Participation in Public Tenders as a High-Risk Zone for Business

Ukraine’s public procurement system was formally designed as a mechanism for transparent competition, efficient use of public funds, and equal access to state contracts. In recent years, however, a different trend has become increasingly visible: tender procedures are less and less likely to end merely with the signing of a contract or an audit review, and increasingly become the beginning of a much more complex process involving investigators, experts, anti-corruption bodies, and criminal proceedings.

The issue is not simply that public procurement remains a traditionally high-risk area for corruption concerns. A far more significant problem is emerging: in current legal practice, the line between an unsuccessful business decision, a procedural violation, and a criminal offense is becoming increasingly blurred. This is particularly evident during wartime, when any operation involving public funds falls under heightened scrutiny not only from Ukrainian authorities but also from international partners.

At a theoretical level, the legal framework appears straightforward. The Law of Ukraine “On Public Procurement” establishes participation rules, documentation requirements, and tender procedures. Violations of these rules carry administrative liability. For example, Article 164-14 of the Code of Ukraine on Administrative Offenses provides sanctions for procurement-related violations, including procedural non-compliance, unlawful decisions, or failures in disclosure obligations.

The practical difficulty, however, lies in the fact that not every procurement dispute ends with an administrative fine.

One of the most common scenarios follows a familiar pattern. During a tender process, a company confirms that it has personnel, equipment, technical capabilities, or prior experience in performing similar contracts. Later, an audit or inspection identifies discrepancies between the actual circumstances and the submitted documentation. At first glance, such situations may appear to be mere formal errors or documentation deficiencies. However, if investigators conclude that inaccurate information was knowingly submitted, the legal consequences may become significantly more serious.

In such cases, law enforcement practice frequently relies on Article 366 of the Criminal Code of Ukraine concerning official forgery. If the use of such documentation resulted in obtaining public funds, Article 191 of the Criminal Code may also come into play, addressing misappropriation, embezzlement, or unlawful acquisition of property through abuse of official authority.

Over the past several years, Article 191 has become one of the most commonly applied provisions in cases involving public procurement.

Cases involving inflated pricing of goods or services are particularly illustrative. From a purely commercial perspective, businesses are entitled to determine prices independently while considering logistics costs, shortages, currency fluctuations, supply risks, and wartime conditions. Once an investigation begins, however, the analytical framework often changes dramatically.

Investigators typically obtain an expert report establishing an estimated “market price” for a product or service. The difference between the contractual price and the expert assessment may subsequently be interpreted as potential losses inflicted upon the state.

At that point, an ordinary commercial dispute can quickly evolve into a criminal law matter.

Practice shows that law enforcement agencies often follow a similar model: inflated pricing becomes grounds for suspicion under Article 191, while supporting contract documentation — including completion certificates, reports, and cost estimates — is additionally examined through the lens of Article 366 concerning official forgery.

This approach is particularly common in construction-related procurement. If experts identify discrepancies in work volumes or material specifications, authorities frequently combine allegations of unlawful appropriation of budget funds with claims of document falsification.

Another category of risk deserves particular attention: subcontractors and counterparties.

In many businesses, due diligence regarding partners is still viewed largely as a formality. Recent practice, however, suggests a very different reality. If a chain of contractors includes a fictitious entity or a company displaying characteristics of a transit or shell structure, law enforcement scrutiny quickly extends beyond procurement issues themselves.

In such circumstances, Article 209 of the Criminal Code of Ukraine regarding money laundering frequently appears in proceedings. Where fictitious transactions or tax manipulation schemes are involved, Article 212 concerning tax evasion may also become relevant.

Another issue frequently underestimated by businesses concerns anti-competitive concerted practices.

For many years, it was commonly assumed that proving collusion between bidders was extremely difficult. However, the practice of the Antimonopoly Committee of Ukraine has substantially changed that perception. Today, indirect indicators may be sufficient: identical IP addresses, similarities in submitted documentation, shared technical infrastructure, or synchronized bidding behavior.

The consequences can be significantly more severe than businesses initially expect. Beyond substantial financial penalties, companies risk being prohibited from participating in future public procurement procedures — a sanction that, for businesses heavily dependent on tenders, may effectively amount to termination of operations.

As a result, market participants increasingly face an uncomfortable reality. A business decision that appeared commercially reasonable and standard at the time a contract was signed may, a year or two later, be viewed by investigators, experts, or prosecutors through an entirely different legal framework.

For that reason, legal security in procurement has long ceased to be merely a matter of properly drafted documentation. Under current practice, it is increasingly becoming a system of preventive legal protection, where due diligence of counterparties, document audits, pricing justifications, and internal compliance procedures serve not as elements of corporate bureaucracy, but as mechanisms designed to explain the rationale behind each business decision long before law enforcement authorities begin asking questions.