This presentation by Sabine Zigelski (Senior Competition Expert, OECD) was delivered during the virtual launch of the publication “Fighting Rigging in the Energy Sector in Ukraine – A review of Public Procurement at Ukrenergo” held on 15 June 2021. The report, highlights brochure and other materials can be found at http://oe.cd/fbr-nrg-ukr.

1. LAUNCH
Fighting bid rigging in
the energy sector in
Ukraine
A review of public
procurement at Ukrenergo
15 June 2021
Sabine Zigelski
OECD Senior Competition Expert
oe.cd/fbr-nrg-ukr

2. • Check Ukrenergo procurement practices against OECD
Recommendation and Guidelines and international best
practices
• Structural and organizational set-up of procurement
• Procurement workflows
• Planning
• Execution
• Monitoring
• Provide recommendations how to increase competition
in tenders, prevent bid rigging, and detect suspicious
signs
• Develop a training manual and provide trainings
Competition mandate
2

3. • Ukrenergo has established a highly professional
procurement team with motivated staff, and is constantly
looking for ways to improve
• Compliance and audit functions were recently installed
and will play an important role in improving procurement
Main findings
3

4. Main findings
4
Tenders suffer from lack of competition/very low numbers of
bidders, too many tenders are cancelled
Bidder numbers are low Cancellation rates are high
58%
36%
20%
56%
34%
49%
0%
20%
40%
60%
80%
Open bidding Simplified procedure Total
% number of cancelled tenders/all tenders % valueof cancelled tenders/all tenders
2.75
2.17
1.00 1.02
1.36
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Open bidding Simplified procedure Sub-threshold
procurement
Negotiated
procurement procedure
Total
% tender value % tender volume Total No. of foreign bidders
2017 40 0.5 1
2018 36 0.9 8
2019 37 0.7 1
Hardly any foreign bidder participation

5. • Tender monitoring must include focus on bid rigging
• Co-operation with law enforcement – AMCU – has to
improve
Main findings
5
Percentage of bid-rigging cartel cases of all
cartel cases prosecuted by AMCU, 2017-2019
Detection and reporting of bid rigging
suspicions by Ukrenergo until mid-2020

6. Main
recommendations
to Ukrenergo

7. • Improve market research – focus and prioritise, benchmark and
compare – and use a systematic approach to identifying risks of
bidder collusion and lack of competition.
• Increase knowledge of technical and administrative procurement
staff and ensure good communication between them.
• Rethink the regional organisation of procurement and the internal
staff allocation and specialisation.
• Learn from international experience and the procurement
expertise gained in tenders based on International Financial
Institutions’ rules.
• Benchmark against prices by other large purchasers and foreign
transmission system operators to inform procurement processes
and priorities.
• Do not rely on reference prices as a proxy for competition as they
cannot replace the competitive process.
IMPROVE TENDER PREPARATION
7

8. • Higher value tenders show higher bidder numbers – aggregate
tenders and use framework agreements where adequate.
• Smaller bidders can be attracted to bid when contracts are split into
lots. Lots should be designed in a way to make bidder collusion
more difficult. The choice between aggregation and splitting into lots
will depend on the specific characteristics of the procurement
market.
• Attract more foreign bidders, publish more tenders in English in
full and advertise them widely.
• Pay close attention to joint bids and sub-contracting as they can
support the implementation of collusive agreements between
bidders.
• Reduce the high number of cancelled tenders through clear
tender design and requirements and education of potential
suppliers.
MAXIMISE BIDDER PARTICIPATION
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9. • Avoid in-person tender or general information meetings that
allow competitors to meet. Avoid joint site visits, and make use of
alternatives to in-person meetings with suppliers, such as virtual
seminars.
• Ensure that appropriate safeguards are in place for in-person
meetings with several suppliers - detailed meeting notes, presence
of anti-corruption and compliance staff.
• Do not be more transparent about competitors, bids, technical and
qualitative characteristics or other competitively relevant information
than necessary. Educate procurement staff to avoid any
unnecessary disclosure of sensitive information.
• Be cautious when contracting industry consultants and ensure
that they are independent and free of any conflicts of interest.
Ensure they sign strict confidentiality agreements.
AVOID BIDDER COMMUNICATION
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10. • Intensify efforts to actively detect bidder collusion in tenders.
Review past tender data and undertake systematic analysis of
Prozorro tender data. Screen for suspicious signs.
• Suspicions must be transmitted to AMCU, and closer co-operation
with AMCU should be established.
• Provide regular training in cartel and bid-rigging detection and
prevention to procurement staff.
• Inform suppliers of illegality, economic and reputational risks of
bid rigging and have them sign statements of independent bid
submission.
• Seek opportunities to obtain compensation for damages when
collusion in Ukrenergo tenders has been condemned by AMCU. To
this end, support of AMCU investigations is vital.
IMPROVE DETECTION AND
REPORTING
10

11. Recommendations
to the government
of Ukraine

12. • Reduce the detail of public information in the annual plan. Limit
public information to aggregated numbers.
• Maximum reference prices should not be published.
• Reduce information available to bidders during and after an
electronic auction. Information on lowest bidding prices and
winning bidder’s name and price is sufficient.
• Allow for stronger use of non-price award criteria – quality and
innovation.
• Rethink rules on bidder exclusion. Allow for readmission under
certain conditions with appropriate monitoring.
• Strengthen Ukrenergo capacities and move responsibilities for
approval of key documents, such as the company’s strategy,
financial plan, business plan, and investment plan to Ukrenergo’s
Supervisory Board.
IMPROVE PROCUREMENT LAW AND
UKRENERGO GOVERNANCE
12

13. Next
steps

14. • Workshops June 2021
• For Ukrenergo procurement staff (22/23 June)
• For Ukrainian stakeholders (17 June)
• On screening for bidder collusion (24 June)
• In-country workshops for Ukrainian SOE
• 2nd half of the year, dates will be communicated
Next Steps
14

15. Access the report, highlights brochure
and read more about the project
oe.cd/fbr-nrg-ukr

16. OECD Recommendation for Fighting Bid Rigging in Public Procurement
The OECD Guidelines, other in-country projects and reports
More on OECD work on bid rigging
www.oecd.org/competition/bidrigging