Butterfly effect: How Mindich case could put end to Ministry of Defence’s procurement

Author: Tetiana Nikolaienko

Ukrainians are still waiting for the release of recordings from Timur Mindich’s apartment on defence. However, this case has already had a butterfly effect, where a random fact causes chaos and destructive changes, negatively affecting the effectiveness of the Ministry of Defence’s work.

In particular, this concerns the formation of the supervisory board of the joint agency and the approval of control samples of goods that are necessary for conducting tenders in the Prozorro electronic system.

The dilemma of supervisory board

As is well known, after the "Midas" operation revealed records of corruption in procurement at "Energoatom," the powers of the company's supervisory board were suspended.

In addition, the powers of the supervisory boards of the main state-owned energy companies were suspended in a domino effect: "Centrenergo," "GTS Operator," "Market Operator," "Ukrainian Distribution Networks," and "Energy Company of Ukraine."

On 3 December, President Volodymyr Zelensky met with Defence Minister Denys Shmyhal and instructed him to carry out an urgent reboot of the supervisory boards in the defence sector.

Currently, supervisory boards are in place at "Ukrainian Defence Industry," the "Defence Procurement Agency," the "State Logistics Operator," and "Ukrnafta," which has been under the control of the Ministry of Defence since 2022.

Of all these enterprises, the most difficult situation is with the supervisory boards of DPA and SLO. This is due to their merger.

The supervisory boards of the DPA and SLO were formed at the end of 2024, with five members elected to each.

The purpose of their creation was to strengthen the independence of agencies from political aspects (such as frequent changes of ministers) and to strengthen control over the execution of contracts.

However, while the supervisory board at SLO began working immediately, its activities at DPA began with scandals because two members of the supervisory board from the state (Yurii Dzhyhyr and Taras Chmut) supported the extension of the contract of the former head of the agency, Maryna Bezrukova. In March, they were replaced by Stanislav Haider and Ivan Havryliuk.

At the same time, the fifth member of the supervisory board (independent) was never elected after Patrick Auroy declined the position.

In the spring of 2025, it was announced that the procurement agencies of the Ministry of Defence DPA and SLO would be merged. This raised the question of what would happen to the supervisory boards of both agencies. Would they be merged into one, would the members of the SLO supervisory board be added to the DPA supervisory board, would this happen through a new competition, or would it be up to the minister or the head of the DPA?

As of mid-December, no one in the ministry had met with the members of the supervisory boards. Although the issue has been raised since the summer.

Similarly, in more than six months, the Ministry of Defence of Ukraine has not decided how many members the supervisory board of the merged agency will have. At various stages, there has been talk of 5-7 people.

This uncertainty, as well as rumours that the members of the supervisory board will be reappointed on the basis of loyalty, have led to some people being prepared to leave their posts.

Worse still, it is already known that due to the complexity of combining two positions and lack of time, First Deputy Minister of Defence Ivan Havryliuk plans to leave his position at the DPA supervisory board. He announced this at a meeting with the Public Anti-Corruption Council in November.

Also, at the last meeting on the strategic review of Ukraine-NATO defence procurement at the NACP, Stanislav Haider, chairman of the Public Council of DPA, announced that two more members of the supervisory board are ready to write letters of resignation.

The latter already jeopardises not only the functioning of the council, but also the signing of contracts for the purchase of weapons, as members of the supervisory board must approve significant legal transactions. To put this into perspective, by the end of the year, the amount of contracts to be approved by the supervisory board could reach 30 billion hryvnias.

On 12 December, the management of the DPA was to present the staffing table of the new agency to the ministry. It is extremely important that the agency has a sufficient number of procurement specialists and not a disproportionate number of PR specialists.

But it is equally important to resolve the issue of the supervisory board of the unified agency in order to strengthen independent corporate governance and avoid disrupting procurement.

There is also a high risk that the supervisory board may be abolished and all control functions returned to the Ministry of Defence of Ukraine. At least for a certain period of time.

Approval of control samples

Another risk to the stable operation of the ministry is related to the approval of quality control for goods.

The fact that the NABU did not disclose its records on defence does not mean that the Ministry of Defence did not understand where its problems lay. In particular, in the case of the purchase of the notorious bulletproof vests from Mindich's company.

Until recently, the ministry had two separate departments that dealt with quality control (CQCD) and the approval of technical specifications and control samples for goods to be purchased by the Ministry of Defence (CMDSMS).

The approval of reference samples of goods and the acceptance of finished products are among the greatest areas of risk, where corruption can most easily flourish. First, by writing technical specifications for a specific manufacturer, and then by accepting or rejecting goods in exchange for kickbacks.

However, after the last head of the CQCD was arrested in August by the SBI for accepting ballistic glasses of inadequate quality, and the CMDSMS received a lot of questions about the approved control sample of a bulletproof vest for a company associated with Timur Mindich, both agencies decided to liquidate. So to speak, away from sin.

Control functions were transferred to the Main Directorate for State Quality Assurance, and the functions of the CMDSMS were transferred to the Armed Forces of Ukraine – the Command of Rear Logistics Forces.

However, the transfer took place without the preparation of the necessary documents on powers. The public anti-corruption council warned of the negative consequences of such a decision.

As a result, on 27 November, the CMDSMS was transferred to the Logistics Forces Command. However, negotiations on the distribution of powers between the Ministry of Defence and the Logistics Forces Command are still ongoing. In particular, the most heated discussion was about who would approve the so-called model of compliance of goods with the requirements of the Ministry of Defence, without which it is impossible for a company to participate in procurement on Prozorro.

As of 15 December, the LFC had allegedly agreed to take on this function, unless the head of this body changes his mind again.

However, this situation also jeopardises normal procurement. Currently, the "State Logistics Operator," a state-owned enterprise of the Ministry of Defence, has announced 80% of tenders for next year, including so as not to force companies to obtain compliance certificates for product samples from the new administrator.

However, this situation is not normal, as the SLO has to conduct a year's worth of tenders in a month while it is in the process of being liquidated. The Independent Anti-Corruption Commission has previously drawn attention to the quality of the SLO's verification of participants' documents. And with such a workload, this will be very difficult to do.

Furthermore, in recent years, no defence minister has been suspected of criminal offences. At the same time, ordinary employees of the ministry are constantly being investigated. Mainly from the SBI. And at some point, this story began to work in their favour – when ordinary employees refused to accept different fabric for jackets or defective bulletproof vests of Mindich's front companies. However, there is a significant downside to this story – no one wants to take responsibility.

 Tetiana Nikolaienko, Censor.NET