radical amount of transparency,” but “also increased . . . Ukrainians’ knowledge of how prevalent corruption is.”123 With this new transparency and focus, Ukraine was poised to turn a corner in addressing these issues and realizing full EU integration. However, geo-political concerns and a deteriorating security situation quickly got in the way.124

After 2014, Ukraine sought to capitalize directly on Georgia’s experience of successful reform under the Saakashvili regime.125 Indeed, Ukraine appointed former Georgian Deputy Interior Minister Eka Zguladze to the Deputy Interior Minister position in Ukraine to implement some of the same police reforms that had been so successful in combating the thieves-in-law in Georgia in the late 2000s.126 These efforts were hindered by the different character of Ukrainian corruption noted before. Where Zguladze’s program in Georgia focused on the petty corruption of entrenched organized crime and policing, Ukraine’s particular style of corruption was much more pervasive and entrenched in all levels of government.127 Ukrainian corruption was not only greater in scope but of a categorically different type than what Zguladze encountered in Georgia.128 Thus, the Georgian approach would not have been as effective in Ukraine’s unique situation.

Ultimately, “[t]his system was shaken but not broken by the 2013–2014 Euromaidan revolution and the fall of the Viktor Yanukovych regime. Much public anger that might have been directed at oligarchs was deflected toward Russia after its military intervention in Ukraine.”129 In the end, “[c]orruption in Ukraine is a system that was wounded by the Euromaidan protests but has survived and, to some extent, retrenched.”130

5. Crimea, Donbass, and the Russo-Ukrainian War

Like Georgia, Ukraine also saw foreign intervention derail its efforts toward reform and further international integration. In 2014, following the same playbook established in Georgia in 2008, Russia took advantage of civil unrest and separatist sentiment in parts of eastern Ukraine to justify incursion and, in the case of Crimea, annexation.131 After Yanukovych’s refusal to sign the EU-Ukraine Association Agreement sparked widespread civil protests and signaled the Ukrainian population’s desire for greater EU integration, Russia once again assessed Western encroachment toward its borders as a threat.132 It seized on the opportunity to send unmarked, deniable Russian military forces into Crimea under the pretense of defending ethnic Russians in the area who were ostensibly persecuted by the Ukrainian government.133

As a result, separatists backed by covert Russian forces quickly seized key military bases in Crimea that housed the Russian Black Sea Fleet under lease agreements with Ukraine.134 Following a questionable referendum indicating the Crimean population favored becoming part of Russia, Russia effectively annexed the peninsula on March 18, 2014 by formally agreeing to accept the self-declared independent Republic of Crimea into the Russian Federation.135 In addition to checking NATO and EU expansion and maintaining some control over its near-abroad sphere of influence, the annexation of Crimea also served internal Russian security interests.136 Specifically, with Crimea now part of Russia proper, Russia could guarantee its access to the Black Sea for military and economic purposes.137 Shortly after the intervention in Crimea, Russia also increased support to Ukrainian separatists in the Donbass region of eastern Ukraine, centered on the breakaway provinces of Donetsk and Luhansk.138 Once again, Russia provided covert support to separatists that were fighting the Kiev government.139

Ultimately, Russia’s approach prior to 2022 had much the same effect as in Georgia, effectively freezing both countries in place politically and economically. Russia’s aims in Ukraine were virtually identical to those it first sought in Georgia. Russia demonstrated its commitment to stop EU and NATO expansion on its direct borders by whatever means necessary.140 Accordingly, by once again calling a neighbor state’s stability and territorial integrity into question, this time in Ukraine, Russia effectively halted further efforts toward European integration. As with Georgia, Ukraine has since been unable to effectively meet the Copenhagen criteria for EU membership and has been limited in its ability to further integrate with the EU under the auspices of the Association Agreement.141 Thus, Ukraine’s prospects for greater access to the EU system, and the effectiveness of such integration as a driver of reform, was stalled by the continuing security situation in the east.

The simmering conflict between Russia and Ukraine boiled over into overt war in early 2022 following a massive allocation of Russian military forces along Ukraine’s borders under the guise of military exercises.142 On February 24, 2022, Russia invaded from the north, south, and east.143 Despite predictions that the Russian military would quickly overwhelm Ukrainian forces, to date Ukraine has withstood the Russian onslaught with surprising success.144 Perhaps even more surprising has been the perseverance and resilience of Ukrainian leadership and government institutions. Though degraded by the chaos of war, Ukrainian governance, including public procurement, continues to function and meet the state’s needs.145

Moreover, this massive escalation of hostilities by Russia, based on the premise of preventing Ukraine’s further drift toward the west and keeping NATO and the EU off Russian borders, has paradoxically had the opposite effect. As mentioned above, barely weeks after the Russian invasion, Ukraine, along with Moldova and Georgia, formally applied for EU candidate status.146 On June 23, 2022, the EU granted that request and formally made Ukraine a candidate for EU membership.147 Thus, despite its best efforts to the contrary, Russia’s aggression has served to push Ukraine further toward European integration. Ukraine is closer now than ever to achieving the reforms implicit in EU accession, opening the door to significant improvement in its already remarkable record of progress in fighting corruption and improving transparency in public procurement.

III. Domestic Procurement Systems

A. 2010 Georgia State Procurement Law

Perhaps the most significant achievement of early Georgian procurement reform efforts was the enactment of the State Procurement Law in 2010.148 The law represents the culmination of Georgia’s efforts since the Rose Revolution toward establishing a truly modern, open, transparent, and competitive public procurement system. It “amounted to a complete overhaul of the country’s formerly inefficient, bureaucratic, and ‘high-risk’ procurement system.”149 According to Georgia’s own Competition and State Procurement Agency (CSPA), Georgia

inherited a heavy legacy . . . [from the] previously existing tendering system, . . . due to a lack of proper transparency[,] . . . discriminatory approaches[,] . . . corruption, favouritism, and other unhealthy practice[s]. Accordingly, [the] degree of trust of society towards the State Procurement System was low, compounded by limited information, high cost for participation in the tender and inadequacy of time requirements.150

To address these shortcomings, the CSPA modeled the new procurement system established by the 2010 law on five key principles—transparency, nondiscrimination, fair selection, facilitated procedures, and less paperwork.151 These efforts led to the creation of a trilingual electronic tendering system that ultimately resulted in the elimination of paper tenders entirely.152 The system has also become an internationally recognized model, especially for developing countries undertaking significant procurement reform efforts.153

1. Electronic Procurement and Procurement Dispute Systems

One of the 2010 law’s most notable achievements is the creation of a robust and effective electronic procurement system that allows all potential offerors to effectively participate in Georgian procurements.154 Under the system established by the State Procurement Law, government contracts are generally awarded to the lowest priced qualified bidder, “often through a reverse auction process.”155 The Georgian electronic tendering system has greatly simplified participation in public procurement, “thereby increasing transparency and competition, and instilling confidence by decreasing corruption risk.”156

The law also established an effective procurement dispute system that enhances fairness, transparency, and competition in Georgian procurements.157 Article 23(1) of the State Procurement Law provides for appeals to the contracting authority or procuring agency, similar to agency-level protests in the U.S. system.158 Any interested party can also appeal the actions of the contracting authority or tender committee to a court at any time for violations of the State Procurement Law or associated laws.159 Article 23(41) called for the establishment of a board composed of government and civilian members to resolve procurement-related disputes.160 The Dispute Resolution Board (Board) was subsequently established by order of the Chairman of the State Procurement Agency, and Rules of Activity governing conduct of the Board were promulgated in 2010.161 The Board functions similarly to the United States Government Accountability Office (GAO) Bid Protest Branch, serving as a “quasi-judicial body” that decides procurement disputes between parties.162

The Board is not subordinate to any other Georgian agency or official, thus preserving its objectivity and independence to the maximum extent possible.163 Additionally, though the rules are not as stringently enforced as in the U.S. system, Board decisions may be appealed to the Georgian administrative court, loosely analogous to the relationship between the U.S. GAO and Court of Federal Claims.164 Board rules on standing to bring procurement disputes and stays of performance to preserve the effectiveness of remedies closely mirror those of the United States,165 as do Board remedies involving recommendations to procuring agencies rather than binding orders.166

The steadily increasing utilization of the Board and increasing effectiveness of its decisions highlight the benefits it has already brought to Georgian procurement. A 2015 study indicated “the annual number of procurement challenges submitted to the Board has increased significantly each year since the Board’s establishment in 2011.”167 Where only 67 challenges were brought in 2011, that number had increased to 895 by the end of 2015.168 The overwhelming majority of these dispute claims challenged agency decisions and actions, such as disqualification of bidders.169 A small portion also challenged the terms of the tender itself.170 This increase in the number of challenges indicates a rise in transparency where more competitors, or even concerned citizens, have been given sufficient access to tendering information to allow them to bring a challenge. Moreover, increased willingness to use such a challenge system suggests greater confidence that violators will be held accountable and the belief that such challenges will actually improve the procurement system with real results.

Short of bringing challenges before the Board, Georgians can also use a quasi-protest mechanism within the electronic tendering system itself. 171 Tenders can be suspended by any person with the click of a button and later referred to the CSPA Appeals Council made up of three agency employees and three civilian representatives.172 Loosely analogous to agency-level protests in the U.S. system,173 the Appeals Council’s decisions are publicly available and often treated as guiding, though not binding, authority.174 While a notable achievement in fairness, transparency and access, an automated tender suspension system such as this does create some risk of abuse.

It is not difficult to envision a scenario in which any registered user, to include private sector actors and government officials, could trigger automatic suspension of a tender for commercial advantage or to improperly skew the results. Empowering all users to address irregularities in this way is a laudable goal, but it practically invites inefficiency and bureaucratic breakdown through frivolous claims. The Appeals Council serves as a check on such a scenario, but it does not eliminate the risk of abuse and inefficiency entirely.

While robust electronic tendering and effective dispute resolution mechanisms indicate massive improvement over previous practices, the law’s effectiveness toward achieving transparency and competition may have been hindered by several sweeping exemptions that threaten to undermine its impact on the improvement of Georgian procurement.175 Georgia must be careful to ensure these exemptions do not swallow the rule.

2. Exemptions to Electronic Tender

Numerous exemptions to the rule requiring the use of open and transparent electronic tenders risk undermining its overall value to the development of Georgia’s procurement system as an open and transparent model for the developing world. These exemptions from open and transparent competition represent a sizeable portion of Georgia’s overall procurement market and have the potential to swallow the general rule if their use is not carefully monitored.176 As a result of these exemptions, nearly half of all procurements in Georgia in 2012 were awarded directly and non-competitively without the benefits and protections that electronic tenders were designed to provide.177

Similar to most other modern procurement systems, and of significantly less concern to transparency and competition, Georgia has established exemptions to electronic tendering for acquisitions falling below a certain monetary threshold. Similar to the United States’ Simplified Acquisition Threshold,178 the Georgian State Procurement Law only requires use of electronic tenders for acquisitions exceeding 200,000 Georgian Laris (GEL).179 Though not required, procuring entities are still permitted to elect the use of electronic tender for acquisitions under this threshold.180 Similarly, non-competitive procedures may be used for acquisitions below the micro-purchase threshold of GEL 5,000.181 “Although the vast majority of [non-competitive] purchases fell under the GEL 5,000 micro-purchase threshold, 74% of the total costs were incurred for direct purchases of large-budget items.”182 Though it is unclear what exactly constitutes “large-budget items” here, the numbers suggest a certain degree of abuse, perhaps not unlike the phenomenon of purchase splitting under the U.S. Government Purchase Card system.183

More troublesome from the perspective of transparency and open competition are the law’s provisions permitting “simplified procurement” outside the electronic tendering system of goods or services that are the “exclusive right” of only one company with no “reasonable alternative” available,184 or in cases of “urgent necessity.”185 The “exclusive right” provision is similar to the U.S. concept of “only one responsible source” where no other good or service can satisfy the government’s requirements.186 The Georgian State Procurement Law explicitly provides that exclusive rights do not exist where the acquisition exceeds the simplified acquisition threshold and an alternative international supplier exists or, in the case of acquisitions below the simplified acquisition threshold, where an alternative domestic supplier exists.187

In cases of “urgent necessity,” the law limits the amount of goods or services procured through simplified procedures to only the “timeframes necessary for resolving the problems caused by the urgent necessity.”188 Similar provisions allowing less than full and open competition in acquisitions of “unusual and compelling urgency,” including limitations on the duration and scope of such purchases, exist in the U.S. procurement system.189

Given the existence of analogous provisions in most other developed procurement systems, including the United States, the mere presence of these exemptions does not necessarily cause concern about their effect on transparency and competition. Rather, their application in practice must be closely monitored to ensure “exclusive rights” are appropriately determined and “urgent necessities” are legitimately present.190 The U.S. system monitors these concerns through legal challenges to justification and approval documents for both sole source awards and emergent circumstances.191 It remains to be seen if the Georgian Dispute Resolution Board or State Procurement Agency will effectively interpret these provisions to avoid abuse and corruption.

Another significant exemption impacting the potential for abuse under the State Procurement Law relates to procurements under Georgia’s “State Secret” Law, which include many military procurements.192 Acquisitions subject to this exemption are determined by the Georgian National Security Council and the President of Georgia pursuant to the Law of Georgia on State Secrets, resulting in many military procurements being exempted from competition requirements by virtue of their relation to national security concerns.193

This national security exemption represents a sizable portion of Georgian government spending. In 2019, Georgia spent over six percent of its total government spending of $4.65 billion USD on military expenditures.194 As a percentage of total government spending, Georgia’s military expenditures are comparable to those of the United States, the world’s leader in military spending.195 Thus, while Georgia’s military and national security expenditures are vastly smaller than the United States’ expenditures in concrete terms, as a proportion of public spending, it is comparable to the most advanced and expensive military in the world. Periods of conflict and instability, which have been common for Georgia in recent decades,196 see military spending rise dramatically.197 For instance, in 2007 during the height of its proxy war with Russia over the provinces of Abkhazia and South Ossetia, Georgian military expenditures rose sharply to thirty-two percent of government spending and over nine percent of Georgia’s entire gross domestic product.198

Given the significant value and quantity of these acquisitions, such a broad and wide exemption to competition and transparent electronic tendering requirements presents a significant risk of corruption and abuse. As a general rule, the United States has no such exemption for military acquisitions and applies the same standards of transparency and competition to acquisitions for national security purposes as to any other government acquisition.199 U.S. acquisitions involving classified information are simply subject to more stringent information safeguarding and disclosure rules, rather than exempted entirely from open and competitive procurement.200

Despite similar proportional spending on defense as the United States, Georgia has carved out a vast chasm in its procurement mechanisms that greatly increases the risk of reduced value for money, waste, and outright corruption. Such risk creates significant obstacles for greater EU integration and continued reform of Georgian procurement systems toward more transparent and non-discriminatory methods. However, to its credit, Georgia’s state secret procedures establish at least some process by which individual acquisitions are reviewed by the President and National Security Council, thereby providing the opportunity to tailor the application of the exemption to more narrow circumstances.201 As will be discussed below, by contrast, Ukraine has exempted a much greater portion of national-security-related acquisitions from transparent and competitive procurement, significantly increasing the risk of abuse and corruption.202

In addition to the potentially vast exemptions noted above, scrutiny reveals several additional sectors that could undermine the effectiveness of the Georgian open tendering system. Notably, procurements of “electricity, firm capacity, natural gas and water supply” are completely exempt from electronic tendering rules, leaving Georgia open to significant risk of waste and corruption in vital, high-value acquisitions.203 In addition, construction services have historically been the largest sector receiving direct, non-competitive contracts through simplified acquisition procedures, followed by state-owned companies and local government spending.204

The mere existence of these exemptions, however sweeping, does not necessarily indicate shortcomings in the Georgian system. After all, similar emergency, national security, and sole source provisions appear in several other mature procurement systems that do not suffer from widespread corruption.205 The real test will be how Georgia interprets and invokes the exemptions. Nothing yet suggests that the exemptions should be abolished or amended, but a procurement system based on sound principles, similar to those mandated by the EU, would be well-served by ensuring that the exemptions are narrowly tailored and selectively used as rare exceptions to the general tendering rules. “While Georgia’s e-procurement system is a marked improvement over the previous system, until Georgia minimizes the use of such exceptions it will not reap the full benefit of competition,” and the risk of corruption and abuse will remain high. 206

B. 2010 Ukraine Public Procurement Law

Despite a history of endemic and deeply rooted corruption problems, Ukraine has managed to make significant progress in the field of public procurement. Indeed, some scholars single out this sphere of public administration as one of the bright spots in an otherwise problematic corruption landscape in Ukraine.207 “Public procurement in Ukraine has undergone a radical overhaul. Previously [to 2014], it had been a means to reward political favorites.”208 Now, as a member of the WTO GPA, a formal Association Agreement and DCFTA with the EU, and newly granted EU candidate status, the Ukrainian procurement system is becoming a model of integrity and transparency.

Ukraine began significant reform in 2000 with the passage of a comprehensive public procurement law which “complied reasonably well with accepted international standards.”209 By 2005, competitive tenders exceeded ninety percent of public procurements, but around the same time, amendments to the law began to undermine its openness and transparency.210 Particularly problematic was the creation of the “Tender Chamber,” a non-governmental organization that was nominally charged with increasing transparency and efficiency in public procurement, but in practice became a mechanism for business-affiliated members to advance their own commercial interests in the process.211

As a result, “between 2005 and 2008 Ukraine was one of the countries with the greatest increase in bribes in the areas of public procurement.”212 By some estimates, Ukraine lost roughly $6 billion USD per year to public procurement corruption between 2008 and 2010, and roughly “ten percent of procurement funds were dispensed as bribes to officials” during that time frame.213 Eventually, following the 2004 and 2005 amendments that severely crippled the effectiveness and transparency of the 2000 law, it was repealed in 2008 and the Tender Chamber was abolished.214

The presidency of Viktor Yanukovych began in 2010 with promises of significant reforms to fight corruption and improve public procurement.215 While these efforts initially showed some success, it soon became clear that special interests continued to trump real reform.216 At the same time that Yanukovych ascended to the presidency, the Ukrainian legislature passed a sweeping public procurement law.217 However, the initial version of the legislation was quickly criticized for serious defects related to the fairness and effectiveness of bid protest and appeal mechanisms.218 In fact, both the EU and World Bank urged Yanukovych to veto the legislation as a result of these concerns, which he ultimately did.219 Approximately five months later, after addressing many of the concerns of Yanukovych and the international community, a new version of the legislation was passed and became law.220

This version incorporated significant aspects of EU public procurement rules and was accordingly praised by the EU and World Bank.221 Specifically, it abolished the Tender Chamber and placed responsibility for oversight and implementation with the Ministry of Economy.222 Additionally, it established a complaints mechanism, effectively a bid protest system, under the authority of the Anti-Monopoly Committee.223 The law expanded the range of grounds on which protestors could challenge procurement decisions and appeal to the Anti-Monopoly Committee and granted the Committee investigative powers, including search and seizure of businesses’ records.224 Requiring the publication of tender information in electronic and paper form improved transparency and fairness.225

Shortly after passage of the final 2010 law, the OECD identified a potential loophole in existing accountability and enforcement mechanisms related to public procurement. A separate Ukrainian law provided for administrative sanctions for certain violations of procedural rules, as well as corruption, in public procurement, but did not specify to whom it applied.226 Even discounting the fact that this language is exceedingly vague and unquestionably self-serving, such an interpretation creates a loophole for procurement officials and government leaders to avoid administrative sanctions for procurement integrity violations by outsourcing corruption to officials of state-financed institutions.227

While the 2010 law represented a quantum leap toward better integrity in Ukrainian public procurement, it was not free from the undermining amendments and exceptions that had plagued its predecessor. Perhaps most famously, the Yanukovych government invoked a sweeping exception to open tendering rules due to the purported time constraints for the 2012 European Soccer Championship (Euro 2012).228 The Yanukovych government blamed the prior regime for failing to adequately prepare for the tournament, thereby justifying exemption of all projects related to it from the “bureaucratic demands of the tender process.”229 Tellingly, it soon became clear that the championship did not really constitute an exceptional situation, and the real beneficiaries of the arrangement were a small group of influential Ukrainian businessmen.230

Though it did not originally provide for electronic procurement, the 2010 law and the political upheaval of 2014 eventually led to the introduction of the ProZorro system in 2015.231 Similar to the Georgian GeGP system discussed above, the ProZorro electronic tendering system was intended to make Ukraine’s procurements “some of the most transparent in the world.”232 In fact, Ukraine once again drew direct inspiration from the Georgian experience with successful electronic procurement.233 Much like the installation of former Georgian officials in high-level anticorruption roles, Ukraine also employed two Georgian electronic procurement experts, Tato Urjumelashvili and David Marghania, to aid in development of the ProZorro system.234

Originally conceived by Ukrainian anticorruption activists in 2014, the goal of ProZorro was to create a transparent and accessible system that “reduce[d] corruption in public procurement.”235 According to the official ProZorro website, the system has “been globally recognized as one of the most innovative public procurement systems delivering government services in a stakeholder-focused, transparent, effective, fair and low-cost way.”236 It became mandatory for all public tenders on August 1, 2016.237

Notably, the system makes all public tendering information and procurement announcements available to the general public without any registration requirements or other barriers to access.238 A group of concerned citizens and government buyers has emerged to monitor public procurements, calling themselves DoZorro, or “watchdog.”239 This radical approach to transparency has, by the ProZorro team’s own estimates, saved Ukrainians roughly sixty billion UAH per year in reduced corruption costs and enhanced competition, as well as facilitating public oversight of the entire government procurement process.240 The system has been praised by the EBRD and won a prestigious World Procurement Award in 2016.241 Similar to Georgia’s GeGP, Ukraine holds ProZorro out as a model of effective and transparent electronic procurement for the international community.242 Perhaps even more important, ProZorro helped change Ukrainians’ view of government, showing citizens and businesses that the government could be trusted to act in their best interests and avoid the corruption and opacity that had plagued Ukraine’s system for so long.243

The system has also proven itself to be incredibly “resilient in the [face of] chaos and war.244 Despite the violence and humanitarian catastrophe taking place across Ukraine since 2022, ProZorro continues to function and make Ukraine’s wartime public procurement more effective, competitive, and transparent.245 For example, information obtained through ProZorro allowed journalists to identify the purchase of government uniforms from a vendor with a history of poor quality, monitor bidding by Russian oligarchs in Ukrainian government procurement, and even assess apparent Russian attacks on Ukrainian satellite feeds through records of telecommunications purchases.246The war spurred expansion of ProZorro as the country’s needs evolved. As the situation deteriorated and humanitarian supplies came into higher demand, Ukraine launched ProZorro+ to facilitate global access to Ukrainian aid.247 The system allows global suppliers to post their goods and Ukrainian buyers to post their needs to facilitate rapid and efficient purchases.248

1. Debarment and Conflicts of Interest

Despite these advances, two significant shortcomings of the 2010 law quickly became apparent. It notably lacked mechanisms for suspension and debarment and avoidance or resolution of conflicts of interest. As to the first, the law appears to lack clear criteria disqualifying firms found to have committed bribery or violated tendering rules from future procurements.249 By way of illustration, in the Euro 2012 example described above, a contractor close to the government official who was responsible for infrastructure projects related to the championship was awarded a stadium reconstruction contract despite having been charged with, and later admitting to, embezzling three million dollars.250

Furthermore, as the OECD noted, the definition of conflicts of interest in public procurement under the law is not clear.

Besides, the [l]aw does not establish an effective mechanism for [conflicts of interest] prevention and detection; tender documentation does not require conflict of interests [sic] declarations, and potential conflicts can only be revealed by looking at the names of beneficiary owners. Members of tender committees are not obliged to declare their conflicts of interests either.251

The difficulties of preventing corruption and avoiding conflicts of interest based on scrutiny of beneficial ownership are highlighted by recent legislative efforts in the United States requiring disclosure and tracking of beneficial ownership of companies doing business with the government.252 Without an analogous legal requirement, effectively determining beneficial ownership, which is the only mechanism to avoid conflicts of interest in Ukrainian public procurement, is nearly impossible. Absent affirmative legal obligations, the prevalence of shell companies and obscure corporate structures, along with secretive banking rules in many countries, would effectively render theconflict-of-interest approach taken by the 2010 Ukrainian law futile.

2. Market Sector Exemptions

Much like in Georgia’s case, the vast exemptions to open tendering present one of the most significant concerns with Ukraine’s 2010 procurement law. The broad availability of these exceptions suggests that “circumventing public procurement procedures has taken on a systemic character.”253 At the very least, given Ukraine’s continuing sensitivity to the resurgence of widespread corruption—how the use of these exemptions is monitored, managed, and enforced—will have significant impacts on the effectiveness and transparency of the system. Furthermore, the trend of exempting whole market sectors and business interests from public tendering rules seems likely to continue.254 In perhaps the most concerning example, in June 2021, Ukrainian “President Volodymyr Zelenskyy signed a law exempting roadbuilding and airport repair projects from standard tendering procedures and oversight.”255

Such a situation creates significant cause for concern since “[e]ach time an exemption from the public procurement law is made, it implies a loss of transparency, since the exempted spheres of activity are no longer obliged to abide by the law’s requirements to make information on tenders public.”256 Effective monitoring and oversight thus becomes increasingly difficult as less information is made available to determine if informal networks are impacting procurement decisions or how public funds are actually being spent.257 Such opacity can also lead to decreases in price control and value for money as competition for goods and services is decreased in the exempted sectors.258

Additionally, even where exemptions do not apply and competitive public tendering is used, significant problems with transparency and market access remain. Such problems include a “lack of public notice of tender rules and requirements . . . covert preferences in . . . [award],” conditions added after the original tender, and ineffective bid protest systems.259 These issues reflect the lingering presence of neopatrimonial informal networks even where formal institutional processes nominally take precedence.260 The broad exemptions further indicate instances in which the exempted sectors officially pass from the formal to the informal institutions.261

One such sector was singled out early on for exemption. In the flurry of amendments shortly after initial passage of the 2010 public procurement law, the segments of the energy, electricity, and natural gas sectors were exempted from open tendering requirements in Ukraine.262 The U.S. system recognizes that, in many cases, utilities, including electricity, energy, and gas, may only be practicably available from a single source and allows for their purchase with less than full and open competition.263 However, it does not go so far as to exempt the entirety of the energy and utilities sectors from open tendering rules, as the Ukrainians have done. As is the case with virtually every sector that the Ukrainians have exempted, such a broad exclusion severely undermines competition and transparency requirements and exposes large segments of procurement activity to higher risk of corruption and abuse.

Like the United States and Georgia, Ukraine also established a monetary threshold for the application of open competitive tendering procedures. That threshold is UAH 100,000 for goods and services and UAH 300,000 for public works.264 Acquisitions below these thresholds account for approximately half of the entire Ukrainian procurement budget.265 Given the relative size of its economy and exchange rates on currency, this threshold puts Ukraine well below the United States, Georgia, and the EU in terms of the amount required to trigger open tendering.266 In other words, based on the monetary values involved, Ukraine should be requiring more open tendering on more goods and services procured than the other procurement systems mentioned above. The application of this exemption may, thus, indicate an area in which Ukraine’s system has exceeded international norms and actually leads its peers, and more developed economies alike, in narrowing the scope of the exemption to a realistic minimum, thereby enhancing transparency and competition overall.

Going even further than the Georgia State Secret exemption described above, and raising significantly more red flags about transparency and corruption, Ukraine exempted its entire defense industrial sector from open tendering.267 The legislative amendment that exempted defense industrial firms from public procurement procedures did so on the basis that the bureaucratic requirements would unacceptably delay delivery of products to international customers.268 In contrast to the relatively limited corruption concern raised by Georgia’s state secret exemption discussed above, Ukraine’s exemption of the entire defense industrial sector from open tendering triggers alarm bells.

As mentioned previously, the United States does not exempt national security procurement from open competition at all.269 Instead, the United States simply applies more controls on the use and dissemination of information that is potentially harmful to national security.270 Even the Georgian approach requires specific findings by the President and National Security Council that a procurement so affects national security as to qualify for exemption.271 Ukraine originally appeared to have done away with even this pretense of process and instead carved out the entire sector as an exemption. However, in recent years, Ukraine has made efforts to establish a competitive and transparent procurement system specifically for the defense sector.272 Work toward defense sector reform began with the passage of a law “On Defense Procurement” that declassified a significant part of the state defense order.273 Though outside of the normal ProZorro-based tendering procedures, these defense-related procurement reforms signal a sensitivity to the risk created by exempting the entire sector from open tendering and a willingness to bring defense procurements more in line with the ProZorro model of efficiency and transparency.274 Based partly on the NATO Support and Procurement Agency (NSPA), Ukraine’s Defense Ministry intends to create an “analogue of ProZorro of a military nature.”275

In 2012, another controversial amendment exempted state-owned enterprises from the public procurement law.276 As a result, open tendering procedures were only required for acquisitions using direct government budgetary funds.277 There was no mechanism by which to determine how state funds were being used by state-owned companies.278 By some estimates, Ukraine spent approximately seventy-five percent of its budget on public procurement in 2011, which amounted to $40.6 billion USD.279 Over $31 billion USD, or roughly seventy-six percent of that spending was given to state-owned entities.280 The state-owned enterprise exemption thus represented a massive gap in oversight and transparency.

This situation created significant risk of corruption and non-transparent dealings. To avoid competitive tendering requirements, officials could simply elect to have a state-owned enterprise conduct the transaction. Given the size and scope of state-owned businesses remaining in Ukraine and the staggering percentage of the public budget devoted to them, exempting such a wide sector of government activity from transparency and competition requirements significantly undermined any real effort at reform that the law may have originally reflected.281

Fortunately, in 2014, this situation was corrected by returning state-owned enterprises under the umbrella of the public procurement law, but with an increased open tendering threshold of UAH 1,000,000.282 While it is encouraging that the Ukrainians recognized the flaws and significant corruption risks of such a vast exemption, its presence in the system for nearly two years suggests a notable danger of future backsliding. After all, the state-owned industry exemption was at best tolerated and at worst encouraged by the Yanukovych government from 2012 to 2014.283 It was not until the Euromaidan movement brought endemic corruption to the forefront of public debate, ousted the government, and elected reformers that the exemption was abolished.284 Finally, the Ukrainian public procurement law also created exemptions, and accordingly increased corruption risk, for land and real estate, as well as mandating simplified procedures for food vendors.285

Even now, there is cause for concern about the Ukrainian approach to exemptions. In 2021, in an act reminiscent of the Yanukovych regime’s approach following passage of the 2010 law, “President Volodymr Zelenskyy signed a law exempting roadbuilding and airport repair projects” from open tendering.286 This extreme measure was taken ostensibly to speed up construction of the Kyiv Great Ring Road, the most expensive public works project in modern Ukrainian history.287 This situation has led to allegations of rigged tenders, with billions potentially lost to corruption, mismanagement, and fraud.288

Again, as with Georgia, the mere presence of the exemptions themselves does not necessarily equate to increased corruption. However, given the systemic and deeply entrenched history of corruption in Ukraine, scrutiny and transparency about the exemptions’ employment and appropriateness must remain paramount if Ukraine is to continue its progress toward better public procurement, especially with respect to anticorruption efforts. However, unlike in Georgia’s case, the wholesale exemption of entire Ukrainian economic sectors from open tendering rules suggests that stronger oversight and implementation will be insufficient to ensure transparency.

In short, there is nothing to oversee. If the entire defense and energy sectors, representing significant portions of Ukrainian government spending, do not fall under open tendering rules in the first place, there is no mechanism or system with which procurement officials could oversee them at all. Spending in these sectors would not even be visible to anyone to oversee. Where there is “no record of processes and expenditures[,] . . . it becomes extremely difficult to determine whether certain firms are receiving informal privileges and whether funding spent on particular projects is within reasonable limits.”289

While the Georgians have created some processes and standards around the implementation of their exemptions, thereby allowing them to be narrowly tailored and applied, Ukraine’s approach prevents any such oversight. Ukraine would be better served, especially with respect to competition and transparency, by eliminating sector-wide exemptions and creating more narrowly tailored provisions that balance the need for efficient, un-bureaucratic processes with effective best-value procurement and anticorruption goals. In that regard, Ukraine and Georgia may derive some valuable lessons from how exceptions are applied and managed in more developed procurement systems.

C. Comparative Approaches to Exemptions

Exemptions to competitive and open procurement rules are not unique to Ukraine and Georgia. As mentioned, several well-developed public procurement systems, including in the United States and the European Union, contain similar provisions for exceptions under certain circumstances.290 However, an important contrast lies in how the use of those exemptions has been developed, implemented, and overseen over time. Recognizing the potential for abuse inherent in such broad exemptions to transparency and competition requirements, the United States and the EU have imposed significant administrative and bureaucratic restrictions on their application.

Such an approach suggests that the existence of the exemptions themselves is not necessarily problematic, but the manner in which those exemptions are invoked, and the regulatory restrictions on how they are invoked, are the key to checking potential abuses. Thus, the system of exemption oversight and management currently practiced in the United States and Europe may serve as a useful guide for Ukraine and Georgia as their public procurement systems mature and their approach to implementation of these exemptions evolves.

1. The United States

The U.S. Federal Acquisition Regulation (FAR) provides the basic and comprehensive definitions and procedures for any type of public procurement intended to be carried out without full and open competition.291 The U.S. system begins with the baseline notion that all government contracts should be solicited with full and open competition absent an enumerated exception.292 This approach is analogous to the open and public tendering requirements of the Ukrainian and Georgian state procurement laws.293

However, the U.S. system goes a step further, directing that, even where full and open competition is not required under an enumerated exception, procurement officials still must “solicit offers from as many potential sources as is practicable under the circumstances.”294 This provision emphasizes that exceptions cannot be used to circumvent competition requirements altogether, but only lessen them under certain, specific circumstances. In other words, exceptions may not be used to take a procurement out of the tendering system entirely, as many Ukrainian and Georgian exemptions do, but only narrow down the scope of potential competition and sources. On whatever scale possible, competition is still the preferred method and must be considered, even where an exception applies.295

While the U.S. system provides for seven enumerated exceptions to full and open competition overall, three are most germane to this analysis since they have fairly direct corollaries in the Georgian and, to a lesser extent, Ukrainian system.296 Specifically, the exceptions for only one responsible source (sole source),297 unusual and compelling urgency,298 and national security299 are most useful in addressing the comparative approaches to exclusion from full and open competition or open tendering. In every case, regardless of the exception invoked, the U.S. approach imposes higher administrative burdens before procurements can be accomplished through less than full and open competition. Before any exception can be applied, procurement officials must provide written justification and obtain approval from specified senior procurement executives.300

The Georgian treatment of exemptions more closely resembles U.S. practice than the Ukrainian approach. In fact, except for the national security exception discussed below, there are no analogous U.S. provisions to the wholesale removal of entire market sectors from public procurement requirements seen in Ukraine. Georgia, however, provides for similar approaches to the United States with respect to at least two enumerated exceptions.

The first is sole source contracting, which the Georgians call the exclusive right of one company with “no reasonable alternative.”301 Though it is perhaps the most obvious impediment to competition in a system that favors competition above almost all else, the law recognizes that there may be situations in which the government needs a specific good or service that can only be procured from one source. Certain rare or highly specialized goods and services may not be well-suited to competitive procurement. In such instances, both the United States and Georgia allow sole source contracting where no other product can meet the government’s needs.302 In fact, Georgia narrowly tailors the exception even further than the United States by specifying concrete circumstances that do not qualify for the exclusive right exemption. Specifically, Georgia stipulates that the exemption may not be used when there are any other sources available, either internationally in cases above the simplified acquisition threshold or domestically in cases below the threshold.303

Secondly, exceptions for urgent and compelling circumstances exist in both U.S. and Georgian procurements. The U.S. approach stresses the degree of urgency required to invoke the exception, justifying its use only when “the agency’s need for the supplies or services is of such an unusual and compelling urgency that the Government would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals . . . .”304 The injury contemplated is usually that suffered as a result of delaying the acquisition in order to subject it to full and open competition.305 Furthermore, when invoking this exception, U.S. procurements may only be exempt from full and open competition for the minimum time necessary to meet the urgent or compelling circumstances and enter into a new contract using competitive procedures.306

As discussed above, the Georgians have virtually identical provisions in place with respect to the temporal limitations on the urgent necessity exception.307 This parallel between the administrative and management requirements of the two systems illustrates an example of confluence in best procurement practices. While what qualifies as urgent necessity under the Georgian system is not as well-defined as it is in the FAR, the affirmative restriction on the time that the exemption may apply limits the impact on competition that its invocation may create.308

Strikingly, only one of the enumerated exceptions under the FAR has an analogous provision in the Ukrainian public procurement law. The U.S. exception for national security bears some resemblance to the Ukrainian exclusion of the defense industrial sector, but the scope of the Ukrainian exemption far exceeds that permitted by the FAR.309 Indeed, as mentioned previously, in the United States, absent a particularly grave impact on national security, defense and security acquisitions are subject to the same transparency and competition rules as all other government procurements.310 Even where a U.S. solicitation would risk compromising national security, the FAR provision only contemplates the limitation of potential sources, rather than wholesale exclusion of the procurement from competition.311

The Georgian approach to security procurements represents a more measured approach than its Ukrainian counterpart, but still potentially far exceeds the scope of the U.S. rule by giving state security officials the ability to exempt certain acquisitions from open tendering entirely.312 This provides another example of an area in which the law is not necessarily faulty, but the implementation could raise significant risk. The standards by which such exemptions are made in Georgia are unknown, and history shows that officials are more than willing to extend this exemption to a large majority of military procurements, a sizable sector in and of itself.313 It is possible that officials are reserving such determinations for only the most serious threats to national security, with narrowly tailored remedies in line with the U.S. approach, but, until such decisions are publicly available for scrutiny, the risk of abuse remains high.

Noteworthy with regard to the Euro 2012 scenario in Ukraine described above, the FAR specifically excludes the government’s failure to adequately and timely plan for the acquisition as a basis for an exception to full and open competition.314 Thus, had Ukraine adopted a similar provision in its procurement law, there would have been no question that the wholesale exemption of projects related to the Euro 2012 championship due to the prior government’s failure to make adequate arrangements in time was unlawful. This is but one example of how adopting strict oversight and management controls on the use of exemptions could prevent abuse and corruption.

Finally, the key lesson of U.S. procurement practice is not found in the exceptions themselves, but rather in how those exceptions are invoked, managed, and overseen. Namely, every exception to full and open competition in U.S. procurements requires either a publicly available justification and approval or determination and findings document before it can be used.315 Unlike the Georgian state secret system described above, U.S. officials are required to publicly and openly justify why an exception to full and open competition is warranted, and such justifications are publicly posted with the solicitation.316 This serves as a significant check against the kinds of abuse risk raised by the Georgian and Ukrainian approaches. This approach further illustrates a means by which transparency can be maintained even in sensitive or emergency situations. There is nothing inherently wrong with national security officials making determinations in the interests of national security, or governments directing acquisitions be made for specific items that only one vendor can provide. However, the risk of abuse and corruption in such situations is significantly reduced where the reasons justifying such decisions are made known.

2. The European Union

Similar to the United States, Georgia, and Ukraine, Article 346 of the Treaty on the Functioning of the European Union (TFEU) provides for flexibility in the application of EU directives to domestic systems in cases involving national security.317 Specifically, member states are neither required to disclose information nor are they prevented from taking certain measures with respect to production of or trade in defense articles, where such disclosure or action is “contrary to the essential interests of its security,” so long as these measures do not affect internal market conditions for non-military items.318 This provision reflects the more narrow application of national security exceptions seen in the U.S. system. Here, as in the FAR, the focus is on classified information and its protection. The EU approach falls far short of exempting entire sectors or excluding classes of acquisitions in secret.

IV. The Way Ahead

A. Georgian Competition and State Procurement Agency Strategy

In its 2013 Strategic Plan, the CSPA of Georgia identified several key areas in need of improvement in order to address perceived weaknesses in the Georgian e-procurement system.319 These areas include organizational development, increased public awareness, business development, and education.320

The organizational development strategy directly addresses some of the main weaknesses identified by the plan, including weak internal business processes, the “absence of delegation and job descriptions,” a lack of project management systems, and failures in human resource management.321 Through analysis and optimization, the CSPA seeks to remove inefficiencies from previous business processes and standardize new procedures throughout the organization.322 Additionally, the agency emphasized optimizing its organizational structure to properly define roles and responsibilities to promote collaboration and resource management.323 Attention will also be paid to ensuring clear and effective human resources practices for the best use of the agency’s human capital, including continued education and professional development.324 If properly implemented, these internal improvements will increase the CSPA’s ability to manage and oversee the public procurement system in order to handle greater complexity, promote wider access, and enforce tendering rules.

The CSPA also recognizes that no matter how effective their internal practices are or how robust and transparent the procurement system is, public confidence in the system will not be commensurate with its level of effectiveness if the public is unaware of these features.325 Accordingly, the CSPA next directed its attention to increasing public awareness. The agency determined that the public is not familiar with public procurement activities, nor does the subject, including Board and Council decisions, get attention from media.326 Correcting this problem should enhance public trust in the agency and the procurement system as a whole, which will, in turn, support further improvements to the system.327

To achieve these aims, the agency identified two objectives. First, a coherent public relations strategy is necessary to enable effective communication with target audiences, including the commercial sector and private citizens.328 Second, the agency will engage with media to disseminate its message across a wider spectrum.329 These efforts will focus on active disputes and cases, inviting impartial analysis of the issues involved.330 The agency also intends to devote resources to training journalists in the workings of the system so that they can adequately convey the agency’s message.331 Overall, increased public awareness of the functioning of the procurement system will encourage wider participation, influence public perceptions of corruption, promote confidence, and enhance transparency.

The business development strategic objective focuses on widening the pool of potential vendors engaged in the public procurement market, as well as the amount and diversity of goods and services offered.332 Notably, the agency intends to emphasize the utility of the e-procurement system as a model for private commercial transactions beyond strictly government procurements and to offer services to assist the private sector in adopting the platform.333 To this end, the agency will shift its procurement data and analytics focus from exclusively internal purposes to also include procurement data that may be useful for business, such as pricing and market tendencies.334 Additionally, cooperation with neighboring countries constitutes a focus area, whereby the Georgians hope to share best practices in e-procurement while buildinggovernment-to-government relationships, enhancing regional cooperation and, potentially, access to foreign procurement markets.335

The Strategic Plan’s emphasis on the CSPA as a teaching organization addresses the need for further development of a well-trained cadre of procurement professionals. The CSPA defines “educator” as one of its main roles in working to accomplish its mission of ensuring effective public acquisitions.336 In line with the emphasis on enhanced public awareness described above, the CSPA’s mission to educate is directed toward both public procurement professionals and the wider society.337 In its own words, “[the] [m]ain principle of the organization . . . is to be in the constant process of teaching and development . . . . At the same time it stands as an example of honesty and professionalism for the society.”338 While “high professional skills of some of the staff” is listed as a strength of the organization, taken as a whole, the strategy suggests that education, training, and professionalization are ongoing processes that pervade all of the agency’s activities.339

Agency analysis further identified that “defective tender[s] or qualitative defect[s] of [the] object of procurement [are] often connected to inefficient awareness of users.”340 In other words, the CSPA identified that, in many cases, problems in the procurement process are not necessarily reflective of shortcomings within the established system, but rather the flawed or inefficient use of the system’s tools and processes by users. To combat this knowledge gap, the agency elected to create a training center for procurement professionals, customers, and other interested parties, focused on case studies derived from Dispute Resolution Board cases, with participation from the actual participants in those cases where possible.341 In conjunction with enhanced training, certification systems for the acquisition workforce would be created to recognize its increased knowledge and skill and incentivize education and advancement.342 Finally, the agency will seek to partner with universities that offer government procurement programs in order to further educate procurement professionals.343

The Strategic Plan thus represents a rather comprehensive and critical self-assessment of the state of the Georgian procurement system, its weaknesses, strengths, and avenues for improvement. While some of the major challenges within the system identified in this paper are outside the CSPA’s control, its analysis reflects a sincere desire to improve and an implicit pride in the successes that it has thus far achieved. Outside pressures may impede full realization of some of the stated strategic goals, but, with this document, the agency has positioned itself as an honest broker seeking genuine improvement to a system that has many of the characteristics necessary to define successful procurement reform for the developing world.

B. Continuing Ukrainian Reform Efforts

While a publicized self-assessment and strategy statement similar to the Georgia CSPA’s described above is unavailable for Ukraine, some experts have nevertheless cited continuing reform efforts that give hope for Ukraine’s anticorruption efforts in the future.344 Of note, as of 2016, Ukraine had created, or was in the process of creating, several new institutions and organizations aimed at combatting corruption.345 In addition to ProZorro and the installation of Zguladze and other Georgians in significant anticorruption positions described above, Ukraine also created a position for a business ombudsman.346 The ombudsman’s role includes official receipt and reporting of business complaints about corruption, including bribery pressure and tax fraud.347

Additional efforts include reforming the problematic state-owned enterprise system. Historically, state-owned enterprises have been “beholden to politicians who used the businesses to generate semilegal or illegal revenue streams.”348 To address this problem, the post-Yanukovych governments have begun breaking up state-owned companies and installing new management.349 Specifically, within the energy industry, where some of the largest and historically most corrupt companies in Ukraine reside, responsibility for appointing management of more than sixty companies was transferred from the Ministry of Energy to the Ministry of Economic Development in 2015.350 However, Ukraine must remain cognizant of the risk of repeating the mistakes of the immediate post-Soviet breakup, wherein privatization of state-owned businesses proceeded too quickly, and inequitable practices resulted in disproportionate financial benefits to politically connected businessmen.351

Other significant anticorruption reforms focus on the political institutions of Ukraine. Notably, judicial reform is necessary to prevent recurrence of crooked judges handing down corrupt judgments that gave corruption the cover of technical legality.352 Similarly, efforts have been undertaken to reduce the disproportionate power of the Public Prosecutor’s Office, which has seen very few successes in prosecuting corrupt officials of the Yanukovych government.353

Appointed directly by the president, the prosecutor general has historically been viewed as an arm of the presidency whose objectivity is compromised by personal and political loyalties.354 Further concerns regarding the prosecutor general’s failure to meaningfully hold any former officials accountable center on incompetence, the potential receipt of bribes themselves, and the risk that aggressively pursuing grand corruption cases will implicate Ukrainian elites to whom the prosecutors are loyal.355 As a result, the Prosecutor’s Office’s power and reach was reduced from 18,000 prosecutors to 10,000 in 2017.356 It is hoped that the creation of the Specialized Anticorruption Prosecutor’s Office in 2016 will further alleviate some of these concerns, though its effectiveness remains to be seen.357

In addition to the special anticorruption prosecutor, Ukraine has also created several new agencies focused on reducing corruption and holding offenders accountable. These include the National Anticorruption Bureau of Ukraine, the National Agency for Prevention of Corruption, and a National Asset Recovery Office and Asset Management Office.358 The Anticorruption Bureau is an investigative agency with limited law enforcement powers, though it lacks the authority to review past cases.359 The Prevention Agency focuses on exposing corruption by senior officials through the monitoring of data such as asset declarations.360

Asset recovery in corruption cases has proven a particularly difficult issue for Ukraine’s attempts at accountability. Despite untold billions of dollars in corruptly acquired assets being shipped abroad by the previous regime, Ukraine has only been able to return a comically small amount to state budgets, though it has had marginally more success freezing assets in foreign bank accounts which have yet to be returned.361 To rectify this disparity, the National Asset Recovery Office is charged with “identifying, tracing, and managing assets derived from corruption and other crimes, with a mandate to pursue stolen assets both in Ukraine and abroad.”362

The creation of these new agencies and institutions to combat corruption reflects the recognition that the institutions themselves in Ukraine’s state capture corruption situation are generally ineffective at combating the corruption from which they have benefitted. The key advantage to new agencies and organizations is that they can be staffed by “freshly appointed professionals untainted by the old system.”363 Of perhaps greater concern, though, is the fear that the creation of new institutions will make “anticorruption policy someone else’s responsibility.”364 In other words, new agencies may allow senior officials to ignore their own anticorruption responsibilities and blame the agencies for failures and shortcomings, rather than exercising responsibility over this key government interest.

While these efforts are nevertheless encouraging, there is some question that the Ukrainian government does not regard the new institutions with the same confidence as the international community.365 Despite international urging, the government acted slowly in creating the new agencies, allocating insufficient funding for them, and failed to staff them with top professionals.366 Thus far, it has taken significant international pressure to properly constitute the agencies, which has been done almost entirely through the “persistence of Western donors.”367 Time will tell if Ukraine is serious about advancing the reforms on its own.

V. Conclusion

Given the legacy of deeply ingrained corruption in Georgia, the unstable security situation, and the corrupt, autocratic leaders that followed the Soviet collapse, Georgia’s anticorruption efforts, and associated procurement reforms, are nothing short of remarkable. In less than a decade, Georgia transformed itself from among the most institutionally corrupt countries to a world leader in government transparency and effective competition in public procurement among developing nations.368

Though Georgia has much to be proud of in this regard, significant obstacles to a fully realized transparent and principled public procurement system remain. Most notably, given the sizeable portion of procurements involved, Georgia must take great care that the exemptions to the tendering rules are narrowly tailored and sparsely used so as to close off potential avenues for corruption and abuse. Such care will improve the effectiveness of Georgia’s internal procurement processes and aid efforts for greater integration into the EU.

The challenge for Ukraine remains more significant. With corruption deeply entrenched in all levels of government and a history of manipulating the public procurement system to benefit oligarchs and well-connected elites, Ukraine still faces significant obstacles to achieving responsible procurement and reducing corruption. Ukraine’s first and most important step should be reassessing its exemption of entire sectors of the market from open tendering rules and focusing its exemptions on a more narrowly tailored approach that balances the competing interests. It should also update provisions concerning conflicts of interest and debarment of offenders in order to render its anticorruption efforts more effective and further enhance transparency and accountability in public procurement.

Despite significant improvements, Georgia and Ukraine must address broad exemptions and further reduce corruption in order to achieve full international integration and further enhance the transparency and effectiveness of their domestic public procurement systems. At the same time, external pressures, geo-political instability, and war have slowed the external drivers of reform and international integration, with the notable exception of spurring the EU to grant Ukraine candidate status after the war began. In the end, Ukraine and Georgia face many foreign and domestic challenges to achieving more open and effective procurement systems, but the progress made since the fall of the Soviet Union and their respective independence are worthy of praise.

As demonstrated by the largely personality-driven character of previous reforms, both countries should focus on maintaining public awareness of corruption concerns in order to prevent backsliding. The United States and the EU can assist with this process by continuing to press for greater regional and international integration and working to resolve the security situations with Russia in both Ukraine and Georgia. Both Ukraine and Georgia have demonstrated that modern, transparent, effective procurement systems are attainable, but careful nurturing remains necessary to fully realize them.

Endnotes

1. See Steven Kelman, Procurement Isn’t Always Just About Procurement—A Tale from Ukraine, Fed. Comput. Week (Mar. 1, 2022), https://fcw.com/comment/2022/03/procurement-isnt-always-just-about-procurement-tale-ukraine/362610 [https://perma.cc/J3EA-6THK].

2. Bogdana Depo, Policy Paper: E-Procurement Lessons from Georgia, Ukraine, and Moldova, German Marshall Fund of the United States, Mar. 2021, at 2.

3. See generally Mark Temnycky, NATO Membership Requests: Georgia and Ukraine Should Not Be Forgotten, Wilson Ctr., (May 9, 2022), https://www.wilsoncenter.org/blog-post/nato-membership-requests-georgia-and-ukraine-should-not-be-forgotten [https://perma.cc/3N3Q-UP53].

4. See Mark Temnycky, How Georgia and Ukraine Are Bolstering Their Chances to Join NATO, Wilson Ctr. (Jan. 23, 2023), https://www.wilsoncenter.org/blog-post/how-georgia-and-ukraine-are-bolstering-their-chances-join-nato [https://perma.cc/V5TD-NDY4].

5. Depo, supra note 2, at 2.

6. Public Procurement Reform, Ministry of Econ. of Ukr., https://www.me.gov.ua/Documents/Detail?lang=en-GB&id=4f2cb072-bac6-4ded-b564-5a00dd24511a&title=ReformOfStateProcurement [https://perma.cc/8VMM-45FH] (last visited on Apr. 30, 2023).

7. See, e.g., Steven Kelman & Christopher Yukins, Overcoming Corruption and War: Lessons from Ukraine’s ProZorro Procurement System, Cont. Mgmt., July 2022, at 26.

8. Natalia Zinets & Aleksander Vasovic, Missiles Rain Down Around Ukraine, Reuters (Feb. 24, 2022), https://www.reuters.com/world/europe/putin-orders-military-operations-ukraine-demands-kyiv-forces-surrender-2022-02-24 [https://perma.cc/J5SB-T5AU]; Russian Forces Launch Full-Scale Invasion of Ukraine, Al Jazeera (Feb. 24, 2022), https://www.aljazeera.com/news/2022/2/24/putin-orders-military-operations-in-eastern-ukraine-as-un-meets [https://perma.cc/4MMJ-PVV6].

9. Kelman & Yukins, supra note 7, at 23.

10. Depo, supra note 2, at 2.

11. See infra Parts II.B., II.C.

12. Samuel Rubenfeld, World Bank Recognizes Georgia’s Progress on Corruption, Wall St. J. (Feb. 1, 2012), https://www.wsj.com/articles/BL-CCB-5819 [https://perma.cc/5AC4-LEG5].

13. Louis Berger, Pol’y and Mgmt. Consulting Grp., Competition and State Procurement Agency, Support to Monitoring of the Public Finance Management Reforms Support Programme 9 (2013).

14. Id.

15. Gabriella Gricius, Transitional Justice: Lustration and Vetting in Ukraine and Georgia, 5 J. Liberty & Int’l Aff. 26, 28 (2019).

16. Id.

17. See Susan Stewart, Public Procurement Reform in Ukraine: The Implications of Neopatrimonialism for External Actors, 21 Demokratizatsiya: J. Post-Soviet Democratization 197, 200 (2013).

18. See id.

19. Gricius, supra note 15, at 28.

20. See generally Stewart, supra note 17, at 200.

21. Id. at 199 (quoting Marlene Laruelle, Discussing Neopatrimonialism and Patronal Presidentialism in the Central Asian Context, 20 Demokratizatsiya: J. Post-Soviet Democratization 301, 305 (2012)).

22. See Stewart, supra note 17, at 200.

23. Thomas de Waal, Fighting a Culture of Corruption in Ukraine, Carnegie Eur. (Apr. 19, 2016), https://carnegieeurope.eu/2016/04/18/fighting-culture-of-corruption-in-ukraine-pub-63364 [https://perma.cc/E2YF-PXRA].

24. Depo, supra note 2, at 2, 4; Kelman, supra note 1.

25. See Stewart, supra note 17, at 201.

26. Id. at 209; see infra Part III.B.

27. History of Competition Policy Enforcement in Georgia, Georgian Nat’l Competition Agency (last visited Apr. 30, 2023), https://gnca.gov.ge/index.php?m=347&lng=eng [https://perma.cc/WFR2-PS28].

28. Id.

29. See Gavin Slade, No Country for Made Men: The Decline of the Mafia in Post-Soviet Georgia, 46 L. & Soc’y Rev. 623, 625–27 (2012).

30. Id. at 624 (“Thief-in-law” is a loose translation of the Russian “vory-v-zakone” or the Georgian “kanonieri qurdi.”); “In Georgia by the end of the Soviet period, thieves-in-law had become particularly influential compared to other republics.” Id.

31. Id.

32. Id. at 6–29.

33. See Gricius, supra note 15, at 33.

34. Id.

35. Slade, supra note 29, at 626.

36. Id.

37. See id. at 625–26.

38. Scott Shane, Nationalist Leader in Soviet Georgia Turns Georgians Against Minorities, Balt. Sun (Mar. 7, 1991), https://www.baltimoresun.com/news/bs-xpm-1991-03-07-1991066043-story.html [https://perma.cc/JP9D-DVD2].

39. Id.

40. Philip Remler, Russia’s Stony Path in the South Caucasus, Carnegie Endowment for Int’l Peace (Oct. 20, 2020), https://carnegieendowment.org/2020/10/20/russia-s-stony-path-in-south-caucasus-pub-82993 [https://perma.cc/N7LD-CYFJ].

41. Id.

42. Gricius, supra note 15, at 31 (citing Caspar Fithen, The Legacy of Four Vetting Programmes: An Empirical Review, Int’l Ctr. for Transitional Just. 3 (2009)).

43. Id.

44. Id.

45. Id. at 32.

46. Id. at 33 (citing Alexandre Kukhianidze, Corruption and Organized Crime in Georgia Before and After the Rose Revolution, 28 Cent. Asian Surv. 215, 231 (2009)).

47. Id.

48. See generally Law of Georgia on Public Procurement, 2010 (unofficial translation), https://www.procurementinet.org/wp-content/uploads/2017/02/State-Procurement-Law-Georgia.pdf [https://perma.cc/ZP4R-K23R] [hereinafter SPL]; see also infra Part III.A.

49. World Bank, Fighting Corruption in Public Services: Chronicling Georgia’s Reforms 7 (2012); Rubenfeld, supra note 12; see also Gricius, supra note 15, at 32.

50. What Is Corruption?, Transparency Int’l, https://www.transparency.org/en/what-is-corruption [https://perma.cc/PK7D-EKFV] (last visited Apr. 30, 2023); see also Gricius, supra note 15, at 31 (“misuse of trusted power for private benefit”). Transparency International’s (TI) Corruption Perceptions Index (CPI) covers the following manifestations of public sector corruption: “[b]ribery, [d]iversion of public funds, [o]fficials using public office for private gain without consequences, [a]bility of governments to contain corruption in the public sector, [e]xcessive red tape in the public sector which increases opportunities for corruption, [n]epotistic appointments to the civil service, [l]aws ensuring disclosure of finances and potential conflicts of interest by public officials, [l]egal protection for bribery and corruption whistleblowers, [s]tate capture by narrow vested interests, and access to information on public affairs/government activities. The ABCs of the CPI: How the Corruption Perceptions Index Is Calculated, Transparency Int’l, (Dec. 20, 2021), https://www.transparency.org/en/news/how-cpi-scores-are-calculated.

51. Gricius, supra note 15, at 31 (citing Peter Rozic & Yuliy Nisnevich, Lustration Matters: A Radical Approach to the Problem of Corruption, 51 Stud. Comp. Int’l Dev. 257, 262 (2016)).

52. Id. at 33.

53. Id. The Transparency International CPI uses a scale of 0 to 100, where 100 is “very clean” and 0 is “highly corrupt.” The ABCs of CPI: How the Corruption Perceptions Index Is Calculated, supra note 50. The World Bank’s Control of Corruption Indicator (CCI) measures a state’s corruption against a world median, with higher values corresponding to better outcomes. Positive values are above the median, while negative values are below it. Worldwide Governance Indicators, World Bank, http://info.worldbank.org/governance/wgi/Home/Documents#wgiDataCrossCtry [https://perma.cc/ZM8J-Y4LW] (last visited last visited July 14, 2022).

54. The European Union and Georgia, Delegation Eur. Union To Geor., (July 26, 2021), https://eeas.europa.eu/delegations/georgia/49070/georgia-and-eu_en [https://perma.cc/N5QP-KHS2].

55. See infra Part III.A.

56. See generally Kornely Kakachia, Eastern Voices: Europe’s East Faces an Unsettled West 77–98 (Daniel S. Hamilton & Stefan Meister eds., 2017); The European Union and Georgia, supra note 54; European Neighborhood Policy and Enlargement Negotiations—Georgia, Eur. Commission, (Feb. 2, 2023), https://neighbourhood-enlargement.ec.europa.eu/european-neighbourhood-policy/countries-region/georgia_en [https://perma.cc/AQ67-LTQQ].

57. See generally Partnership and Cooperation Agreement Between the European Communities and Their Member States, of the One Part, and Georgia, of the Other Part, 1999 O.J. (L205) 3.

58. Id. at 3, 15.

59. EU/Georgia Action Plan, Eur. Neighborhood Pol’y § 1, (2011).

60. Id. § 4.5.5.

61. Association Agreement Between the European Union and European Atomic Energy Community and Their Member States, of the One Part, and Georgia, of the Other Part, 2014 O.J. (L 261) 7 (EU) [hereinafter Georgia Association Agreement].

62. European Neighborhood Policy and Enlargement Negotiations, supra note 56; Kakachia, supra note 56, at 77.

63. Georgia Association Agreement, supra note 61, at 307 (Annex XVI-B).

64. World Bank, supra note 49, at ix–x.

65. Id. at 61.

66. Tinatin Akhvlediani, et al., European Commission, Ex-post Evaluation of the Implementation of the Deep and Comprehensive Free Trade Area between the EU and Its Member States and Georgia xiv (2022).

67. Id. at 31.

68. See generally Lionel Beehner et al., Mod. War Inst., Analyzing the Russian Way of War: Evidence from the 2008 Conflict with Georgia 42 (2018).

69. See generally id.

70. Id. at 3, 9.

71. Id. at 20.

72. Id. at 3, 29.

73. Id. at 3.

74. Id. “[T]he conflict spiral between Russia and Georgia initially centered on Georgia’s enclave of Abkhazia, but the actual war broke out in and around the separatist region of South Ossetia.” Michael Kofman, The August War, Ten Years On: A Retrospective on the Russo-Georgian War, War on the Rocks (Aug. 17, 2018), https://warontherocks.com/2018/08/the-august-war-ten-years-on-a-retrospective-on-the-russo-georgian-war [https://perma.cc/5TKV-T2JB].

75. Beehner, supra note 68, at 13, 48; see also Marco Ferraro, After the Georgia War: The EU and Eastern Europe, Italian Inst. for Int’l Pol. Stud. (Aug. 2, 2018) https://www.ispionline.it/it/pubblicazione/after-georgia-war-eu-and-eastern-europe-21102 [https://perma.cc/Y2J3-V7Z9].

76. Beehner, supra note 68, at 3.

77. Ferraro, supra note 75.

78. European Neighborhood Policy: What Is It?, Eur. Comm’n, (last visited Apr. 30, 2023) https://ec.europa.eu/neighbourhood-enlargement/european-neighbourhood-policy_en [https://perma.cc/9C5E-VNZ9]; see also id.

79. Ferraro, supra note 75.

80. Id.; Eastern Partnership, Eur. Union, https://www.eeas.europa.eu/eeas/eastern-partnership_en [https://perma.cc/BZF5-CPNU] (last visited Apr. 4, 2023).

81. Ferraro, supra note 75; see also supra Part II.B.3; infra Part III.A.

82. Ferraro, supra note 75.

83. See Kakachia, supra note 56, at 87–92.

84. Conclusions of the Presidency (EC) SN 180/1/93 REV of 21–22 June 1993, at 13 [hereinafter Copenhagen].

85. See infra Part II.C.5.

86. Maria Katamadze, Georgians Rally for European Future, Deutsche Welle (June 21, 2022), https://www.dw.com/en/tens-of-thousands-rally-to-defend-georgias-european-future/a-62212580 [https://perma.cc/P5BP-7M8C]; Timothy Jones, Georgia Formally Applies for EU Membership, Deutsche Welle, (Mar. 3, 2022), https://www.dw.com/en/georgia-formally-applies-for-eu-membership/a-61001839 [https://perma.cc/36E8-NLUB]; Tens of Thousands Gather in Pro-EU, Anti-Government Demonstrations in Georgia, Euronews (July 4, 2022), https://www.euronews.com/2022/07/04/tens-of-thousands-gather-in-pro-eu-and-anti-government-demonstrations-in-georgia [https://perma.cc/A79H-9E3T].

87. Thousands Rally in Georgia in Support of EU Membership Bid, Aljazeera (June 20, 2022), https://www.aljazeera.com/news/2022/6/20/thousands-of-georgians-in-tbilisi-demonstrate-for-eu-candidacy [https://perma.cc/8JVD-4M5E].

88. Katamadze, supra note 86.

89. Thousands Rally in Georgia in Support of EU Membership Bid, supra note 87.; see also Tens of Thousands Gather in Pro-EU, supra note 86.

90. Kelman, supra note 1; Stewart, supra note 17, at 200–01; see infra Part II.A

91. Gricius, supra note 15, at 38; De Waal, supra note 23, at 1.

92. De Waal, supra note 15, at 1; Gricius, supra note 15, at 33, 36.

93. See Gricius, supra note 15, at 36.

94. De Waal, supra note 23, at 1.

95. Id. at 2.

96. Gricius, supra note 15, at 36.

97. Id. at 37–38; De Waal, supra note 23, at 1.

98. Gricius, supra note 15, at 37; see also John Hellman & Daniel Kaufmann, Confronting the Challenge of State Capture in Transition Economies, Fin. & Dev., Sept. 2001, at 31 (“We define state capture as the efforts of firms to shape the laws, policies, and regulations of the state to their own advantage by providing illicit private gains to public officials.”).

99. Gricius, supra note 15, at 38. See generally Susan Rose-Ackerman, The Economics of Corruption, 4 J. Pub. Econ. 187 (1975) (distinguishing between petty and grand corruption); Michael Johnston, Elite Cartels: How to Buy Friends and Govern People, in Syndromes of Corruption 89, 89–90, 119 (2005) (defining categories of corruption as either oligarchs and clans, elite cartels, influence markets, or official moguls). “[G]rand corruption [is] defined as the abuse by leading officials of their public positions for personal enrichment.” De Waal, supra note 23, at 2.

100. Gricius, supra note 15, at 38.

101. Id. at 37 (listing scores and rankings from 2013-2017).

102. See generally The European Neighborhood Policy, Eur. Parliament, Eur. Union, https://www.europarl.europa.eu/factsheets/en/sheet/170/the-european-neighbourhood-policy [https://perma.cc/X4HX-CWBC] (last visited Apr. 28, 2021).

103. Id. As of 2022, the ENP applies to Algeria, Armenia, Azerbaijan, Belarus, Egypt, Georgia, Israel, Jordan, Lebanon, Libya, Moldova, Morocco, Palestine, Syria, Tunisia, and Ukraine. Id.; see also European Neighborhood Policy, supra note 78.

104. European Neighbourhood Policy and Enlargement Negotiations (DG Near), Eur. Comm’n, https://ec.europa.eu/neighbourhood-enlargement/neighbourhood/eastern-partnership_en (last visited Apr. 29, 2023) [https://perma.cc/P92R-MFJS]; see also Ferraro, supra note 75; Eastern Partnership, supra note 80.

105. European Neighbourhood Policy and Enlargement Negotiations (DG Near), supra note 104.

106. Association Agreement Between the European Union and its Member States, of the One Part, and Ukraine, of the Other Part, 2014 O.J. (L161) 3 [hereinafter EU-Ukraine Association Agreement]. Negotiations began on the Association Agreement in 2007 and the DCFTA in 2008. Provisional application of the Association Agreement began in 2014, with full implementation in 2017, and the DCFTA became effective in 2016. EU-Ukraine Association Agenda to Prepare and Facilitate the Implementation of the Association Agreement, at 4 (Mar. 16, 2015), https://eeas.europa.eu/archives/docs/ukraine/docs/st06978_15_en.pdf [https://perma.cc/F8EX-H6UH] (last visited Apr. 28, 2021); (see also Three Eastern Partnership Neighbours: Ukraine, Moldova and Belarus, Eur. Parliament, https://www.europarl.europa.eu/factsheets/en/sheet/171/three-eastern-partnership-neighbours-ukraine-moldova-and-belarus [https://perma.cc/FA6R-MV9M] (last visited Apr. 28, 2023).

107. See infra Part II.C.4.

108. See generally EU-Ukraine Association Agenda, supra note 106(b); Timeline: The Events Leading Up to Russia’s Invasion of Ukraine, Reuters (Mar. 1, 2022, 4:03 PM), https://www.reuters.com/world/europe/events-leading-up-russias-invasion-ukraine-2022-02-28 [https://perma.cc/9LJQ-6PCW].

109. Stewart, supra note 17, at 212.

110. Id.

111. See generally Agreement on Government Procurement, World Trade Org., https://www.wto.org/english/tratop_e/gproc_e/gproc_e.htm [https://perma.cc/H5ZF-JWJU] (last visited Apr. 28, 2021) (briefly describing the goals of the GPA); Adoption of the Results of the Negotiations Under Article XXIV.7 of the Agreement on Government Procurement, Following Their Verification and Review, As Required by the Ministerial Decision of 15 December 2011 (GPA/112), para. 5, WTO Doc. No. GPA/113, (Apr. 2, 2012).

112. Agreement on Government Procurement: Parties and Observers, World Trade Org., https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm [https://perma.cc/7QER-Y77W] (last visited Apr. 28, 2023) [hereinafter Parties and Observers]. While the WTO only lists twenty-one parties to the Agreement, it counts the twenty-seven individual European Union countries acceded to the Agreement as one party. Id.

113. Christopher R. Yukins & Johannes S. Schnitzer, GPA Accession: Lessons Learned on the Strengths and Weaknesses of the WTO Government Procurement Agreement, 7 Trade L. & Dev. 89, 91 (2015).

114. Agreement on Government Procurement, supra note 111.

115. Parties and Observers, supra note 112.

116. Id. (noting that Georgia is negotiating accession). While outside the scope of this paper, GPA accession complements EU integration efforts as another significant external driver of procurement reform in Georgia and Ukraine and is another avenue of achieving greater international integration in public procurement.

117. Luke Harding, Ukraine Suspends Talks on EU Trade Pact as Putin Wins Tug of War, Guardian (Nov. 21, 2013), https://www.theguardian.com/world/2013/nov/21/ukraine-suspends-preparations-eu-trade-pact [https://perma.cc/R8WR-4AJ9]; Ukraine Protests After Yanukovych EU Deal Rejection, BBC (Nov. 30, 2013), https://www.bbc.com/news/world-europe-25162563 [https://perma.cc/5MDD-YQF9]; Steven Pifer, Ukraine: Six Years After the Maidan, Brookings (Feb. 21, 2020), https://www.brookings.edu/blog/order-from-chaos/2020/02/21/ukraine-six-years-after-the-maidan [https://perma.cc/7PAT-6YEP]; Gricius, supra note 15, at 34; see also supra Part II.C.2.

118. Pifer, supra note 117; Gricius, supra note 15, at 34.

119. Pifer, supra note 117; Gricius, supra note 15, at 34.

120. Pifer, supra note 117; Gricius, supra note 15, at 34.

121. Pifer, supra note 117.

122. EU-Ukraine Association Agenda 2015, supra note 106, at 1; Pifer, supra note 117.

123. Gricius, supra note 15, at 36.

124. See infra Part II.C.5.

125. De Waal, supra note 23, at 3.

126. See id. In addition to Zguladze, several other Georgians were also appointed to key anti–corruption positions in Ukraine. Id. “The hope is that [the Georgians] can replicate the first phase of Saakashvili’s reforms in 2004–2007, when much positive change was achieved, without repeating the mistakes of the later Saakashvili period, when power was abused and the public was disengaged from elite-level decisions.” Id.

127. Id. at 1.

128. See id at 1, 3.

129. Id. at 2.

130. Id. at 6.

131. See Wojciech Kononczuk, Russia’s Real Aims in Crimea, Carnegie Endowment for Int’L Peace (Mar. 13, 2014), https://carnegieendowment.org/2014/03/13/russia-s-real-aims-in-crimea-pub-54914 [https://perma.cc/3XTE-EJL7].

132. See Russia President Vladimir Putin Signs Treaty to Annex Crimea After Residents Vote to Leave Ukraine, CBS News (Mar. 18, 2014), https://www.cbsnews.com/news/russia-president-vladimir-putin-approves-draft-bill-to-annex-crimea-after-residents-vote-to-leave-ukraine [https://perma.cc/J4WK-YEYD].

133. Pifer, supra note 117.

134. See Andrew Osborn, Russian Fleet at Heart of Ukraine Crisis is Central to Putin, Reuters, (Mar. 7, 2014), https://www.reuters.com/article/ukraine-crisis-russia-fleet/russian-fleet-at-heart-of-ukraine-crisis-is-central-to-putin-idINL6N0M33L820140307 [https://perma.cc/6U69-SCN2].

135. Agreement on the Accession of the Republic of Crimea to the Russian Federation Signed, Kremlin (Mar. 18, 2014), http://en.kremlin.ru/events/president/news/20604 [https://perma.cc/9GHR-X9XQ]; Pifer, supra note 117.

136. Paul Stronski, What Is Russia Doing in the Black Sea?, Carnegie Endowment for Int’l Peace (May 20, 2021), https://carnegieendowment.org/2021/05/20/what-is-russia-doing-in-black-sea-pub-84549 [https://perma.cc/L25A-MKTY].

137. Id.

138. See Pifer, supra note 117.

139. Id.

140. See id.

141. See Copenhagen, supra note 84, at 19.

142. Alexander Marrow & Aleksander Vasovic, West Warns Military Build-Up near Ukraine Growing, Not Shrinking, Reuters, (Feb. 16, 2022), https://www.reuters.com/world/europe/russian-pullout-meets-uk-scepticism-ukraine-defence-website-still-hacked-2022-02-16 [https://perma.cc/2LAY-CF5H]; David Brown, Ukraine Conflict: Where Are Russia’s Troops?, BBC (Feb. 23, 2022), https://www.bbc.com/news/world-europe-60158694 [https://perma.cc/N669-MUM5]; Timeline: The Events Leading Up to Russia’s Invasion of Ukraine, supra note 108.

143. Zinets & Vasovic, supra note 8; Steven Pifer, Russia vs. Ukraine: How Does This End?, Brookings (Mar. 10, 2022), https://www.brookings.edu/blog/order-from-chaos/2022/03/10/russia-vs-ukraine-how-does-this-end [https://perma.cc/QH8K-ZA45].

144. Pifer, supra note 143.

145. See infra Part III.B.

146. Katamadze, supra note 86.

147. EU Leaders Grant Ukraine and Moldova Candidate Status, Politico (June 23, 2022), https://www.politico.eu/article/eu-leaders-grant-ukraine-and-moldova-candidate-status [https://perma.cc/D3NZ-Y7XL]. Candidate status triggers Ukraine’s ability to enter formal negotiations for full EU membership, which will address transition periods and the transcription of EU legislation into national law. See Joining the EU, Eur. Union, https://european-union.europa.eu/principles-countries-history/joining-eu_en [https://perma.cc/KN2D-KWM5] (last visited Apr. 30, 2023).

148. See SPL, supra note 48.

149. Martin G. Masse et al., International Procurement, 50 Int’l L. 211, 216 (2016).

150. Strategic Plan of Competition and State Procurement Agency, at 3 (May 2013), http://procurement.gov.ge/Files/ShowFiles?id=5ca142a6-6d41-40bd-b742-c750cf65a174 [https://perma.cc/LK29-2K9W] [hereinafter CSPA].

151. Id. at 3–4.

152. Id. at 4. The official Georgian electronic Government Procurement (Ge-GP) portal can be viewed in Georgian, English, and Cyrillic. St. Procurement Agency, https://tenders.procurement.gov.ge/login.php?lang=en [https://perma.cc/NV55-YZWG] (last visited July 15, 2022).

153. Ana Dabrundashvili et al., Public Procurement in 2013–2014: How Taxpayer’s Money Got Spent, Transparency Int’l Georgia 4, 7 (2015) (“The radical public procurement reforms of the last five years have made the Georgian system one of the most transparent in the world. TI Georgia and a number of international organizations have praised the system, including the World Bank, the United Nations and the European Bank for Reconstruction and Development.”).

154. Masse et al., supra note 149, at 216.

155. Id. at 217.

156. Id. at 216 (citing Giorgi Gaprindashvili, Public Procurement Development Stages in Georgia, 9 Int’l J. Econ. Mgm’t. Eng’g 956, 956 (2015); Georgia: An E-Procurement Success, World Bank (Feb. 18, 2015), http://www.worldbank.org/en/news/feature/2015/02/18/georgia-an-e-procurement-success [https://perma.cc/P6MF-NJXC]; CSPA, supra note 150, at 4.

157. See generally SPL, supra note 48, art. 23(1).

158. Id.

159. Id. art. 23(2).

160. Id. art. 23(41).

161. Masse et al., supra note 149, at 218. The Rules of Activity were subsequently updated in 2015. Id.

162. Compare id. at 219, with Sys. Application & Tech., Inc. v. United States, 691 F.3d 1374, 1385 (Fed. Cir. 2012).

163. Masse et al., supra note 149, at 219.

164. Id. While the Court of Federal Claims does not technically hear appeals of GAO decisions, protestors have the option to have their protest heard anew at the court following an adverse decision at GAO. See, e.g., Metro. Van & Storage, Inc. v. United States, 92 Fed. Cl. 232, 252 (2010); Integrated Bus. Sols., Inc. v. United States, 58 Fed. Cl. 420, 426 n.7 (2003).

165. See, e.g., James W. Nelson, GAO—COFC Concurrent Bid Protest Jurisdiction: Are Two Fora Too Many?, 4 Pub. Cont. L.J. 587, 598 (2014) (outlining the bid protest jurisdiction of the GAO and Court of Federal Claims).

166. Masse et al., supra note 149, at 219–20.

167. Id. at 222.

168. Id.

169. Id. at 223.

170. Id.

171. CSPA, supra note 150, at 5.

172. Id.at 4.

173. See, e.g., FAQs, U.S. Gov’t Accountability Off., https://www.gao.gov/legal/bid-protests/faqs [https://perma.cc/JEZ7-ENXC] (last visited Apr. 17, 2023).

174. CSPA, supra note 116, at 4.

175. Masse et al., supra note 149, at 217.

176. Id.

177. Id. (In 2012, “as much as 45% of Georgia’s total procurement spending [was] made through simplified procedures, and therefore, without the benefit of competition.”). By 2014, that figure fell to 32%. Dabrundashvili et al., supra note 153, at 4.

178. See generally FAR Part 13 (outlining simplified acquisition threshold procedures in the United States).

179. SPL, supra note 48, art. 3(1)(p); see Masse et al., supra note 149, at 216; Dabrundashvili et al., supra note 153, at 7. In 2016, 200,000 Georgian Laris (GEL) was equivalent to roughly $83,000 USD. Id.

180. Masse et al., supra note 149, at 216.

181. SPL, supra note 48, art. 3(1)(r); Masse et al., supra note 149, at 217; Dabrundashvili et al., supra note 153, at 7.

182. Masse et al., supra note 149, at 217–18.

183. See FAR 13.003(c)(2).

184. SPL, supra note 48, art. 101(3)(a); Dabrundashvili et al., supra note 153, at 7.

185. SPL, supra note 48, art. 101(3)(b).

186. See FAR 6.302-1.

187. SPL, supra note 48, art. 101(3)(a), (a.a), (a.b.). For purposes of this determination, the simplified acquisition threshold for goods is GEL 2,000,000 and for services is GEL 4,000,000. Id.

188. Id. art. 101(3)(b).

189. See FAR 6.302-2(d); see also infra Part III.C.1.

190. Dabrundashvili, supra note 153, at 7 (noting instances where procurements justified based on urgent necessity lacked substantiation of the urgency).

191. See generally FAR 6.302–6.305; 10 U.S.C. § 3204; 41 U.S.C. § 3304; see also infra Part III.C.1.

192. SPL, supra note 48, art. 1(2)-(3).

193. Masse et al., supra note 149, at 217 (citing Transparency International—Georgia, Reform of Georgia’s Defence Sector, (Jan. 2007), https://www.transparency.ge/sites/default/files/Reform%20of%20Georgia%27s%20Defence%20Sector.pdf) [https://perma.cc/AVY7-AKPP].

194. Military Expenditure Georgia, World Bank, https://data.worldbank.org/indicator/MS.MIL.XPND.ZS?locations=GE [https://perma.cc/AG8Z-GHZS] (last visited Nov. 30, 2020).

195. Military Expenditure United States, World Bank, https://data.worldbank.org/indicator/MS.MIL.XPND.ZS?locations=US [https://perma.cc/Y3S8-74PT] (last visited Nov. 30, 2020). The United States devoted 9.6% of government spending to defense in 2019. Id.

196. Georgia Profile—Timeline, BBC (Jan. 29, 2019), https://www.bbc.com/news/world-europe-17303471 [https://perma.cc/WAS5-PR4S].

197. See Georgia Profile, supra note 196 (noting that Georgia was involved in violent domestic conflicts); Military Expenditure (% of General Government Expenditure) – Georgia, United States, World Bank (last visited June 12, 2023), https://data.worldbank.org/indicator/MS.MIL.XPND.ZS?locations=GE-US&name_desc=true [https://perma.cc/6LLJ-82NS] (Georgia’s military spending skyrocketed beginning in 2004) [hereinafter Georgia Spending Percentages].

198. Georgia Spending Percentages, supra note 197.

199. FAR 6.302-6 allows for less than full and open competition where disclosure of the agency’s needs would compromise national security but does not include acquisitions that simply involve classified material. FAR 6.302-6. Even when invoked, this exception requires use of “as many potential sources as practicable under circumstances.” FAR 6.302-6(c)(3). This exception is used sparingly and requires a written justification and approval. See FAR 6.304.

200. See, e.g., FAR Subpart 4.4; FAR 14.409-2.

201. Georgia Country Procurement Assessment Rep., Operations Pol’y and Serv. Unit Eur. & Cent. Asia Region, Rep. No. 26660-GE, World Bank 12 (2002).

202. See infra Part III.B.2.

203. SPL, supra note 48, art. 1(31)(c).

204. Masse et al., supra note 149, at 218 (citing PMC Rsch. Ctr, Analysis of the State Procurement Sys. of Georgia 16 (2014), https://www.pmcresearch.org/policypapers_show/22/Analysis-of-the-State-Procurement-System-of-Georgia [https://perma.cc/U8G8-X7J5]); Dabrundashvili, supra note 119, at 15–16. The authors note that “contrary to the stated intent of the Law, Georgia’s prime minister has encouraged local governments to utilize simplified procurement.” Id.

205. See, e.g., FAR 6.302-2(d) (U.S.); Council Directive 2014/24, 2014 O.J. (L94) 7, 56 (EU); Council Directive 2009/81, 2009 O.J. (L216) 76 (EU).

206. Masse et al., supra note 149, at 218.

207. See, e.g., De Waal, supra note 23, at 3; Gricius, supra note 15, at 36.

208. De Waal, supra note 23, at 3.

209. Stewart, supra note 17, at 201 (citing World Bank, Operational Policy and Services, Europe and Asia Region, Ukraine Country Procurement Assessment Report 2006, Report No. 39948-UA (2007) [hereinafter World Bank, Ukraine 2006].

210. Id.; see also World Bank, Trends in Corruption and Regulatory Burden: East Europe and Central Asia 17 (2011).

211. Stewart, supra note 17, at 202.

212. Id. at 202 (citing World Bank, Trends in Corruption and Regulatory Burden in Eastern Europe and Central Asia 17 (2011)); World Bank, Ukraine 2006, supra note 208).

213. Id. at 202–03. By 2011, President Yanukovych himself declared the number to be as high as fifteen percent of public procurement funds expended as bribes, totaling roughly $7.4 billion, which he used to justify further reform efforts. Id. at 203.

214. Id. at 202.

215. Id. at 203.

216. Id.

217. Id. at 203–04.

218. Id. at 204.

219. Id.

220. Id.

221. Id.

222. Anti–corruption Network for E Eur. and Cent. Asia, Org. Econ. Coop. Dev., Istanbul Anti–corruption Action Plan: Second Round of Monitoring: Ukraine Monitoring Report 59 (2010) [hereinafter OCED].

223. Id.; see also Stewart, supra note 17, at 204.

224. OECD, supra note 222, at 59–60.

225. Stewart, supra note 17, at 204.

226. Id. (“Ukrainian authorities clarified that this provision is not applied to . . . state officials; it is applied to the responsible persons who hold positions in institutions financed by the state but are not recognized as state officials.”).

227. Id.

228. Stewart, supra note 17, at 204–05.

229. Id. at 205.

230. Id.

231. OECD, supra note 222, at 60; see also ProZorro Is a Hybrid Electronic Open Source Government E-Procurement System Created as the Result of a Partnership Between Business, Government and the Civil Society, ProZorro, https://prozorro.gov.ua/en [https://perma.cc/KP5V-N5YP] (last visited Apr. 29, 2022) ProZorro means “transparently” in Ukrainian. Yuriy Bugay, ProZorro: How a Volunteer Project Led to Nation-Wide Procurement Reform in Ukraine, Open Cont. P’ship, (Jul. 28, 2016), https://www.open-contracting.org/2016/07/28/prozorro-volunteer-project-led-nation-wide-procurement-reform-ukraine [https://perma.cc/8SVT-3MVK].

232. De Waal, supra note 23, at 3.

233. See id.

234. Bugay, supra note 231.

235. Kyiv Sch. of Econ., Transparency Int’l, Co-Creation Of Prozorro: An Account Of The Process And Actors 4 (2016). Ukrainian activists were aided by a coalition including Transparency International, Open Contracting, the European Bank for Reconstruction and Development (EBRD), the private sector, non-governmental organizations, and government experts. Id. at 4, 14.

236. Bugay, supra note 231. Despite its long association with corruption, Ukrainian public procurement “is considered a recommended model for e-procurement reform by the European Bank for Reconstruction and Development and won a prestigious World Procurement Award in May 2016.” Id.

237. De Waal, supra note 23, at 3; Bugay supra note 231; Kyiv Sch. of Econ., supra note 236, at 4.

238. Bugay, supra note 231.

239. White House, United States Strategy on Countering Corruption 28 (Dec. 2021).

240. See Bugay, supra note 231.

241. Achievements & Awards, ProZorro, https://prozorro.gov.ua/en/about/achievements [https://perma.cc/3C6T-XM72] (last visited Mar. 9, 2023).

242. Bugay, supra note 231.

243. Kelman & Yukins, supra note 7, at 25.

244. Id. at 23.

245. See id. at 25–26.

246. Id. at 24–25.

247. ProZorro Launches Platform for Procurement During War, Transparency Int’l Ukr. (Mar. 30, 2022), https://ti-ukraine.org/en/news/prozorro-launches-platform-for-procurement-during-war [https://perma.cc/3E7E-PJ49]; Kelman & Yukins, supra note 7, at 26.

248. Kelman & Yukins, supra note 7, at 26.

249. Stewart, supra note 17, at 204. However, a separate anti–corruption law prohibits the provision of public funds to legal entities that have been convicted of corruption and prevents them from acting on behalf of the state or performing public services under contracts with the government for five years following the conviction. OECD, supra note 222, at 60.

250. Stewart, supra note 17, at 205.

251. OECD, supra note 222, at 60.

252. See, e.g., William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021, Pub. L. No. 116-283, §§ 819, 885, 134 Stat. 3388, 3751–52, 3791 (2021).

253. Stewart, supra note 17, at 206.

254. Id. at 207–08.

255. Andrew D’Anieri, More Backsliding in Kyiv, Atlantic Council: UkraineAlert (July 27, 2021), https://www.atlanticcouncil.org/blogs/ukrainealert/more-backsliding-in-kyiv [https://perma.cc/AGC7-NGJQ].

256. Stewart, supra note 17, at 208.

257. See id.

258. Id.

259. Id. at 207 (citing Bureau of Econ. Energy & Bus. Aff., U.S. Dep’t of State, 2011 Investment Climate Statement – Ukraine (2011))

260. Id. at 208.

261. Id. at 209.

262. Id. at 206.

263. FAR 6.302-1(b)(3).

264. Bureau of Econ. Energy & Bus. Aff., U.S. Dep’t of State, 2013 Investment Climate Statement—Ukraine (2013). In 2013, 100,000 Ukrainian Hryvnia (UAH) was equivalent to $12,500 USD, and UAH 300,000 equaled $38,000 USD. Id.

265. Bugay, supra note 231.

266. See generally supra Part III.A.2; FAR 2.101 (U.S. simplified acquisition threshold being $250,000); Thresholds, Eur. Comm’n, https://ec.europa.eu/growth/single-market/public-procurement/rules-implementation/thresholds_en [https://perma.cc/T479-Z9MV] (last visited Apr. 29, 2023) (EU threshold currently €5,382,000 for works contracts and €431, 000 for all supplies and services contracts).

267. Stewart, supra note 17, at 207.

268. Id.

269. See generally 41 U.S.C. § 3301.

270. See FAR 6.302-6.

271. See supra Part III.A.2.

272. Ukraine Defense Procurement, Int’l Trade Admin., https://www.trade.gov/market-intelligence/ukraine-defense-procurement [https://perma.cc/5PNN-CYAG] (last visited Apr. 29, 2023); Defense Ministry Planning to Create Military Procurement Agency, Ukrinform (Jan. 31, 2022), https://www.ukrinform.net/rubric-defense/3394792-defense-ministry-planning-to-create-military-procurement-agency.html [https://perma.cc/2KLD-2QTR].

273. Int’l Trade Admin., supra note 272.

274. Ukrinform, supra 272.

275. Id.

276. U.S. Dep’t of State, supra note 264.

277. Id.

278. Id.

279. Stewart, supra note 17, at 208.

280. Id.

281. Though accounting for less than ten percent of the economy, Ukraine’s state-owned sector is one of the largest in Europe, with roughly 3,340 business entities that are involved primarily in the energy and industrial sectors. “The sector is inefficient and often unprofitable.” Bureau of Econ. & Bus. Aff., U.S. Dep’t of State, Investment Climate Statement for 2016– Ukraine (2016).

282. Id.; Public Procurement Transparency Generates 12% Savings of Public Funds, ONE, https://www.one.org/international/follow-the-money/public-procurement-transparency-generates-12-savings-of-public-funds [https://perma.cc/P6ZH-E2YX] (last visited Apr. 29, 2023).

283. Lucinda Pearson, Viktor Yanukovych: Corruption, Opulence and Decadence in Ukraine, Transparency Int’l EU (Apr. 7, 2021), https://transparency.eu/corruption-opulence-and-decadence-in-ukraine.

284. See Ukraine’s Inspiring Journey in the Open Government Partnership, Open Gov’t P’ship (Apr. 28, 2022), https://www.opengovpartnership.org/stories/ukraines-inspiring-journey-in-the-open-government-partnership [https://perma.cc/6PF2-WCX9].

285. Stewart, supra note 17, at 207.

286. D’Anieri, supra note 255.

287. Id.

288. Id.

289. Stewart, supra note 17, at 208.

290. See, e.g., FAR subpart 6.3; Consolidated Version of the Treaty on the Functioning of the European Union, art. 346, Oct. 26, 2012, 2012 O.J. (C326) 47 [hereinafter TFEU].

291. See generally FAR subpart 6.3.

292. FAR 6.301(a); 10 U.S.C. § 2304; 41 U.S.C. §§ 3301, 3304.

293. See SPL, supra note 48.

294. FAR 6.301(d).

295. Id.

296. See generally FAR 6.302. (The seven total enumerated exemptions include (1) only one responsible source, (2) unusual and compelling urgency, (3) industrial mobilization, (4) international agreement, (5) statutory authorization, (6) national security, and (7) public interest.) Id.

297. FAR 6.302-1.

298. FAR 6.302-2.

299. FAR 6.302-6.

300. See generally FAR 6.303.

301. See supra Part III.A.2; SPL, supra note 48, art. 101(3)(a).

302. Compare FAR 6.302-1, with SPL, supra note 48, art. 101(3)(a).

303. SPL, supra note 48, art. 101(3)(a)(a.a) & (a.b.); see also infra Part III.A.2.

304. FAR 6.302-2(a)(2) (indicating that the provision only contemplates the limitation of sources for competition, and not the wholesale suspension of competition requirements).

305. FAR 6.302-2(b)(2).

306. FAR 6.302-2(d)(i).

307. SPL, supra note 48, art. 101(3)(b); see also supra Part III.A.2.

308. Id.

309. FAR 6.302-6.

310. Id.

311. FAR 6.302-6(a)(2).

312. See SPL, supra note 48, art. 1(2), (3).

313. See Masse et al., supra note 149, at 217 (citing Irakli Sesiashvili, Transparency Int’l-Geor., Reform of Georgia’s Defence Sector 1 (2007)); Ana Dabrundashvili et al., Transparency Int’l-Geor., Public Procurement in 2013–2014: How Taxpayers’ Money Got Spent 17 (2015) (noting that information concerning noncompetitive procurements conducted by the Ministry of Defense and its agencies is not made available through the online system); SPL, supra note 48, arts. 1(2), 1(3).

314. FAR 6.301(c)(1).

315. See generally FAR 6.303–6.305.

316. FAR 6.305(a), (d).

317. TFEU, supra note 291, art. 346.

318. Id.

319. See generally CSPA, supra note 150, at 7.

320. See generally id. at 9–14.

321. Id. at 7.

322. Id. at 10.

323. Id.

324. Id. at 10–11.

325. Id. at 10.

326. Id. at 11.

327. Id.

328. Id. at 11.

329. Id.

330. Id. at 12.

331. Id.

332. Id. at 14.

333. Id.

334. Id. at 14–15.

335. Id.

336. Id. at 8.

337. Id.

338. Id.

339. Id. at 7.

340. Id. at 15.

341. Id. at 16.

342. Id.

343. Id.

344. See De Waal, supra note 23, at 8 (discussing Ukraine’s reform efforts aimed at battling corruption in the country).

345. Id. at 5, 8.

346. Id. at 3.

347. Id.

348. Id. at 3–4.

349. Id. at 4.

350. Id.

351. Id.

352. Id.

353. Id.

354. Id. at 4–5.

355. Id. at 5.

356. Id. at 4.

357. Id. at 5.

358. Id.

359. Id.

360. Id.

361. Id. at 6 (“As of July 1, 2015, a mere 7,865 hryvnia ($356) had been returned from abroad to the Ukrainian budget.”).

362. Id. at 5.

363. Id.

364. Id.

365. Id. at 6.

366. Id.

367. Id.

368. Masse et al., supra note 149, at 216 (“As a result, the new system has been recognized as one of the most successful and transparent procurement systems in the region and is cited as a model for transitional countries seeking to adopt international standards of procurement.”).

Entity:
Topic:
The material in all ABA publications is copyrighted and may be reprinted by permission only. Request reprint permission here.

Michael R. Tregle, Jr.

United States Army Judge Advocate General’s Corps

BA, May 2001, Loyola University – New Orleans; JD, May 2004, The George Washington University Law School; LLM, June 2017, The Judge Advocate General’s Legal Center & School. A Thesis submitted to The Faculty of The George Washington University Law School in partial satisfaction of the requirements for the degree of Master of Laws May 16, 2021. Thesis directed by Professor Christopher R. Yukins Lynn David Research Professor of Government Contracts Law. The author wishes to thank Professor Christopher Yukins, Mr. Bruce Bach, Ms. Elizabeth Wright, Major Matthew Mackey, USAF, Mr. Joseph Orenstein, and Ms. Sandra O’Hern for their contributions to this work. Lieutenant Colonel Michael R. Tregle, Jr. serves in the United States Army Judge Advocate General’s Corps. This paper was submitted in partial satisfaction of the requirements for the degree of Master of Laws in Government Procurement Law from The George Washington University Law School. All views expressed in this paper are solely those of the author and do not reflect the official policy or position of the United States Army, the Department of Defense, or the U.S. Government.