Tender Champions Rating 2023: Who and why profits the most from gov. procurement

In collaboration with the Clarity Project open data analytics system Mind presents the 2022 tender champions rating and Q1 2023 – 50 companies that are most successful in tenders. The story of each one is a potential topic for a separate journalistic investigation.

We do not claim that all of them win unfairly. Among the leaders are both natural monopolies and companies with unique experience or technologies. However, the participation of such structures in tenders, at the very least, indicates that your chances are minimal, when you plan to compete.

According to the Ministry of Economy, in 2022, 94,000 purchases were made in the Prozorro public purchase online system for a total amount of 120 billion UAH. Over 23,000 enterprises participated in the tenders. The difference between the amount that state customers planned to spend on their purchases and the amount for which contracts were concluded through tenders was 6 billion UAH.

At the same time, there is a noticeable decline in many indicators, if one compares the tender results of 2022 with 2021. For example, the number of procedures (not only those carried out, but also tenders that did not take place/cancelled) halved – to 2.73 million. The expected cost of purchases decreased by 2.3 times – to 724 billion UAH. The number of tender organisers decreased by 14% – to 30,000, and that of suppliers – by 32%, to 177,000 UAH.

Source: Smarttender's data

What is happening with government purchases in a state of war? First, due to the war, holding out tenders was suspended for more than 4 months. It was only in July 2022 that the Cabinet of Ministers reinstated mandatory procurement through Prozorro. As a result, the number of successfully conducted competitive procurements has halved.

Second, the reduction in the number of tenders is also associated with a decrease in expenditures for non-critical needs. Also, since the beginning of the war, all public procurements with budgetary funds have been conducted through direct contracts to cover defence and other urgent state needs. That is, procurement for defence and critical infrastructure is carried out without the use of Prozorro. Therefore, most tenders were announced in the following categories:

• Construction, auxiliary products – 313,000 tenders;
• Food products, beverages, tobacco products – 264,000 tenders;
• Repair and maintenance – 200,000 tenders;
• Oil products, fuel, electricity and other energy sources – 173,000 tenders;
• Medical equipment, pharmaceutical products and personal hygiene products – 141,000 tenders.

The main customers (organisers of procurement) in 2022 were central government bodies, local self-government bodies, territorial communities, state and municipal enterprises, law enforcement structures. The largest numbers of lots were placed in Kyiv (328,200), Lviv (194,000), Vinnytsia (175,000), Poltava (170,000) and Odessa (165,600) provinces.

Thirdly, many companies, enterprises and entrepreneurs have ceased their operations. Some have lost production capacity due to combat operations, while others could not withstand autumn-winter blackouts. Therefore, the number of state contractors has decreased. In addition, many companies had to relocate, which also temporarily knocked them out of the procurement process.

At the same time, 2022 was a very fruitful year for many bidders. According to Smarttender, 5 companies participated in more than 10,700 tenders. This accounts for 11% of all purchases made.

How public procurement authorities and tender participants violate tender conditions. On the one hand, the fact that businesses, even in wartime, have the opportunity to earn, is undoubtedly a positive phenomenon. As we have mentioned, many companies have lost a stable source of income. And the state, through tenders, helps them stay afloat.

On the other hand – despite the openness, the procurement process has flaws that allow for deception of the Prozorro system. For example, these include:

• Specifying the conditions of the tender in such a way as to narrow the circle of potential participants as much as possible;
• Establishing discriminatory conditions (impossible contractual requirements, huge penalty sanctions, formal reasons for non-admission to bidding, etc.) to be able to filter out candidates;
• Creating the appearance of competition at auctions, when one of the participants is a dummy and deliberately loses the competition in favour of a specific company.

The customer, for their part, often overestimates the tender budget. The purpose of such manipulation is clear: the government order gets its "fellow" winner, who later shares the margin (between the inflated and actual cost of goods/services/works) with the tender organiser.

Source: Smarttender's data

Moreover, violations in public procurement are quite systematic. For instance, since mid-2022, the number of complaints to the Antimonopoly Committee (AMC) began to grow. These appeals concern direct challenges to bidding results and alleged unjust (according to the losing tender participants) actions by the customer. So, the number of corresponding appeals overall decreased – 4,300 in 2022 versus 14,800 in 2021, but the volume of procurement, as we recall, also decreased.

Some cases related to tenders even make it to court. According to court statistics published on the official web portal Judicial Branch of Ukraine, during 2022, the courts tried 1,012 lawsuit applications related to public procurement. Proceedings have been opened for 908 of these. Meanwhile, an additional 1,315 lawsuits were not processed by the courts in 2022.

Administrative court case statistics related to public procurement

Source: https://court.gov.ua

The Cabinet of Ministers, however, has reviewed the requirements for tenders. But it did too belatedly – only at the beginning of 2023. This refers to Resolution No.157 of 17th February. This document has reinforced the requirements for customers to publish reports on the fulfilment of tender contracts; it has cut opportunities for procurement without using Prozorro; it has made it mandatory to publish contracts and all their appendices, even if procurement was carried out without applying a competitive procedure.

Why is a "tender champions" rating necessary?

Therefore, Mind decided to compile a rating that will allow businesses to filter out at the search and analysis stage those tenders featuring these perennial favourite companies.

The rating methodology is built on three main criteria:

• A selection was made of the 100 largest companies that win 80% or more tenders they participate in.
• The cash flows that each individual company receives were analysed (the larger the sum, the higher the contender’s position).
• The ratio of funds received from tenders to the total revenue of the company was calculated. In this case, the correlation is obvious: if public procurement provides the lion's share of revenue, the company unequivocally enters the list of tender champions.

How the rating can help to detect non-transparent tenders. Of course, one cannot categorically argue that any tender in which a company with a high percentage of won bids (about 70–80% of the procurements in which it is involved) is associated with machinations. However, as practice shows, frequent winners of tenders often have strong ties with the organisers of public procurement (through persons occupying high positions in agencies and ministries, through MPs and other affiliated persons), and also become the subjects of investigations and criminal cases.

There are many examples of this. Here are just a few of them. The Ukrhidroenergobud consortium consistently wins tenders of the State Company Ukrhidroenergo. At the same time, the consortium and the state enterprise have long been "on notice" by the Prosecutor's Office and the Security Service of Ukraine (SBU), as they have repeatedly been caught embezzling budget funds through tenders. This in particular is about procurements at inflated prices and theft on the project to modernise the Dniester PSPP, the total cost of which exceeds 35 billion UAH.

Since the end of 2021, the Ukraina Printing And Publishing has been purchasing products for manufacturing biometric passports from Polly-Service LLC, and that too without the Prozorro system. Polly-Service was created by firms that were part of the well-known YeDAPS – a consortium that was a monopolist in the production of documents and holographic security elements in Ukraine in 2004–2013. Interestingly, the Ukraina refused a contract with Chinese Linxens and entered into a contract with Polly-Service on less favourable terms from the cost perspective.

The Kinokit company, which previously belonged to Kyrylo Tymoshenko, the former deputy head of the Presidential Office, won all the tenders in which it participated in 2022, and earned 324 million UAH thanks to them. Interestingly, in January 2022, the state-owned TV channel Rada chose Kinokit to create content and decided to purchase its services for 180 million UAH. Furthermore, there is no data on whether a tender was held. It is only known that Kinokit became the winner of a "creativity competition", as part of which it received this monetary order.

A no-name company from Brovary, Mist Engineering, suddenly became a tender tycoon at the end of 2022. Without previous background in large projects, it got a contract from Ukravtodor (Ukraine’s State Motorroad Agency) for the repair of ruined bridges in the Kharkiv Oblast worth 694 million UAH.

There are dozens, even hundreds, of such stories, where some companies, due to a lucky confluence of circumstances, receive government orders for hundreds of millions and even billions of hryvnias. Therefore, Mind’s rating will be helpful in detecting potentially non-transparent tenders. The emergence of champion companies in procurements will be one of the markers of such "non-transparency" and a signal to business that it is probably not worth spending time and effort on such public procurements.

1. Private Enterprise Rivneteploservice

Total awards (since 01.01.2022): 510.5 million UAH

% of victories: 100

Beneficial owners: Ivan Nadein

In 2022, PE Rivneteploservice, according to Prozorro data, won 100% of tenders. In total, 230 contracts were concluded for a total amount of 264 million UAH. One nuance – all of them were carried out under a non-competitive procedure, since the enterprise holds a monopoly position in the market for transporting thermal energy by mainlines and heat networks in Rivne.

PE Rivneteploservice is a "daughter" of another monopolist – Rivneteploenergo LLC, which provides centralised heating and hot water supply services. It is part of the Ukrteplo Group, the ultimate beneficiary of which is Ivan Nadein. Overall, he is the beneficiary of 21 companies, including 10 that he fully owns.

In February of this year, the Rivne Executive Committee nearly doubled the Rivneteploservice’s rates for thermal energy, produced using alternative energy sources (mainly biogas installations) for budgetary institutions – from 2491 UAH/Gcal to 4394 UAH/Gcal. And more than doubled for the population.

2. Energy Centre Plus LLC

Total awards: 2.01 billion UAH

% of victories: 100%

Beneficial owners: Iryna Gavrysh

The company with 1000 UAH of statutory capital, owned by Iryna Gavrysh, focused on selling electricity in 2022. In this very segment  it won 100% of tenders held by state structures or state enterprises. Meanwhile, the enterprise ended 2022 with an income of 1.1 billion UAH, although the State Treasury actually transferred 91.9 million UAH to the company. So, the main profit from participating in the 2022 tenders will carry over to the current year, when settlements will be made for completed contracts.

For now, the company is actively suing customers, who collectively owe the enterprise almost 40 million UAH (the main debt is owed by the State Inter-District Water Supply And Sewerage Enterprise Dnipro-Western Donbas, and Energy Centre Plus succeeded in court).

3. European Road Construction Company LLC

Total awards: 578.4 million UAH

% of victories: 100

Beneficial owners: Altcom Group, the Keloyev Family

Throughout 2022, the European Road Construction Company LLC (ERCC) won 100% of the tenders in which it participated. The total amount of tender orders received by the enterprise is 578 million UAH. Meanwhile, the State Treasury transferred 80 million UAH to the company in 2022.

Previously, ERCC was part of the Altcom holding company and was called Altcom-Bridge. However, in 2019, the LLC changed its owners and name. According to the YouControl analytical system, ERCC's statutory capital today is 51,500 UAH, with the main type of activity being road and highway construction. The sole owner of the company is Paid LLC, which in turn belongs to Muslim Keloyev. He is the son of Musa Keloyev, the head of the Odessa Oblast Organisation The Chechen People Diaspora.

ERCC repeatedly wins large tenders. In April 2018, the company entered into an agreement with the Kyiv International Airport for 3.5 billion UAH, in September of the same year it won a 4.3 billion UAH tender organised by the Lviv Airport. In July-August 2021, as part of the Great Construction government project, the company received five contracts for road repairs near Mykolaiv and in the Mykolaiv Oblast for a total amount of almost 3.4 billion UAH. In 2022, the largest orders were three tenders from the Service for the Infrastructure Restoration and Development in the Kherson Oblast worth 308 million UAH in total.

In November 2020, a complaint against ERCC was received by the Antimonopoly Committee. It was filed by representatives of the Antitrust League. ERCC was suspected of conspiring with another regular participant of road tenders – the Rostdorbud company, allowing them to receive large state orders.

There is not much information about the owner of ERCC, Muslim Keloyev. He is only known to be involved in a business related to oil products. For example, the already mentioned Paid firm in February 2023 won a tender of the Ukrainian Sea Ports Authority for the supply of diesel fuel in the amount of 45 million UAH, and in April – two tenders for the supply of petrol and diesel fuel worth 7.5 million UAH to the Izmail Sea Port.

4. Vestashliakhbud LLC

Total awards: 1.34 billion UAH

% of victories: 90

Beneficial owners: Anna Lavreshina (daughter of the former mayor of Kryvy Rig), Mendel Ederi’s family  (Chief Rabbi of Kryvy Rig)

In 2022, Vestashliakhbud LLC won 90% of the tenders in which it participated. As a result, the company received state orders worth over 1.33 billion UAH. The State Treasury transferred 381 million UAH to the contractor in 2022.

Vestashliakhbud is based in Kryvy Rig (Dnipropetrovsk Oblast) and has been operating since 2002. The company’s specialisation is road and highway construction, and its statutory capital amounts to 20 million UAH. This is, for comparison, 388 times more than that of one of the leaders of our rating – ERCC. According to YouControl, Samvel Yeganyan, Menachem Mendel Ederi, and Anna Lavreshina are Vestashlyakhbud’s beneficiaries.

Menachem Mendel Ederi is the son of Liron Ederi, Chief Rabbi of Kryvy Rig, becoming the company’s co-owner in 2021. Anna Lavreshina is the daughter of Yuriy Liubonenko, former Mayor of Kryvyi Rig. Samvel Yeganyan is associated with Odessa businessman and the leader of the Armenian community of Odessa Suren Sardaryan.

Vestashlyakhbud is a lucky company, with dozens of won tenders in Kryvy Rig and Dnipropetrovsk Oblast. Since the beginning of 2023 alone, it has received contracts for the repair of roads, streets, and the Shakhtarsky Park from the Kryvyi Rig City Council for a total of almost 738 million UAH, according to the Clarity Project. In addition, the company wins tenders for the procurement of cleaning services and sewage disposal. The company is a defendant in court cases, many of which are related to the violation of the procurement procedure with budget funds.

5. Trust Zhytlobud-1 JSC

Total awards: 849 million UAH

% of victories: 95

Beneficial owners: Oleksandr Kharchenko

Being one of the major developers in Kharkiv, Trust Zhytlobud-1 won 95% of the tenders in which it participated in 2022. The company received state orders totalling over 849 million UAH. The State Treasury transferred 755 million UAH to the contractor in 2022.

Trest Zhytlobud-1 JSC has existed since 1947, when it was established as the Kharkiv Union Trust under the Ministry of Higher Education of the USSR. In its current form, the developer has been operating since 1994. The company's statutory capital is 5.5 million UAH, and it is focused on the construction of residential and non-residential properties. According to YouControl, the key beneficiary (shareholder) of the company is Oleksandr Kharchenko, who owns 94.7% of the shares. He is a member of the Executive Committee of the Kharkiv City Council.

Therefore, it is not surprising that Trust Zhytlobud-1 is nearly a monopolist in Kharkiv's construction market. According to lun.ua, the company has about 50 completed and under-construction residential complexes in Kharkiv.

Since the beginning of 2023, according to the Clarity Project, the developer has won over 40 tenders. The largest of these are the emergency repair of two apartment buildings for a sum of 34 million UAH, as well as several dozen orders for construction related to territorial defence, each amounting to 5–8 million UAH.

Furthermore, Trust Zhytlobud-1 is constructing one of the most expensive public toilets in the world in Kharkiv – for 31 million UAH. This company turned out to receive one of the largest contracts from Kharkiv in 2021 for the construction of a zoo, at a cost of around 300 million UAH. The toilet, whose cost accounts for about 10% of the total budget allocated to Trust Zhytlobud-1 by the Kharkiv authorities, is to be built on the zoo's territory.

6. Gas Supply Company Naftogaz Trading LLC

Total awards: 96%

% of victories: 17.5 billion UAH

Beneficial owners: Naftogaz NJSC

NJSC Naftogaz of Ukraine’s subsidiary, the Gas Supply Company Naftogaz Trading, won 96% of the tenders it participated in during 2022. The total sum of tender orders received by the company amounts to 17.5 billion UAH. The State Treasury transferred nearly 18 billion UAH to the company in 2022.

Naftogaz Trading was established in August 2018. According to YouControl, its statutory capital is 17 million UAH, and its specialisation is gas trading. From 2021, the company has been led by Sergiy Beliaev, former CFO of Naftogaz of Ukraine.

The company has repeatedly found itself in unpleasant situations related to tenders. For example, in January 2023, Ukrtransgaz purchased gas from"Naftogaz of Ukraine for 25.9 billion UAH and from Naftogaz Trading for 5.4 billion UAH. Meanwhile the average price per 1000 cubic metres was about 47,400 UAH. However, under some other contracts, Naftogaz Trading sold gas at prices ranging from 16,500 UAH to 32,100 UAH per 1000 cubic metres. Furthermore, an audit of Naftogaz of Ukraine, conducted from October 1, 2018, to the end of December 2019, revealed that the NJSC ran dubious gas operations. In particular, it sold blue-coloured fuel to the company Naftogaz Trading at prices lower than the cost, after which the "daughter" resold gas to private companies at prices lower than the market.

At the same time, from December 21, 2022, the Cabinet of Ministers granted Naftogaz Trading the right to purchase gas for the needs of the heating season 2022–2023 without a competitive procedure using the Prozorro system. The government authorised Naftogaz Trading to buy natural gas under both domestic and foreign economic contracts according to this scheme and then sell it.

7. Mist Engineering LLC

Total awards: 694 million UAH

% of victories: 100

Beneficial owners: N/A

In 2022, Mist Engineering LLC won 100% of the tenders it participated in. The company received government orders worth 694 million UAH. The State Treasury transferred 19.8 million UAH to the contractor.

According to YouControl, Mist Engineering LLC  was registered in June 2018 in Brovary (Kyiv Oblast). The company's statutory capital is 1 million UAH, and its main line of business is the construction of bridges and tunnels. The beneficiary is Olga Chernovska, who is registered in temporarily occupied Donetsk. The head of Mist Engineering LLC is Stanislav Kovin, the former director of the Central Park of Culture and Rest of Kyiv.

The company won its first tenders in 2020, according to the Clarity Project. These were three contracts for bridge repairs in the Poltava Oblast worth 53.4 million UAH and another one for the reconstruction of a bridge across the Southern Bug in Vinnytsia for 13.7 million UAH. Initially, large-scale projects did not come to the company.

However, for some reason in 2022, Ukravtodor chose Mist Engineering LLC for major bridge repairs in the Kharkiv Oblast and handed over three contracts worth almost 700 million UAH to the company. Moreover, all this was done without a competitive procedure, outside the Prozorro system..

8. UTB-Engineering LLC

Total vawards: 610 million UAH

% of victories: 89

Beneficial owners: Pavlo Khaitov

Throughout 2022, the company UTB-Engineering LLC won 89% of the tenders in which it participated. As a result, it received government orders for almost 610 million UAH. In 2022, the State Treasury transferred 276 million UAH to the contractor.

UTB-Engineering LLC, or UTB, is a developer from Chernigiv. The company was registered in July 2016, its statutory capital is 1 million UAH. The main line of activity is the construction of residential and non-residential buildings. According to YouControl, the sole direct owner of UTB-Engineering is Pavlo Khaitov. According to information from open sources, this is a Chernigiv lawyer who also heads the Labris law firm. Among the leaders of UTB-Engineering is Mykhailo Tomilko, who concurrently manages the Oberig law firm.

The company has been actively participating in tenders since its establishment. Since the beginning of 2023, UTB-Engineering has won more than 10 auctions. In 2022, the largest tender that the company won was the reconstruction of Chernigivvodokanal utility company’s water pumping station worth 371 million UAH. In 2023, the company received an order for the reconstruction of the sewerage system in one of the villages of the Chernigiv Oblast for 19.6 million UAH.

UTB-Engineering undertook to complete the construction of two problematic objects in Chernigiv at the end of 2021. Among them was the Nezalezhnist residential complex. According to lun.ua, UTB-Engineering has still been constructing this residential complex.

9. Oblteplokomunenergo JSC

Total awards: 609.7 million UAH

% of victories: 100

Beneficial owners: None

A Chernigiv-based enterprise, whose shareholders are 72 individuals, none of whom are so-called public figures, earns from the supply of heat and hot water. It has a competitor – Tekhnova LLC, which owns the Chernigiv Heat and Power Plant. Heat generation mainly takes place in gas boiler houses, half of which are located in the city of Chernigiv, and the rest are throughout the province. Six out of 93 boiler houses operate on pellets.

Last year, Oblteplokomunenergo JSC did not end very successfully: liabilities have significantly increased and almost doubled the proceeds. The loss amounted to almost 220 million UAH. Of the 636 million UAH in proceeds, more than half – 403 million UAH – were state purchases.

And this is understandable – the city and the province suffered greatly during the occupation: practically all boiler houses were damaged, one was completely destroyed, more than 140 buildings were ruined by direct hits. In addition, rates for the population were frozen, and for business, they were raised insignificantly.

10. Polly-Service LLC

Total awards: 8.37 billion UAH

% of victories: 99

Beneficial owners: Yuriy Sydorenko

Polly-Service is part of the Industrial Innovation Group. The companies of the YeDAPS consortium, which was a monopoly on the production of documents and holographic security elements in Ukraine in 2004–2013, merged under this name in 2015–2016.

The consortium was headed by Yuriy Sydorenko, who has long lived in the United Arab Emirates. A co-owner of the Industrial Innovation Group is Iryna Obidenko, Sydorenko’s  long-time business partner and a friend of Tetiana Bondarenko, deputy director of an information technology and personalisation company, according to the media.

In 2022, the company won 74 out of 75 tenders in which it participated, and concluded contracts for 8.4 billion UAH.

[INSERT_TENDERS_RATING_20224]

Source – Clarity Project , calculations – Mind

Methodology

1. Initially, the editorial team selected 500 companies based on the total awards received in tenders for 2022.
2. Among them, 100 private companies were chosen that had a success rate of over 80%.
3. To calculate the Tender Champions ranking, our team analysed three indicators, giving each equal weight and accordingly ranking the companies.
4. The first indicator was the percentage of victories in tenders in which the company participated over the last five quarters (2022 and Q1 2023). If a company participated in fewer than 10 tenders, the score was adjusted from 10% (provided the company participated in 9 tenders) to 90% (in one tender).
5. The second indicator was the volume of contracts received in tenders for 2022.
6. The third indicator was the ratio of funds received from the Treasury to the company's total revenue. That is, the higher the share of receipts from tender purchases in the company's total revenue, the higher the value of the factor.