During the first six months of 2024, the Kharkiv region witnessed more than 10,000 tenders held by state institutions, local authorities and enterprises subordinate to them. The Analytical Center "Observatory of Democracy" conducted a detailed analysis of fuel purchases by Kharkiv's communal enterprises and the activities of the Centralized Purchasing Organization of the Kharkiv City Council.
The "gold standard" of nepotism
Purchases of wood for the construction of fortifications by the Kharkiv Regional Military Administration at inflated prices from newly created companies became a vivid example of how direct contracts contribute to overpayments from the budget. Despite implementing the Prozorro e-procurement system since 2016, officials have found ways to circumvent the system.
Such schemes include the creation of a technical task for a specific winner, the use of "sparring partners" and the victory of fictitious enterprises. These methods allow "favorite firms" close to officials to receive government orders without real competition.
The same problems are observed in the procurement of fuel and lubricants by communal enterprises of Kharkiv. The post-payment procedure after a long period scares away potential bidders, and "favorites" get contracts even if their offers are not the most profitable.
Gold Standard Monopoly
During the first six months of 2024, the Kharkiv City Council, its subdivisions and utility companies concluded 18 contracts for the supply of fuel in the amount of over UAH 186.5 million. From them, the company LLC "Gold Standard K", founded by Kostyantyn Batvinov - close to the mayor Igor Terekhov, received UAH 116.1 million. according to 9 contracts.
In 2013, Kostiantyn Batvinov, who was a co-owner of the chain of gas stations "Spika", together with a companion sold it to the currently sanctioned oligarch Kurchenko, but remained working in it. At the end of 2014, he founded "Gold Standard K". The success of the new business coincided with Terekhov's election to the post of Kharkiv mayor. The company began to receive contracts from municipal utilities. As a result, "Gold Standard" for the first half of 2024 received 50% of the most expensive fuel supply contracts (over UAH 1 million) and 62.3% of all funds. On the other hand, in other communities of the region, the company failed to win a single tender.
Other significant fuel supply contracts were awarded to Kalam LLC and Brent Oil-95 LLC, associated with the former first deputy of the Kharkiv Regional Administration Oleksandr Skakun.
Centralized purchasing organization
At the beginning of 2023, the Centralized Procurement Organization of the Kharkiv City Council was created, which, according to the mayor, should increase transparency and reduce corruption in public procurement. However, the results of the CZE for the first six months of 2024 indicate the opposite.
The Central Committee announced 120 tenders, of which 69 ended with the signing of the contract. Most of the canceled tenders were due to lack of offers or technical errors. In addition, electricity purchases showed that two companies - Enera Sumy LLC and El-energo LLC - received most of the contracts, often without real competition.
Claimed savings from wholesale purchases through the CZO are not confirmed. Most of the tenders were conducted for one utility company, which calls into question the expediency of creating a CZE.
Conclusions
An analysis of purchases of fuel and lubricants by the Kharkiv City Council and its communal enterprises, as well as auctions organized by the KP "Centralized Procurement Organization" in the first half of 2024, demonstrated that although overpayments from the budget for the third year of a full-scale war are perceived extremely acutely by society, the corruption component in tenders did not disappear anywhere.
Thus, in a number of purchases by the Kharkiv City Council, "favoritism" can be traced - when contracts and orders are received by companies owned by representatives of local authorities or close to them. In particular, the Golden Standard K company receives 62.3% of the funds for the purchase of gasoline and diesel by Kharkov's communal enterprises.
The founder and ultimate beneficiary of the "Gold Standard" is Batvinov Kostyantyn Leonidovych - a person from the entourage of Kharkiv Mayor Ihor Terekhov. The Batvin family baptized the son of Hanna Kuznetsova, ex-deputy director of KP "Kharkivski Izvestia" and a close person of Terekhov.
The establishment of the KP "Centralized Procurement Organization", which, according to Igor Terekhov, should contribute to cost savings and anti-corruption in public procurement did not significantly change the situation. Thus, the Central Central Committee became one of those KPs that concluded contracts for the supply of fuel with the "Gold Standard" for a total amount of more than UAH 22 million. In addition, signs of "favoritism" and corruption can be traced in other areas, in particular, in the supply of consumables for the maintenance of the public transport fleet and electricity.
One of the arguments in favor of the creation of the "Centralized Purchasing Organization" the mayor called the possibility of complex purchases for several enterprises at once, which will allow to obtain more favorable prices at the expense of wholesale. However, more than 3/4 of the tenders (53 out of 69) were conducted by the CZE only for one KP, accordingly, there is no benefit from the conclusion of these contracts by the "Centralized Purchasing Organization". In addition, there is a tendency towards "shredding" of tenders. For example, 18 tenders were held for the purchase of electricity, 6 for fuel, 4 for motor oil and quartz sand. By combining each of these groups, it would be possible to really save due to the volume of the order, however, the main meaning of the creation of the CZO is de facto ignored.
As a result, the procurement situation of the Kharkiv City Council and community utilities in 2024 remains almost unchanged. All those problems and shortcomings that occurred earlier ("favoritism", corruption and, as a result, the inflated cost of procurement items) have not gone anywhere. And attempts to solve these problems and save city funds remained only on paper and in the mayor's statements.
