Posts Tagged ‘corrutpion’


Move to transparent public procurement should be about more than avoiding corruption – Ukraine

October 10, 2015

The academic semester has once again begun after a summer of little more than “conferences” and “forums” in Odessa with titles that tended to mask nothing more than glorified trade and/or investment expo’s.

As such your author is once again “round tabling” on a fairly consistent basis both within Ukraine and occasionally abroad, sometimes as a panelist and other times lurking in dimly lit corners scribbling notes but saying little – or nothing.

A fairly recent local round table related to the issue of public procurement – an area that would have seemingly (despite having a very long way to go) improved since the on-line public procurement systems were introduced by the current government – albeit more transparent than ever before, it of course goes nowhere near to removing corruption from the procurement chain.

For example, the issue of sealed envelope bid  can be a single or double envelope bid.  The premise of a double envelope bid is that technical and financial issues are submitted separately and the tender assessed primarily on the technical merits (or lack of) without the influence of costings – for tender pricing is not necessarily the only or best way to select tender winners.  The quickest and the cheapest is not necessarily the best value for public money – there are many other considerations.

Sealed bids, of course, mean nothing depending upon the morality of those receiving them. If the committee is corrupt and/or self-serving, then there is always room for nefarious acts.

Nevertheless a little more light shining upon what has traditionally been a very dark and murky part of government mechanics has to be welcomed – and is – despite any reservations over the corrupt nature of those that remain involved in the process.

Having listened to the round table rightly deliberating issues of transparency, accountability and all such very necessary and relevant issues – there are public procurement issues that were not touched upon whatsoever.

In almost every nation “government” is one of the (if not the) biggest purchaser within internal economics – which is why corruption within the procurement system of the Ukrainian government is such a major issue.  Indeed in several market sectors, government purchases are a significant percentage of that market.  Whichever way you shake it, the Ukrainian government is a major player within the Ukrainian market as a buyer and will always remain so.

Government expenditure on “whatever project” is not a small driver within the domestic economy either.  That such projects always seem to be unfinished long after expected completion dates and at costs far greater than anticipated/expected maybe down to endemic corruption as claimed at the round table mentioned above – but it may also be down (at least in part) to extremely poor management both within the relevant government department and the contract winner.

It is without doubt that Ukraine is not the only nation where government projects fail to be delivered on time and on budget – far from it.  The civil service in many countries are replete with competent policy thinkers, but severely lacking in competent project managers.  Ukraine is not alone in the lack of competent project managers within government – something that will become far more acute when genuine “decentralisation” of budgets, responsibility, accountability and decision making occurs.  (Undoubtedly the lack of competent civil service policy thinkers will also become apparent at a local level rather quickly too.)

An exasperation of inefficiency and ineffectiveness of project management within the Ukrainian civil service seems all-but guaranteed.

A short term fix is obviously to bring in (expensive vis a vis a civil servant wage) private sector project management to work along side the local civil servants on major local budget projects – but it will certainly prove to be cost effective when viewed against losses from ineffective and inefficient project management – as well as making corruption a little more difficult.  It is not, however, the answer to the problem in the long term.

If the current government policy is to bring the Ukrainian economy from the Soviet epoch, leap frog the “acceptable”, and move to a cutting edge and dynamic economy whilst the opportunity exists, it would do very well to consider encouraging degree courses at universities in all Ukrainian regions in Public Administration – with part of the curriculum concentrating upon project management.  At worst such universities will become “feeder” universities to the civil service with employee that have studied public administration – at best it may produce capable civil servants that are policy thinkers yet also able to manage projects.

Unfortunately, at least within Ukraine, the idea of sabbaticals for existing civil servants within large corporations to witness quality project management or large and/or complex projects in action is a non-starter – for the large corporations in Ukraine are almost all State owned loss making, subsidy munching, inefficient and corrupt behemoths with horrendous management.  There are no BPs, Haliburtons, BAE Systems, DuPonts etc to send civil servants on a sabbatical.

There also seems to be a lack of clear-eyed use of procurement to develop the domestic economy over the long term.


There are of course immediate issues that require immediate solutions.  Short term and low cost procurement may appear to save money, but it entirely ignores development of the national and local industrial development.  It is all very well buying existing “off the shelf” products (ultimately researched and developed by taxpayers in other nations) but that does nothing for domestic R&D or the existing domestic industrial base that needs to be weened from subsidies, transformed, updated and made competitive whilst delivery quality products – or otherwise simply closed.

As and when the sickly Ukrainian budget is freed from subsidising hundreds of soon to be privatised (or closed) State owned enterprises, presumably more efficient, better managed, streamlined entities will take their place – both nature and the free market abhor a void after all, and especially so when opportunities to tender for State procurement present themselves as a result.

Clearly directing government expenditure in some areas, such as IT, defence, education, space exploration, agriculture etc could and should be directed at home – and future needs directed at domestic R&D entities.  Indeed domestic R&D may well serve to more swiftly retool domestic industry to become competitive regionally.

It is not enough for Ukraine to simply look at the (gargantuan) tasks facing it today.  Clever procurement today will help in addressing some of the issues it faces tomorrow.  A solid commitment to science, technology and R&D by way of GDP % investment may seem luxurious today in such dire circumstances – but it will make tomorrow, when it arrives, much easier and far more dynamic.

Sadly one doubts the level of interaction and vision of the relevant ministries and Cabinet of Ministers over this issue when as an entity that would be the lead customer for many, it could be driving this issue when seeking efficient and effective solutions to its innumerable issues that require solving today and tomorrow.

Clever use of procurement, together with planning, will not only lead to growth, it will lead to effective and efficient growth.  Growth that is perhaps slow, but growth that is solid and reliable across all sectors of the economy where the government is a significant buyer.

Thus when faced with building a new nation, one has to hope that round tables of assorted boffins and activists, politicians and civil society that talking about procurement across Ukraine, are doing so without looking only at the issue as one of corruption and transparency, but also about how best to insure government procurement is effectively and deliberately used to build an entirely new economic  free market commensurate with the national challenges of tomorrow – rather than procurement that will only meet the fire-fighting needs of today.


Ukrainian Oil & Gas to get international management?

March 30, 2015

After all the unnecessarily public shenanigans that played out last week between the majority and minority shareholders of Ukrnafta – the State and Igor Kolomoiski – and other potential confrontations, such as Uktransnafta, Prime Minister Arseney Yatseniuk has announced that a change of management, which had a great deal to do with the unnecessarily public collision between State and Igor Kolomoiski, will occur.

It will occur with international management being brought in to insure transparency for all stakeholders.

“A new approach to the state of public companies – Ukrnafta, Ukrtransnafta, and all others, Ukrtatnafta – The state recovers its management, we respect the rights of other shareholders, receive and distribute dividends, and we put in place a new high-quality foreign management.”

First and foremost, a reasonable compromise in light of the aforementioned public spat.  Indeed, perhaps a way to combat corruption at the top of many State owned entities, from energy to the defence entities and beyond.

Naturally to attract the best international industry specific senior professionals, the State and other shareholders will have to pay the commensurate international remuneration (plus perks, and possibly “golden hello’s” and/or “contractually assured “golden handshakes” too) for such management.  That said, it will probably still save the State (and shareholders) a small fortune in losses due to gargantuan corruption by doing so.

The Prime Minister went on to state that “The new leadership will Ukrnefti, it must be selected by an international audit, through professional people with serious international reputation.  “We, the government, decided that now all heads of state companies have elected only in open competition, publicly, live, and no longer can there be inserted a godfather, brother or matchmaker.

Fair enough.

However, the issue will be whether the senior industry specific professionals with a “serious international reputation” can be attracted – and the remuneration + package, is not going to be enough to do that on its own.

As any professional “headhunter” knows, money and perks have to be attractive, but the actual challenge of the job on offer also has to appeal.

Those that have previously been “headhunted” will attest to this being undoubtedly true.  Indeed, your author attests to it being true.

The question therefore arises as to the professional challenges that appeal to these specific international professionals – for the challenges that the Ukrainian companies face will not appeal to all who may be approached, dependent upon the parameters of the job role.


What is the aim of changing the management?  To insure more transparent dividends for the shareholders and nothing more?

How much of a free hand will any new senior international professionals have to restructure the businesses?  A restructuring that is drastically required.

Can they go through the supply chain like the proverbial dose of salts, reducing or increasing access to the supply chain, whilst undoubtedly annoying a few vested interests in doing so?  Is the supply chain “tiered”, similar to BP for example?  How broad should Tier 1, 2 or 3 be?  Is there a requirement of oversight for any subcontractors/suppliers to those appointed Tier 1, 2 or 3 suppliers regarding quality assurance?

Are they equally at liberty to go through the existing employees with the same proverbial dose of salts, considering many have been placed there through nepotism, rather than on merit?

Whilst corruption and transparency will undoubtedly be atop of the agenda for any new international management, is there scope for corporate expansion during their tenure?  Is there a need for reduction to core competencies?  Perhaps there is a desire to become more of a global player, and more actively tender/bid for international opportunities in due course?  Does the desire exist to act as a (minority or majority) partner in any global opportunities?

It would be foolish to waste the global relationships that senior international industry professionals bring with them, as there is much to be said for personal relationships and the opportunities they can (and generally do) bring.  Would the shareholders want to make that leap as and when such opportunities present themselves?

Whilst it may appear from Mr Yatseniuk’s words above, that Ukraine would be interviewing any serious professional international candidate, it would be rather naive to think of it that way.  The truth be told, it is very much vice versa – Ukraine will be interviewed by the candidates in line with their (primarily managerial) expectations, if they are to make the move from their current positions to those that are on offer.

To be very blunt, there will not be many serious international industry professionals interested in a managerial role confined to insuring that dividends are transparent and duly paid to shareholders.

If, however, the gauntlet is thrown down to turn these State entities into respected and competitive industry players, with a (more or less) free managerial hand to accomplish that, then top quality global candidates there most certainly will be – for the challenge presented would then certainly appeal to many.

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