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95% of expenditures on the state defense orders of Ukraine are classified

The state defense order is one of the largest expenditures in Ukraine, but 95% of its items remain classified. Excessive secrecy and lack of competition hinder the reform of the state defense order.

A comprehensive reform and increase in the transparency of the state defense order (SDO) is possible through the decrease in the volume of classified procurement (95% of SDO items) and the introduction of competitive procurement procedures, said the experts during a discussion on defense procurement on June 18.

A number of risks arise when performing a state defense order, says Taras Yemchura, member of the Secretariat of the Independent Defence Anti-Corruption Committee (NAKO):

  1. Lack of a centralized database containing information on weapons and military equipment manufacturers.
  2. Lack of modern information tools at the SDO planning stage.
  3. Complexity of getting into the register of the defense order contractors.
  4. Inconsistent legislation in terms of SDO approval.
  5. Excessive secrecy of such orders.
  6. Lack of competitive procedures in classified procurement.
  7. Limit on the maximum revenue of suppliers.
  8. Lack of competitive procurement procedures when importing goods.
  9. Limited possibility for the representatives of customers to verify information.
  10. Change in production costs during contracts performance.
  11. Blurriness of responsibility in the field of control over the SDO implementation.
  12. Lack of modern information processing tools at the SDO reporting stage.

In order to minimize these risks, NAKO experts recommend:

  1. Increase SDO transparency by reducing the number of classified procurement.
  2. Improve the pricing mechanism for military products.
  3. Abandon the SDO registry by introducing a transparent licensing procedure for WME manufacturers.
  4. Improve the procedure for approval and control over the SDO implementation.
  5. Simplify procedures simultaneously with the introduction of secure automated information processing systems.

The first steps for the declassification of the state defense order should be made when purchasing Soviet military equipment, which is no longer a secret for foreign intelligence, believes Head of StateWatch NGO Hlib Kanievskyi.

NATO member states also have cases of defense products procurement at inflated prices, but this is due to incompetence rather than corruption, noted a retired lieutenant general, a NAKO member, Mishel Yakovliev.

The Ministry of Defense of Ukraine should play a bigger role in the SDO formation as it is currently limited by the Ministry of Finance, so there is a “dispersion” of the responsibility of executive authorities in military procurement, stressed Serhii Zhurets, director of information and consulting company Defense Express.

The state defense order is one of the largest expenditures in Ukraine, but 95% of its items remain classified, says NAKO Committee member Yuliia Marushevska.

According to experts, 70% of the SDO can be produced in Ukraine, 20% – in cooperation with foreign partners, and a mere 10% can be imported.

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