Procurement isn't always just about procurement -- a tale from Ukraine

Though a few of us find the topic fascinating, for most in the U.S., government procurement is a pretty sleepy area. Sure, there is a lot of money at stake (and for vendors to the government, procurement is an important topic). But we generally take for granted a system that proceeds without political drama.

My colleague Chris Yukins, a contracting law expert at George Washington University, is especially interested in international procurement, recently sent me the story of a procurement system in Ukraine called ProZorro. The word does not come from a TV show of my childhood, but is rather Ukrainian for "transparency." It is basically a straightforward system to give wide publicity to procurements and to solicit digital bids using reverse auction technology.

Ukraine's recent history makes this system a pretty big deal.

After the collapse of the Soviet Union and the emergence of an independent Ukraine, the country was ruled for many years by a clique of corrupt oligarchs headed by Ukraine's version of Vladimir Putin. In 2014 the oligarchs were overthrown by a popular democratic revolution that was so significant that the Chinese government has been obsessed with it ever since as something they worry about coming to China. Eventually that revolution produced the election as president of Volodymyr Zelensky, a TV comedian from the country's traditionally persecuted Jewish minority who was about as far as you can get from earlier rulers of the country.

Most Americans will doubtless be puzzled to learn that one of the first priorities of the new government, starting almost as soon as it came to power, was to develop a new procurement system for the country.

Why?

The answer is that government procurement was an important part of what was wrong with the old system. That system made little information available to the public about how government money was being spent. And more importantly, the system was rife with corruption – and procurement bribes were a main source of the wealth of the traditional oligarchs.

In 2014, the same year as the revolution, the new government passed a new procurement law. It had two simple, but revolutionary goals – to increase procurement transparency and to reduce corruption. ProZorro was the main tool for these changes. It was about basic changes in an entrenched procurement system that was dysfunctional, if not evil. The basic element of ProZorro was a one-stop shop platform that publicized procurement solicitations, shared requests for proposals, and allowed people to bid in reverse auctions (reverse auctions are where bidders bid lower and lower prices rather than higher ones as in a regular auction).

Consistent with the emergence of the new government from popular protests, Ukrainian non-governmental organizations and private software firms who wanted to help out to help out their emerging country played a major role in actually developing the new system. A priority was to make the system easy for sellers and government buyers to use – in discussing how the new system was architected, I heard the phrase "user-centered design." For example, reverse auctions were traditionally very complicated to use; the system architects created an auction system that didn't even require training.

Before 2014 about 14,000 vendors sold to the Ukrainian government; the number is now up to 200,000. The system has won a number of Europe-wide procurement awards.

There are some ways ProZorro is actually more advanced than our system in the US. Amazingly, most procurements are now conducted using reverse auctions, which seem to be a genuine feature of the system, while in the U.S. we have been talking about this for a long time, but at the federal level not getting very far.

We do not have a single site as Ukraine is trying where people can get RFPs online and submit bids – a souped-up version of SAM.gov – though to be sure Ukraine has a much smaller and simpler set of procurements than we.

Remember there was no independent Ukraine before the breakup of the Soviet Union. Ukraine has made revolutionizing its procurement system part of democratization and nation building. It has become the home for this new system – nothing this advanced exists in any other European country on a national level -- because, more than almost every other country in Europe, it was a newly emerging (democratic) country.

It is amazing that Ukraine is attempting some advances in doing procurement that actually go beyond we are in the U.S. Having said that, and admiring the exciting things Ukraine has done, my overall reaction to reading about what is going on over there is to return to the beginning of this post and note that we should count ourselves very lucky that in the U.S. government procurement is so boring.