Questions/Answers

Many countries around the world, especially former Soviet countries, struggle with privatization processes often characterised with mismanagement, corruption and murky deals with politically connected oligarchs. This was the case for Ukraine too. State Enterprise (SE) Prozorro.Sale was established to transform the public assets management in Ukraine through a transparent electronic auction system. Prozorro.Sale has been dubbed as an “EBay for Government”, and it has completely changed the practice of selling / leasing public assets in Ukraine. The initial commitment was to establish and implement clear procedures, via a single online system, to ensure the transparency of the privatization and leasing of state-owned property and enterprises. Previously, the privatization and leasing procedures were decentralized on the different official web-resources of local city councils. There was little information about the varying procedures for privatization and leasing and a lack of trust in the efficiency of the “paper procedures” of selling state and municipal property. Authorities published auction announcements on their local official websites, which meant there was a limited audience and, therefore, little competition among bidders. According to Transparency International (TI) Ukraine (one of the original co-developers of Prozorro.Sale) and state-owned-enterprise Prozorro.Sale, the collaboration between the government, business and TI Ukraine helped to ensure successful implementation of this commitment. The successful work of Prozorro.Sale has provided outstanding early results from opening government processes on the sale and leasing of state property. The introduction of easily accessible and transparent auctions reduced the opportunity for uncompetitive tenders and corruption. Statistically, there has been a year-on-year increase in the number of bidders and, therefore, an increase in open competition. The selling of public assets and the leasing of publicly owned property via Prozorro.Sale have also increased final sale and leasing prices.

Prozorro.Sale, the world's most transparent auction system originated from Ukraine, ensures transparency of selling public assets. Among technical advantages of Prozorro.Sale are protection against monopolization. The two-tier Prozorro.Sale system guarantees the impossibility of any "manual" intervention in the course of the auction. So no one can: restrict the access of a potential bidder / competitor to participate in the auction; to interfere in the course of auctions; to own (and as a result - “trade”) insider information; hide information about participants or change it after the auction. The system is built on the principle of "everyone sees everything".

The Prozorro.Sale initiative contributes to Goal 16 by bringing the rule of law and eliminating corruption in markets which have been traditionally non-transparent and /or monopolized. Prozorro.Sale supports the target 16.5 which relates to the substantial reduction of corruption and bribery by introducing a digital solution and universal rules of the game for all players at such markets in Ukraine as land, timber, state and municipal property sale and lease, bankruptcy, concession, etc. Prozorro.Sale also effectively contributes to the target “16.6 Develop effective, accountable and transparent institutions at all levels” by adhering to the principle “everyone sees everything” and spurring transparency and accountability in local stakeholders (such as city councils, communal institutions) and national-level players (such as State Property Fund of Ukraine, Deposit Guarantee Fund, Ukrainian Post, Ukrainian Railways, Ministry of Justice, etc). The Prozorro.Sale electronic trading system provides 100% transparency of each step within every auction, all information on the results, and most importantly - a complete, convenient and public archive of all data, which anyone can view online both in aggregate form and in the context of each auction. This ensures contribution to the target “16.10 Ensure public access to information”.

3 years ago, no one knew how many vacant square meters of public property there were or how to lease them without bribes in Ukraine. Now we have a unified online system with information about every asset that could be rented and a clear way to bid through e-action. Thus complete transparency of all deals allows to build trust among society, decrease corruption, turn abandoned assets into productive ones, provide opportunities for business, while generating more revenues to the government and municipalities.

Before the launch of Prozorro.Sale, Ukraine had no effective mechanism for sales and lease of such assets, which negatively influenced both potential investors and state creditors. Sales and leasing procedures were complicated and opaque, while property was sold for ridiculously low prices. Starting from October 2019, it became mandatory to sell and lease the property of the insolvent companies through the Prozzorro.Sale system. Before that, the procedure of selling this property could last for several years. Starting from February 2020, Prozorro.Sale system has to be used also for the lease of the national and municipal property. Launch of Prozorro.Sale allowed anyone to bid on auctions that are open and accessible for everyone and proved to be extremely efficient in bringing additional profits to the national and municipal authorities. Open data and transparency exclude a human factor, so corruption risks are minimized. These assist Ukraine in bringing about the goal of building markets and trust: startups and private businesses which want to work in clear, competitive and market conditions, are the first users of the Prozorro.Sale system, as well as the Dozorro community performing civil society oversight and monitoring.

Prozorro.Sale contributes to the expanding of the national markets. Opportunities are growing for regional state enterprises, cities and local businesses. This stimulates the increasing competition and equalizing opportunities for everyone to freely participate with no discrimination by gender. Prozorro.Sale as a state enterprise is harnessing the impact of female talent in public asset management, supporting women in positions of leadership, developing a customized career development approach and nurturing an inclusive culture where women can make a significant contribution to the reform.

The target group is state and local authorities and the State Property Fund of Ukraine responsible for selling and leasing the state and municipal property, as well as businesses and citizens participating in online auctions. Final beneficiaries of the project are citizens benefiting from efficient management of national and municipal assets and filled in budgets that are later used for betterment of their communities. Through e-auctions the state or local authorities can sell / rent out their property at an attractive fair price. The greater the competition, the higher the price and, accordingly, budget revenues will increase. Moreover, there is a possibility for attracting investors that could rent abandoned state property and develop it further. For the SMEs Prozorro.Sale provides easy and cheap access to the assets, property and resources to start or replenish their business. For such streams as Small Privatization or Property Disposal the average auction exercise price approximates USD 55 - 75k, which is a well affordable investment for this type of enterprise. Marketplaces have the opportunity to launch new business directions providing access to a variety of auctions. For foreign investors the Ukrainian market for property and land lease is open, that gives Ukraine investment infusion.

Prozorro.Sale is the pioneering digital auction system that helps to generate state revenue through open and fair bidding. Prozorro.Sale was born in 2016 from partnership between various state institutions, and Transparency International Ukraine who initially administered the Central Database. Today the rights are fully transferred to the State Enterprise Prozorro.Sale created in 2018. Initiative that had started as a project exclusively backed by international donors with no state funding has evolved into a self-financing enterprise adhering to the best corporate governance practices. The state company that was built from scratch since 2016 has successfully generated more than 55 bln UAH (2,13 bln USD) to state and various municipal budgets over 57’000 successful auctions and reformed such markets as: state property management (privatization and lease - 20 468 successful auctions & USD 350 mln of revenue for the state and municipal budgets), insolvency (2 453 successful auctions & USD 460 mln of revenue), timber (9 321 successful auctions & USD 72.3 mln of revenue), land leasing (work in progress: 468 auctions already), state reserve, natural resource licensing (255 successful auctions & USD 88 mln of revenue) and management of the failed banks (13 648 successful auctions & USD 855.6 mln of revenue). More than 2’300 different state and local authorities are using the system. Prozorro.Sale received international recognition and took second place at the World Commerce & Contracting Award, the world's leading association of commercial contracts; in the Open Contracting Partnership Award for Open Contracting Impact for its significant contribution to creating open and competitive markets through open data (2020); has obtained Anti-corruption startup award from Citigroup and international award “The best anti-corruption startup in public administration” in the C5 Accelerate and USA Institute of Peace’ “The Shield in the Cloud Innovation Challenge”.

The big challenge has been garnering widespread political support. But the improvements delivered by the system have been so dramatic that they’ve changed the market’s expectations. Government employees have seen how their work has become more efficient, while time-consuming inquiries from prosecutors have become less frequent. Prozorro.Sale reformers have also been concerned that some entities are engaging in “open washing”, adopting the system to appear more transparent without making any substantive structural reforms. The Prozorro.Sale team has worked hard to lobby to change the often outdated and overly bureaucratic laws.

Prozorro.Sale is the world's most transparent auction system. After the auction all the data about the bidders and the signed contract is published in machine readable format and is easily accessible via api, business analytics module or websites. The auction can be observed in real time, the auction information is relevant and constantly updated. That has substantially increased trust in the auction results and allowed the state and local governments to do transactions. Prozorro.Sale is also proud to be marked as a “Global Public Service Team of the 2019 Year “Doing More for Less” from Apolitical.

The Prozorro.Sale auctions follow two types of auction design: an ascending English auction and a Dutch type. But the hybrid Dutch auction model in Prozorro.Sale system is a unique combination of existing auction elements that is not found elsewhere in the world. It is a product of great academic effort put together by DGF, Kyiv School of Economics and Prozorro.Sale team. The utilization of this model could be seriously considered within the ‘Vienna Initiative’ as a fast and transparent way to deal with the European Union’s non-performing loan problem.

What sets Prozorro.Sale apart from other government privatisation and asset sales systems is its tamper-proof, network design. More than 50 privately-owned and a couple of state-owned online platforms are affiliated with the system and link up to a central database hosted by the government. Thanks to its two-tier structure, Prozorro.Sale accumulates all objects to be sold and does not communicate with bidders or sellers. Such a configuration allows it to adhere to the “everyone sees everything” principle which allows to minimize the likelihood of fraud and quickly detect it and makes it impossible to monopolize or manipulate bidding.

As part of the dissemination of Prozorro.Sale experience, the team provided assistance to the State Agency of Azerbaijan in reforming the existing system of distribution of mineral resources through the introduction of an electronic trading system, which would allow conducting auctions for licenses for the extraction of mineral resources in accordance with the legislation of Azerbaijan. Now Moldova, which experienced a major banking crisis in 2014, is one of the countries adopting the Prozorro.Sale model to reform its public asset management. A “M-Sale” system is set to be launched by the National Bank of Moldova and the EBRD in 2020. Several knowledge sharing events have been organized with the Prozorro.Sale representatives, namely: Ukraine-Armenia exchange on e-auctions (2021); international exchange of experience “Digitalization of Public Auction Processes in Ukraine” within the framework of the SENECA.gov Brown Bag Lunch initiative (2021: the following countries were present: Armenia, Azerbaijan, Georgia, Ukraine, Kosovo, Germany, Montenegro); in addition Prozorro.Sale has been presented as a good practice during GIZ Future Forum 2021 “States, Societies & People in the Digital Age – Shaping a Global Transformation” which addressed the transformative impact of the digital transformation in the context of governance.

Several countries have shown interest in adopting the Prozorro.Sale technology. We’re talking to the European Union, CIS [Commonwealth of Independent States] countries, and the South Asians; mostly countries that have problems with trust and transparency. Factors for Prozorro.Sale transferability: - The solution is completely open-source. Electronic auctions help to sell the property in a fully transparent way; - The principles of Prozorro.Sale system allow to digitize and transform different markets; - This idea as well as the technical solution can be replicable internationally and provide benefits to many governments across the globe. Among the major take away / learning experiences from Prozorro.Sale reform are the following: Prozorro.Sale helps to boost competition and transparency to overcome monopoly and corruption at the same time providing high-quality services to create a comfortable and transparent environment for the change to come. Prozorro.Sale practice is an example of a forward-looking thinking and focus on the result. Security of Prozorro.Sale auctions: - Documentation on ALL auctions is stored in the system in the public domain. - No information security incidents during system operation. - Open source. - The auctions are available for online viewing. - Open data.

Prozorro.Sale e-platform was created within the cooperation among the Ministry of Economic Development and Trade of Ukraine, Transparency International Ukraine, the State Deposit Guarantee Fund, the National Bank of Ukraine and Ukrainian electronic platforms. The support by 12 donors and international partners made it possible to create the first Central Database of the Prozorro.Sale electronic trade system. TI Ukraine hosted development, administration and legal support of the e-auction system. In 2019 TI Ukraine transferred to the government two Centralized Databases of Prozorro.Sale system. Now SE Prozorro.Sale team includes more than 55 members.

Prozorro.Sale operates as a one-stop shop [develop legislation, lobby, execute and develop the code, repeat]: we both help to draft the rules and develop them into IT system. Starting from February 2020, Prozorro.Sale system is obligatory at the legislative level for state and municipal assets realization in Ukraine. There is a list of laws (more than 10) that stipulate SE Prozorro.Sale as administrator of the system for conducting electronic auctions. A fraction of each successful sale also goes to the SE Prozorro.Sale to cover the system’s maintenance and administrative costs (making it financially sustainable).

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The evaluation has been done by the Open Government Partnership, a global partnership that brings together government reformers and civil society leaders to create action plans that make governments more inclusive, responsive, and accountable. OGP’s Independent Reporting Mechanism (IRM) presented “Ukraine Transitional Results Report 2018–2020” with evaluation of Ukraine’s Action plan commitments, inter alia, Commitment 3: Ensure transparency of selling public assets.

For the purpose of the Transitional Results Report, the IRM used the “Did it Open Government?” (DIOG) indicator to highlight early results based on the changes to government practice in areas relevant to OGP values. Report focuses on outcomes from the implementation of commitments that had an ambitious or strong design (Among them - Prozorro.Sale) and had successful implementation with “major” or “outstanding” changes to government practice.

The DIOG indicator has been classified as “Outstanding”. The government completed the three milestones of this commitment through legislation and by mandating, by decree, the use of Prozorro.Sale. On Prozorro.Sale, public officials now publish online auction announcements, full sets of documents about sellers and lots, auction protocols and contracts, and auction organizer decisions. This constituted a step forward, because, previously, bidders would have to look at individual local council websites for auction information about the privatization or leasing of state-owned property and enterprises. The successful implementation of this commitment has provided outstanding early results from opening government processes on the sale and leasing of state property via Prozorro.Sale. The introduction of easily accessible and transparent auctions reduced the opportunity for uncompetitive tenders and corruption. Statistically, there has been a year-on-year increase in the number of bidders and, therefore, an increase in open competition. The selling of public assets and the leasing of publicly owned property via Prozorro.Sale have also improved the transparency of the sale and leasing process and increased final sale and leasing prices. The increased number of bidders is sustained and there is a diversity of auction winners.

Over the past year, by decisions of the Verkhovna Rada and the Cabinet of Ministers, SE Prozorro.Sale was determined to be the administrator of electronic auctions in many spheres of state and municipal property and land market: lease, insolvency, land lease, small privatization. Prozorro.Sale as a digital solution supported digital transformation within the partner institutions, among them: State Property Fund of Ukraine, Deposit Guarantee Fund of Ukraine, State Institution “Open Public Finance”, State Enterprise “Forestry Innovation and Analytical Center”, local governments, etc. SE Prozorro.Sale relates to the Ministry of economy of Ukraine and cooperates closely with other Ministries, such as the Ministry of digital transformation, Ministry of agrarian policy, as well as specialized parliamentary committees and the Cabinet Office. This allows for an improved legislative framework of public property realization through advocacy on national and municipal level. Ukraine’s innovative solution for shopping from the government transparently, efficiently and fairly, is helping to restore public trust and reinjecting much-needed funds into public coffers.

The “golden triangle” - i.e. the collaboration between the government, business and a trusted NGO partner of the government, the anti-corruption watchdog TI Ukraine, helped to ensure successful implementation of Prozorro.Sale. The ministerial leadership helped advance changes. Ukraine has used this “start-up” model with Prozorro.Sale to test several innovative reforms, giving the government more flexibility to test out innovative approaches without taking on the risk that they could be prosecuted for mismanagement of funds if the project failed. Monitoring and controls by government and civil society organizations (anti-corruption NGOs and journalist investigators as well as national and regional media) are important factors in sustaining the success of the overall sale and leasing processes in Ukraine: non-profits groups and media that monitor the sales readily name-and-shame any attempts at corrupting the auction process. International organizations and donors, who provided the venture capital for Prozorro.Sale launch and continuously support Prozorro.Sale development, play an important role in the initiative to succeed. Among them: EBRD, World Bank, GIZ, USAID, European Union, SIDA, UKAid, Western NIS Enterprise Fund, Embassy of the Netherlands and others.

1. Only competition and transparency can overcome monopoly and corruption. 2. High-quality services can create a comfortable and transparent environment for the change to come. 3. Future is innovation. 4. Multi-stakeholder cooperation is a must. 5. Strategic planning and forward-looking thinking are essential. 6. We were strictly consistent in our approaches and created a holistic regulatory framework that included integrated public offering tools for additional legal comfort in the risk disclosure segments. The most important element of our legal architecture has been the development and adoption of transparent e-auction rules by all market participants. 7. Learn to delegate trust from day one. 8. Any successful reform starts from political will and a corresponding mandate. 9. Quick victories must be forgotten if the goal is institutional transformations. The reality is much more complicated than what is written in books about various success stories. Get ready for a long marathon. 10. The key requirements for team members should be: real expertise, professionalism and flexibility. 11. Do not try to blindly borrow ideas and decisions made by other people in other countries in other settings. Always stay focused on the result, not the process.