Negotiated procurement procedure

The public procurement system in Ukraine, based on the Prozorro platform, is designed to ensure transparency, competition, and efficiency in spending public funds. However, there are situations when the use of standard procedures, such as open tenders, is impractical or even impossible. It is for such cases that the legislator has provided an exception – a negotiated procurement procedure.

Legislative background and basic principles

The Law of Ukraine “On Public Procurement” does not have a separate, clear definition of the negotiated procedure. Instead, it is mentioned in part two of Article 13 as an exception that may be applied in cases provided for in Article 40 of the same Law. This is a key point: the negotiated procedure is not an alternative to open tenders, but a tool for special situations.

The essence of the procedure is that the customer initiates negotiations with one or more potential participants regarding the terms of the future contract (price, terms, quality, etc.). It has several important differences from standard tenders:

• The absence of an auction: the winner is chosen not by the lowest price at the tender, but by the results of negotiations, which allows taking into account other important aspects in addition to cost.
• Minimum terms: the procedure is much faster, which is critically important in emergency situations. The minimum period can be from 6 days, and in some cases even less.
• Without tender documentation: the customer is not obliged to prepare a full package of tender documentation, which simplifies the process.
• Limited access: the procedure is carried out with specific suppliers selected by the customer.

When is the negotiated procedure used?

The legislator has clearly outlined the list of grounds under which the contracting authority may apply the negotiated procedure. This is a safeguard against abuse and ensures that it is used only in exceptional cases:

1. Open tenders were not held twice: if the contracting authority announced open tenders for the same procurement item twice, but did not receive a sufficient number of offers or all offers were rejected.
2. Procedure for restoring solvency: purchase of goods, works or services from a supplier who is in bankruptcy or liquidation, but under a procedure that provides for the restoration of its solvency.
3. Additional procurement: if a contract has already been concluded with a supplier, but there is a need to make additional purchases of similar goods, works or services. In this case, such additional purchases must be justified and not exceed 50% of the value of the initial contract.
4. Legal services for the protection of state interests: procurement of services related to the protection of the rights and interests of Ukraine in international courts, arbitrations or other international bodies.

Urgent need: the need for procurement arose due to unforeseen and urgent circumstances that could not have been foreseen in advance, and the use of other procurement procedures is inappropriate.

Stages of the procedure

The procedure consists of several key stages, most of which take place outside the Prozorro electronic system:

• Decision making. The first step is the decision-making by the tender committee or an authorized person. This decision is drawn up in the form of a protocol, which must include:

1. A clear reason for applying the procedure with a reference to the relevant provision of the Law.
2. Justification of the feasibility of its application.
3. Information about the procurement (subject, expected cost, terms).
4. Name of the potential supplier (if there is one).

• Negotiations. The customer negotiates with the selected participant (or several) on all terms of the future contract. This stage can last from one day to a longer period, depending on the complexity of the procurement subject.
• Intention to conclude a contract. After successful completion of the negotiations, the customer makes a decision on the intention to conclude a contract. This information is published on Prozorro. This allows other market participants to familiarize themselves with the future agreement and, if necessary, challenge it.
• Publication and conclusion of the contract. Within a certain period after the publication of the intention (usually 35 days, in some cases – 20), the customer concludes a contract with the selected supplier. This contract is also published on Prozorro. After its execution, the customer is obliged to publish a report on the execution of the contract.

Negotiation procedure under martial law

Under the martial law in force in Ukraine, the public procurement system has undergone significant changes. In accordance with the Resolution of the Cabinet of Ministers No. 1178, customers are guided by the features that provide for the use of open bidding with features and other procedures specified by this resolution. The classic negotiation procedure, as described in the Law “On Public Procurement”, is currently not used.

However, to meet urgent needs related to the elimination of the consequences of emergencies, military aggression or other defense needs, the legislator has provided for simplified mechanisms that are essentially reminiscent of negotiations: procurement without the use of an electronic system, conclusion of direct contracts. This allows you to purchase the necessary goods or services in the shortest possible time, but requires special responsibility and justification from the customer.

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