Defence Ministry procurement: conclusions by State Audit Office will delay victory – Minister

Oleksii Reznikov, the Minister of Defence of Ukraine, has referred to the conclusions of the State Audit Service (SAS) following its inspection of the Defence Ministry as "an audit that is delaying victory". 

Source: Reznikov has written about this in an article for Forbes Ukraine, commenting on the auditors' assertion that it is a violation of the law for private and state companies working with the Ministry of Defence to be making a profit.

Quote: "I – and I am sure the vast majority of Ukrainians – have only one priority: to bring victory over the enemy closer. Anything that brings victory closer is good, and anything that postpones it and increases its price is bad... But there are some people who have other priorities and criteria for decision-making. And it’s becoming very difficult to ignore that, and even more difficult to tolerate it. We currently have a situation in which the absurd conclusions of the State Audit Service have created huge problems for both the Ukrainian army and Ukrainian business," Reznikov wrote. 

The minister emphasised that dozens of Ukrainian businesses have withstood a year and a half of "the continuous horror of Moscow's invasion", have survived devastating shelling and got through an exhausting winter, only to be potentially defeated by the audit. 

Quote: "Someone came up with the ‘groundbreaking’ idea that the Defence Ministry’s Ukrainian suppliers – both state-owned and private – that supply the army do not have the right to make a profit. None at all. That’s only Ukrainian companies: for some reason, this ‘innovative’ approach doesn’t apply to foreign ones," noted the minister. 

Reznikov noted that "a conflict of laws has arisen" in which the Ministry of Defence and Ukrainian businesses have a number of backbone laws on entrepreneurship and a raft of secondary legislation, etc., on their side.

Quote: "But on the other side, there is a formal opportunity to find a loophole in one of the government's resolutions (No. 335) and to decide on that basis that Ukrainian businesses should work for no profit and pay back all the profit previously gained, at the same time as creating jobs, supporting our economy, and paying salaries and taxes here," the article says. 

According to Reznikov, the Defence Ministry has already challenged the State Audit Service’s position in court. 

Quote: "The situation does not require any amendments to legislation or complex measures. We have everything we need to act wisely and legally. This is purely about the approach to law enforcement. That is, you apply the law to create an opportunity, or vice versa – to create a problem. That’s all this is about," the minister said. 

"How can a Ukrainian business scale up production without profit? We want more Ukrainian weapons and guaranteed supplies of Ukrainian uniforms, don’t we? How can we ensure this without scaling up production and without profit? And why does no one question the right of foreigners to make a profit? Is this fair? Absolutely not!" he added. 

Reznikov also emphasised that one can always find a loophole in Ukrainian legislation that will endanger some important process. 

Quote: "I say this as a professional lawyer. When this concerns defence, it is dangerous. And it isn’t only defence. Today, Ukrainian businesses have been forbidden to make a profit, and tomorrow they will forbid the receipt of Western weapons and start filing claims about that. Now they are demanding their money back – tomorrow they’ll force us to give back the HIMARS and the Leopards. We can choke on formalism and stop. I’m not exaggerating," the defence minister declared. 

Reznikov remarked sarcastically that "for some reason, people who got lost somewhere in spring 2022 and then heroically defended our western border for a long time have been displaying an excessive thirst for mindless formalisation lately."

Quote: "If they are doing this in an attempt to ‘play catch-up’ and highlight their own importance for this country during a difficult time, then that’s wrong," he said.

Reminder: 

• The State Audit Service classified the report of the Ministry of Defence inspection but revealed new details of corruption. 
• Among other things, the inspection confirmed the fact that caused the biggest stir in the media, which is that the Ministry of Defence purchased eggs at UAH 17 [about 46 US cents] each. 
• At the same time, it later turned out that due to an error in government decree No. 335 dated 20 March 2022, the state actually prohibited businesses working under state contracts, in particular for the army, from making a profit. 
• This error was revealed after the State Audit Service (SAS) examined the Defence Ministry contracts, as a result of which violations of US$66.9 million worth of "damage caused to the state" were calculated.

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