How Public Procurement Was Looted in Dnipro

They make good videos when they are just planning to occupy the comfortable seats of high officials.

BORIS FILATOV, mayor of Dnipro:

- It is very important that each of us has a responsible position, that we want and can build and develop our city.

They speak confidently about their extremely important tasks when they only begin to taste power.

VYACHESLAV MISHALOV, secretary of the Dnipropetrovsk City Council:

- My main task as secretary is to be an apolitical, technocratic secretary.

But here’s what happens when they finally realize: the job is done, and now it’s time to divide and rule.

DMYTRO KHOZIN, deputy of the Dnipropetrovsk City Council:

- Today housing payments of residents are being siphoned off, and these are sums of several hundred million annually. For some reason everyone is silent about this, but practically all the money of Dnipropetrovsk residents is being routed to 2 companies. There are some front people there, but they are associated with the city’s top management.

Worst of all, the corrupt schemes are connected not with the notorious “predecessors,” but with people who, on a wave of patriotism and change in the country, only recently took high positions.

“THE MOST PATRIOTIC” TEAM

In the last days of April the Dnipropetrovsk City Council caused quite a stir in the community: from the public procurement system Prozorro to 1 June officials withdrew the housing and communal services sector, the metro, and deputies’ funds — in other words, everything most valuable.

BORIS FILATOV, mayor of Dnipro:

- I ask you to support, we vote… Dear colleagues, the decision is made, 36 votes, thank you.

Such a decision, and the way it was adopted, then sparked lively discussion not only among civic activists but also among the deputies themselves.

DMYTRO KHOZIN, deputy of the Dnipropetrovsk City Council:

- I have a question for the lawyers: how legal is it to bring this issue forward if it hasn’t been rested, it was only published yesterday and hasn’t passed the commission?

Thoughts on this matter were also expressed on social media by Deputy Minister of Economic Development and Trade Maksym Nefyodov.

“Now, clearly, they will try to manage to tender everything ‘properly’ before August, because only city officials can manually choose the highest-quality supplier. We certainly cannot welcome such decisions.”

And there is indeed a lot to pre-tender. The total value of withdrawing the mentioned sectors is really a juicy piece if you know how to work with the old imperfect procurement system. Prozorro, introduced in 2015, has already shown its effectiveness. The state saved more than 500 million UAH on it. And traditional tenders are a paper affair...

DENYS SELIN, civic activist:

- Approximately in the housing and communal services sector at least about half a billion hryvnias will be spent on below-threshold amounts, 500 million.

And the reason for such actions, according to civic activists, is painfully banal.

DENYS SELIN, civic activist:

- They fear that the wrong suppliers will win. I think that a number of housing services, at minimum, do not want there to be savings, so that firms perform honestly, not for kickbacks.

Some deputies are convinced: all this was cooked up solely for the communal sector, because it is the most expensive. Everything else is just for show.

DMYTRO KHOZIN, deputy of the Dnipropetrovsk City Council:

- In fact, deputies’ funds were included in this issue only so that deputies would support the project as a whole. Let us free up your deputies’ funds so it will be easier for you.

The city council’s official version for abandoning Prozorro for certain sectors is the program’s imperfections and the late adoption of the Dnipropetrovsk budget.

OLEKSANDR SANZHARA, executive office manager of the Dnipropetrovsk City Council, deputy mayor:

- The Prozorro mechanism, for example, does not allow holding auctions with a price below 3 thousand UAH. Well, at least there was already one collision when the procurement was 1,5 thousand UAH, at 2 thousand and when the city council could not carry out any procurements.

However, stories about 3 thousand hryvnias are meant to distract attention from the main thing. In less than a month the housing department has already managed to allocate the budget among dubious firms. But this kind of “absorption” began at the end of last year.

COMMUNAL “SUCCESSES” WORTH MILLIONS

During the last weeks of December 2015 the Dnipropetrovsk communal authorities achieved the unbelievable.

ILLIA RYBAKOV, civic activist:

- Our housing department ordered more than 200 roof projects and more than 200 lift overhaul projects from 2 firms. All these projects were ordered from two rather dubious firms with a small charter capital. There are already open proceedings against them.

We are talking about LLC “ABC Build Service” and the private enterprise “Bagliy-IX,” which are linked to the pro-government party in the city council. Then the two firms received more than 6 million hryvnias.

DMYTRO KHOZIN, deputy of the Dnipropetrovsk City Council:

- These are firms that did not perform the work themselves. They have 3-5 people registered, everything else is done by contractors. To replace a lift you need to develop a 1 project, our lifts are standard in all buildings. And it was paid – 15-20 thousand for each lift for design work.

And in May, precisely during the suspension of Prozorro, new favorites appeared for the city council: the enterprise “Agat LTD” and “Vavilon Stroy.” The mechanism for diverting money is so simple that it doesn’t even require a tender.

By law, tenders do not need to be held for works costing up to one and a half million hryvnias and for goods and services costing less than one hundred fifty thousand. What the housing department does: sums are simply split into several small payments, and then the money is transferred to the needed people without breaking the law.

For example, Vavilon Stroy received more than one and a half million hryvnias in this way on 1 day, 26 May. Agat LTD, in turn, received two and a half million over two days.

There is no information about tenders in the state registers, so it is impossible to find out whether these firms were chosen fairly. Only the city council knows what merits earned Vavilon Stroy and Agat LTD those millions.

At first we visited Agat LTD. The office is in a luxury space downtown. The management was, of course, not present, so we asked the company’s lawyer about the money from the communal authorities.

Lawyer of LLC “Agat LTD”:

- Few people are interested in such matters. This is commercial secrecy, this is the financial and economic activity of the enterprise. Why should we give you such information? It was not we who made the payment; the housing department made the payment. Contact them.

Next we went in search of Vavilon Stroy. The situation with it proved even more comical.

Vozz’yednannya Street 25. At this address Vavilon Stroy, which received several million UAH from the housing department in one day, is supposed to be located. In fact, this is the outskirts of the city and there is no office of the firm here.

We call the number listed as the company head’s contact phone. The man answers vaguely, asks us to call back in an hour or in 20 minutes. But he no longer picks up.

How a company created at the end of last year, Vavilon Stroy, with a charter capital of 5 thousand hryvnias could receive such an amount — we ask officials.

OLEKSANDR SANZHARA, executive office manager of the Dnipropetrovsk City Council, deputy mayor:

- Unfortunately, I am not the profile deputy on housing and communal services issues, I am not the profile deputy on finances, I find out this information from you. Today I cannot say where the payments went. Maybe it was a normal payment, maybe there are some questions about it.

But those who could answer this question avoid talking to the press. They are either on business trips or too busy with work. For example, the head of the housing department of the city council, Mykhailo Lysenko, is checking in at one of the Austrian airports.

The Ministry of Economic Development understands that the serious accountability required by the Prozorro public procurement system certainly prevents someone from putting their hands into budget money. For some officials it is much more convenient to live by the old dark schemes.

MAKSYM NEFYODOV, Deputy Minister of Economic Development and Trade of Ukraine:

- What is being purchased, at what price, from whom — from firms that are fronts or really from a reliable and quality supplier — is simply unknown.

On 1 August Prozorro will become a mandatory tool for all public procurements at the legislative level. Apparently, the Dnipropetrovsk officials, as in that saying, decided to take a breath before death. However, to really be remembered as reformers, they once again proved: money once again triumphs over common sense.

YULIA BRYK, Slidstvo.Info