Audit reveals 5.4 billion hryvnia overpayment in Ukraine’s classified weapons spending, - NYT
Internal government audits that examined purchases made by the Ukrainian Defence Procurement Agency revealed dozens of contracts concluded with companies at inflated prices despite the availability of lower-cost offers from competitors.
This was reported in an article in the American newspaper The New York Times, according to Censor.NET.
Ukraine has built up a defence industry that produces thousands of artillery shells, armoured vehicles and drones with a variety of models and capabilities.
As billions of dollars flow to domestic manufacturers with financial assistance from European donors, much of the spending is shrouded in wartime secrecy.
This worries analysts and activists who say Ukraine has made little progress in curbing a long history of corruption in military procurement, the article says.
Procurement audit
One issue that concerns auditors reviewing military spending is Kyiv's repeated awarding of contracts to companies whose bids were higher than those of competitors, without explanation.
Internal government audits reviewed by The New York Times found dozens of contracts awarded to companies at inflated prices when lower-cost bids from competitors were available.
The audit also found cases of delays or incomplete deliveries of orders and prepayments for weapons that were never delivered.
The NYT writes that awarding contracts to the highest bidders does not in itself indicate corruption or waste. However, the audits illustrate the challenges facing Ukraine as it moves away from dependence on allied weapons in favour of domestic production and international arms markets.
Government auditors who reviewed purchases made by Ukraine's Defence Procurement Agency from early 2024 to March this year did not allege embezzlement, although some contracts were referred to law enforcement agencies for evaluation.
But their 465-page report found that dozens of contracts for artillery shells, drones and other weapons were not awarded to the lowest bidders.
The difference between the lowest bids and the contracts actually awarded by the Agency amounted to at least 5.4 billion hryvnia, or $129 million.
"They overpay for unknown reasons and without justification," the publication quotes Tamerlan Vakhabov, a former adviser to the agency, which is a division of the Ministry of Defence.
In the midst of war, according to him "there is a lack of political will to do it the right way."
What does the DPA say?
In his statement, the agency’s director, Arsen Zhumadilov, said that lower bids were sometimes rejected because they "may not meet the required standards of quality, delivery timelines, payment terms or other essential criteria."
According to him, the agency recently reviewed its contracting practices to ensure fairness. The official added that last year the agency began to gradually terminate contracts with intermediary companies that received a mark-up on sales.
Purchases through intermediaries
Until last year, a significant portion of purchases were made through intermediaries, most of whom received a 3% markup on sales, according to a separate audit of purchases prior to July last year. The agency used such intermediaries in 83% of contracts, instead of purchasing directly from suppliers.
The article states that the audit revealed numerous contracts that led to delays or incomplete deliveries, as well as cases of prepayments to companies that never delivered the weapons.
They found contracts signed with companies without prior verification of their production capacity.
