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Public Contract Law Journal

Public Contract Law Journal Vol. 52, No. 4

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

Michael Tregle


  • 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 and recognizes that some reform challenges still remain.
  • 2010 Laws reformed the procurement systems and their dispute systems to be electronic and based on the principles of transparency, fair selection, nondiscrimination, facilitated procedures and less paperwork.
  • Significant gaps still exist based on exceptions, contract value thresholds, and lack of transparency to the basis for the use of exceptions.
Corruption and Conflict: Public Procurement Reform and International Integration in Ukraine and Georgia
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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.”

I. Introduction

Ukraine and the Republic of Georgia present valuable insights and contrasts regarding efforts toward procurement reform following their shared Soviet past. Since the fall of the Soviet Union, both countries have followed separate but parallel paths in their efforts to overcome significant legacies of corruption and gain greater assimilation into their respective regional and global international communities. 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. 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. 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. In Ukraine’s case, the landscape changed dramatically with the Russian invasion of Ukrainian territory in February 2022. 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. 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. 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.

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. 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. The agency identified organizational development, increased public awareness, business development, and education as areas deserving of focus during the ensuing decade. 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. It has been noted that “[t]he legacy of communism often came with a ‘centrally planned economy, close-knit elitism, and even hypocrisy.’” As the Soviet system became more bureaucratic and inefficient, getting results out of formal institutional processes became all but impossible. As a result, working within the formal institution became knowing who in the government could circumvent the bureaucracy to get results. 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.

The term given to such reliance on dominant informal networks in lieu of formal institutions is “neopatrimonialism.” “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.’” The transfer of public goods to private persons is one of the most significant corruption risks faced by post-Soviet states. Indeed, corruption is commonly understood as the practice of government officials enriching themselves through official activities, usually to the detriment of the public good. 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. 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.” 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.”

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. 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. 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.

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. “[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.” This practice evolved the informal networks of the past into a quasi-official, quasi-institutional shadow government run by organized crime.

As the name implies, thieves-in-law controlled many of the levers of power under the cover of quasi-official recognition and authority. They “were more than just normal criminals, they were high-ranking criminal professionals that acted with the direct understanding of the government and police.” 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. 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.

The thief-in-law system, with all its attendant corruption and abuse, thrived under some of the early post-Soviet Georgian leaders. 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. His authoritarian, and even fascist, tendencies did little to alter the seemingly authoritarian practices of the Soviet era. 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. 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. “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.’”

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. Saakashvili immediately embarked on a sweeping reform agenda to combat corruption in all aspects of Georgian governance, including public procurement. 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.

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.” 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.”

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. In fact, the World Bank recognized Georgia as a leader in anticorruption in 2012. 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). 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.’” 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. 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.

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. EU requirements for openness, transparency,non-discrimination, and competition were likely significant drivers of the reforms resulting in the 2010 State Procurement Law. 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.

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). The PCA created a framework for further integration of Georgia and the EU and specifically called for open and competitive public contracting through tendering. This framework was further refined and developed by the EU-Georgia Action Plan, signed in May 2004. 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.”

These efforts culminated in the EU-Georgia Association Agreement, which includes a Deep and Comprehensive Free Trade Area (DCFTA) Agreement. Both agreements were signed in 2014 and entered into force in 2016. 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.

Thus, while Georgia’s internal desire for anticorruption reform drove significant changes across the whole of government, those efforts supported and reinforced the growing trend toward greater EU integration, especially as they relate to public procurement. 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, as well as the enhanced value and competition attendant with opening its own internal procurement markets to EU suppliers.

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. Specifically, the geo-political security situation in the region changed drastically at the behest of Russia. 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. 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.

This conflict between Russia and Georgia served as the initial test of a strategy that would be repeated later in Ukraine. “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.” 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. 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. 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.”

“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.” 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. 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.

The security situation in Georgia also sped up the creation of the EU’s Eastern Partnership (EaP), which officially launched on May 7, 2009. The EaP framework was the initial spark that ultimately led to the EU-Georgia Accession Agreement and the DCFTA. 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.

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. 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. . . .” 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, Georgia, Ukraine, and Moldova officially applied for EU membership. 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. 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. 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.” 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. In some cases, Ukraine’s challenges were even more pronounced, especially with respect to corruption. As with thieves-in-law in Georgia, corruption took on an institutional and systemic character in post-Soviet Ukraine. Informal networks remained common as the drivers of government activity, and the use of public goods for private gain, especially public contracts, remained widespread. 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.”

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.

“In short, corruption in Ukraine was endemic.”

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.” State capture refers to a system of corruption wherein every level of the state is involved. Put another way, Ukraine’s corruption may be described as oligarchic and grand where Georgia’s is petty and dominated by elite cartels. “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.” 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.

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. 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.” 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. 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.

Also like Georgia, Ukraine entered into an Association Agreement, including its own DCFTA, with the EU in 2014. However, as discussed below, this agreement would prove much more controversial and divisive than similar arrangements in Georgia. 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. 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. “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.”

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). 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. It is “arguably the most important binding international agreement on public procurement worldwide.” 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.

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. As of 2021, the WTO lists Georgia as one of several countries currently in the process of accession to the GPA.

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. 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. 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.

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. The preceding government inherited a clear, popular mandate to reduce corruption and continue efforts toward greater European integration. 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.

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.” 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.

After 2014, Ukraine sought to capitalize directly on Georgia’s experience of successful reform under the Saakashvili regime. 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. 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. Ukrainian corruption was not only greater in scope but of a categorically different type than what Zguladze encountered in Georgia. 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.” 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.”

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. 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. 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.

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. 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. 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. Specifically, with Crimea now part of Russia proper, Russia could guarantee its access to the Black Sea for military and economic purposes. 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. Once again, Russia provided covert support to separatists that were fighting the Kiev government.

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. 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. 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. On February 24, 2022, Russia invaded from the north, south, and east. Despite predictions that the Russian military would quickly overwhelm Ukrainian forces, to date Ukraine has withstood the Russian onslaught with surprising success. 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.

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. On June 23, 2022, the EU granted that request and formally made Ukraine a candidate for EU membership. 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. 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.” 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.

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. These efforts led to the creation of a trilingual electronic tendering system that ultimately resulted in the elimination of paper tenders entirely. The system has also become an internationally recognized model, especially for developing countries undertaking significant procurement reform efforts.

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. 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.” The Georgian electronic tendering system has greatly simplified participation in public procurement, “thereby increasing transparency and competition, and instilling confidence by decreasing corruption risk.”

The law also established an effective procurement dispute system that enhances fairness, transparency, and competition in Georgian procurements. 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. 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. Article 23(41) called for the establishment of a board composed of government and civilian members to resolve procurement-related disputes. 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. 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.

The Board is not subordinate to any other Georgian agency or official, thus preserving its objectivity and independence to the maximum extent possible. 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. 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, as do Board remedies involving recommendations to procuring agencies rather than binding orders.

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.” Where only 67 challenges were brought in 2011, that number had increased to 895 by the end of 2015. The overwhelming majority of these dispute claims challenged agency decisions and actions, such as disqualification of bidders. A small portion also challenged the terms of the tender itself. 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. 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. Loosely analogous to agency-level protests in the U.S. system, the Appeals Council’s decisions are publicly available and often treated as guiding, though not binding, authority. 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. 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. 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.

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, the Georgian State Procurement Law only requires use of electronic tenders for acquisitions exceeding 200,000 Georgian Laris (GEL). Though not required, procuring entities are still permitted to elect the use of electronic tender for acquisitions under this threshold. Similarly, non-competitive procedures may be used for acquisitions below the micro-purchase threshold of GEL 5,000. “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.” 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.

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, or in cases of “urgent necessity.” 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. 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.

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.” 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.

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. The U.S. system monitors these concerns through legal challenges to justification and approval documents for both sole source awards and emergent circumstances. 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. 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.

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. 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. 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, see military spending rise dramatically. 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.

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. 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.

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. 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.

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. 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.

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. 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.

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. “Public procurement in Ukraine has undergone a radical overhaul. Previously [to 2014], it had been a means to reward political favorites.” 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.” 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. 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.

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.” 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. 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.

The presidency of Viktor Yanukovych began in 2010 with promises of significant reforms to fight corruption and improve public procurement. While these efforts initially showed some success, it soon became clear that special interests continued to trump real reform. At the same time that Yanukovych ascended to the presidency, the Ukrainian legislature passed a sweeping public procurement law. 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. In fact, both the EU and World Bank urged Yanukovych to veto the legislation as a result of these concerns, which he ultimately did. 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.

This version incorporated significant aspects of EU public procurement rules and was accordingly praised by the EU and World Bank. Specifically, it abolished the Tender Chamber and placed responsibility for oversight and implementation with the Ministry of Economy. Additionally, it established a complaints mechanism, effectively a bid protest system, under the authority of the Anti-Monopoly Committee. 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. Requiring the publication of tender information in electronic and paper form improved transparency and fairness.

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. 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.

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). 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.” 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.

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. 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.” In fact, Ukraine once again drew direct inspiration from the Georgian experience with successful electronic procurement. 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.

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.” 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.” It became mandatory for all public tenders on August 1, 2016.

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. A group of concerned citizens and government buyers has emerged to monitor public procurements, calling themselves DoZorro, or “watchdog.” 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. The system has been praised by the EBRD and won a prestigious World Procurement Award in 2016. Similar to Georgia’s GeGP, Ukraine holds ProZorro out as a model of effective and transparent electronic procurement for the international community. 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.

The system has also proven itself to be incredibly “resilient in the [face of] chaos and war. 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. 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.The 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. The system allows global suppliers to post their goods and Ukrainian buyers to post their needs to facilitate rapid and efficient purchases.

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. 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.

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.

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. 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.” 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. 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.”

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.” 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. 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.

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. These issues reflect the lingering presence of neopatrimonial informal networks even where formal institutional processes nominally take precedence. The broad exemptions further indicate instances in which the exempted sectors officially pass from the formal to the informal institutions.

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. 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. 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. Acquisitions below these thresholds account for approximately half of the entire Ukrainian procurement budget. 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. 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. 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. 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. Instead, the United States simply applies more controls on the use and dissemination of information that is potentially harmful to national security. 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. 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. 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. 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. 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.”

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

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. 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. 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. 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.

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. 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. This situation has led to allegations of rigged tenders, with billions potentially lost to corruption, mismanagement, and fraud.

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.”

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. 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. 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. This approach is analogous to the open and public tendering requirements of the Ukrainian and Georgian state procurement laws.

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.” 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.

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. Specifically, the exceptions for only one responsible source (sole source), unusual and compelling urgency, and national security 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.

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.” 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. 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.

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 . . . .” The injury contemplated is usually that suffered as a result of delaying the acquisition in order to subject it to full and open competition. 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.

As discussed above, the Georgians have virtually identical provisions in place with respect to the temporal limitations on the urgent necessity exception. 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.

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. 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. 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.

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. 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. 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. 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. 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. 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. 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. 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. These areas include organizational development, increased public awareness, business development, and education.

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. Through analysis and optimization, the CSPA seeks to remove inefficiencies from previous business processes and standardize new procedures throughout the organization. Additionally, the agency emphasized optimizing its organizational structure to properly define roles and responsibilities to promote collaboration and resource management. 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. 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. 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. 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.

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. Second, the agency will engage with media to disseminate its message across a wider spectrum. These efforts will focus on active disputes and cases, inviting impartial analysis of the issues involved. 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. 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. 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. 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. 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.

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. 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. 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.” 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.

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.” 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. 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. Finally, the agency will seek to partner with universities that offer government procurement programs in order to further educate procurement professionals.

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. Of note, as of 2016, Ukraine had created, or was in the process of creating, several new institutions and organizations aimed at combatting corruption. 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. The ombudsman’s role includes official receipt and reporting of business complaints about corruption, including bribery pressure and tax fraud.

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.” To address this problem, the post-Yanukovych governments have begun breaking up state-owned companies and installing new management. 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. 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.

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. 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.

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. 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. As a result, the Prosecutor’s Office’s power and reach was reduced from 18,000 prosecutors to 10,000 in 2017. 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.

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. The Anticorruption Bureau is an investigative agency with limited law enforcement powers, though it lacks the authority to review past cases. The Prevention Agency focuses on exposing corruption by senior officials through the monitoring of data such as asset declarations.

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. 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.”

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.” Of perhaps greater concern, though, is the fear that the creation of new institutions will make “anticorruption policy someone else’s responsibility.” 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. 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. 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.” 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.

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.