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1 July, 2021
How to Make Medical Procurement More Efficient? NAKO Provides Recommendations

In May 2020, the Medical Forces Command of the Armed Forces of Ukraine purchased 2.5 million medical masks and received UAH 1,0 worth of "kickbacks" for each mask they procured. According to the SBI, the officials facilitated the conclusion of a contract between the Ministry of Defense and a selected company, following which they accepted the goods without the required paperwork despite the late delivery. Currently, the criminal proceedings have been handed over to the judiciary. This is just one example of violations and corruption risks highlighted by NAKO in its research "Medical Procurement in the Defense Ministry during a Pandemic: Corruption Risks and Recommendations". The report was presented at the Ukrinform news agency on July 1. Another example includes the purchase of defective lung ventilators. At the same time in May 2020, the Medical Forces Command of the Armed Forces of Ukraine purchased 10 lung ventilators for UAH 11 million. The devices were unusable - their inventory and technical characteristics did not meet the requirements of the bidding documents. The investigation of the elements of corruption, in this case, is currently underway. These cases clearly illustrate one of the key risks that NAKO draws attention to – dishonest conduct, which can manifest itself in the form of nominal, i.e. false competition, or dishonesty on behalf of the customer's officials. Other top-ranking risks include restricting competition and overpricing of procurement. In general, the tenders of all seven procurers researched by NAKO in this report feature a minimal level of competition - in 90% of cases, only two bidders participated in the procurement, and as a result, budget savings did not exceed 5%, even as it was possible to save up to 18% in tenders with more participants. In terms of the competition effect, we should mention the purchase of the Meropenem antibiotic by the military unit A4615, where 5 different vendors took part in the bidding which resulted in a 41% price decrease during the auction compared to the initial price. Several factors prevent such tenders from becoming more competitive, such as the prerequisite to provide a letter of guarantee; a direct indication of the trade name instead of the active substance, and the packaging requirements. For instance, the Northern region’s MMCC held a tender for the purchase of the Ambroxol drug and specified the type of packaging which corresponded only to the products made by Kusum Pharm LLC. The example of the Western region’s MMCC procurement demonstrates an excessive increase in the cost of procurement. The cost of the tender held by a Lviv hospital included a payment to a third party for consulting services in the amount of UAH 10 – 12,000. Thus, the analyzed 18 procurement cases held by this hospital could have offered UAH 194,000 in savings; instead, the funds were paid to external consultants. This nearly amounts to the annual salary of an additional staff procurer. As part of the analysis, NAKO looked at more than 120 procurement cases (9 open tenders announced by the Ministry of Defense of Ukraine and the 20 largest tenders announced by each of the six largest customers under the Ministry of Defense). The report provides detailed recommendations on how to reduce the corruption risks of MOD’s medical procurement and increase its efficiency. In particular, NAKO proposes introducing professionalization of procurement, i.e. handing procurement functions over to a centralized procurement organization.

During the presentation of the research, Maryana Bezuhla - Deputy Chairman of the Parliamentary Committee for National Security, Defense and Intelligence suggested sending a report to the Committee, to inform MPs and to add urgency to this issue, specifically through a dialogue with the Ministry of Defense.

Mykhailo Zagorodniy, who represented the Command of the Medical Forces of the Armed Forces of Ukraine, thanked NAKO for the results and stressed that previous mistakes had already been taken into account by the department. In particular, he noted that relevant decisions and personnel changes were made. He assured that the Command of the Medical Forces of the Armed Forces of Ukraine was making every effort to prevent similar risks in the future. At the same time, Zahorodniy added that "their products, medical products for the needs of the Armed Forces are very particular in terms of use, storage; and some things that seem discriminatory are, in fact, vital." His colleague, Tetyana Lukyanenko agreed with NAKO’s key recommendation on the need to professionalize procurement. "Indeed, many military units do not have the human resources to carry out this function, so we need the Command to make some balanced decisions; I think we need to work on the professionalization of procurement", Lukyanenko noted. She added that in her opinion, it would be appropriate to develop some cooperation or exchange of experience with a centralized procurement organization, and specifically with the Medical Procurement State Enterprise. Tetyana Takhtuyva, who represented the Department of Public Procurement and Material Resources of the MOD, also spoke about the expediency of professionalization of procurement. "I think military units need to do other things instead of simply purchasing goods, works and services. One unit commander cannot know everything about both military matters and public procurement. I support that this must be resolved somehow", she noted.

Kateryna Pryimak, Deputy Chair of the Women's Veterans Movement NGO, said that it was painful and disappointing to hear about corruption in the military. She focused on the corruption risks surrounding the military medical formulary, which is what her organization is currently working on. "There is a military medical formulary (editor's note: it's a kind of official guide for medicines that service people can get) with a bunch of medicines that the military for some reason never received. In other words, who is it purchased for and for what purpose?", she asked a rhetorical question. Following the presentation, NAKO will cooperate with public authorities, including the Ministry of Defense, the Parliament, and civil society partners to advocate for our recommendations. The presentation was organized with the kind support of the British Embassy in Kyiv. The video of the event is available on Ukrinform’s YouTube channel.