25.01.2025
Investigations
Money laundering
Tenders
Corruption in blood: how the State Logistics Operator leaves Ukrainian defenders without clothes, food and fuel. Digest of the biggest failures of the Defense Ministry and the Ministry of Defense
Arsen Zhumadilov, who was elected by the Ministry of Defense of Ukraine to head the State Logistics Operator, said immediately after Maryna Bezrukova’s dismissal that he was ready to lead the Defense Procurement Agency “in a difficult time.”
Can these innovations really change the situation? It seems that the problems in the DOT are only getting worse, and corruption schemes are only growing. For example, we have repeatedly highlighted schemes where individual officials and companies that are supposed to provide the army with everything it needs abuse trust by supplying low-quality products, raising prices and sabotaging reforms.
Here are some vivid examples from recent tenders and procurements that demonstrate Zhumadilov’s helplessness.
Summer uniforms for the Armed Forces at an inflated price
The State Logistics Operator has purchased summer uniforms for the military for UAH 1.9 billion. However, the prices for the uniforms turned out to be significantly overpriced, and the competition among the bidders was fictitious.
Facts:
- The average cost of a set of uniforms in the ATO was UAH 1757, while the price for other customers was much lower – UAH 1482.
- In most lots, participants did not conduct real bidding, but simply divided the contracts with a 1% discount.
- Some companies, such as Top Guardian Form LLC, participated in the tenders without even submitting the necessary documents.
- Some of the companies that were awarded contracts had previously been involved in criminal proceedings and had ties to Russia, such as Textile-Contact LLC.
Unjustified overpayment for Arctic diesel
Another questionable tender held by DOT concerned the purchase of 19 thousand tons of Arctic diesel fuel worth almost UAH 860 million. This fuel is usually used in Arctic conditions at temperatures down to -35°C.
But there are a few problems:
- Arctic diesel is only needed at temperatures below -20°C. For our army, which is mostly in milder climates, this is an excessive overpayment.
- The delivery is to take place only on February 28, 2025, i.e. at the end of winter.
- The guaranteed shelf life of the product is 9 months, and after that date, the supplier is not responsible for quality.
- The difference between Arctic diesel and regular winter diesel is only UAH 1 per liter, which translates into UAH 19 million in terms of the procurement.
Why is this amount of money spent on a product that is not actually needed in Ukraine?
How DOT left 100,000 defenders without bulletproof vests
Perhaps the most disturbing fact is that the State Logistics Operator has actually blocked the supply of bulletproof vests needed by the army. This happened due to non-transparent schemes and manipulations in tenders.
Facts:
- The Ukrainian manufacturer TEMP-3000 offered bulletproof vests for UAH 27,000, which is significantly lower than the prices of competitors, which started at UAH 35,000.
- TEMP lowered its prices, but its production was accused of dumping and monopoly.
- As a result, the DOT started manipulating prices by announcing tenders for other prices and standards. At the same time, suppliers began offering bulletproof vests at much higher prices.
- During 2024, the DOT entered into three direct agreements for bulletproof vests, the cost of which was much higher, namely UAH 1.279 billion for 41,840 bulletproof vests.
As a result: Due to these manipulations, more than 100,000 Ukrainian defenders were left without armor protection at a critical time.
In addition, in December 2024, after the DOT failed to provide the army with the necessary bulletproof vests, a new tender was urgently announced amid criticism and scandals. However, instead of correcting its mistakes, the DOT allowed firms with dubious reputations or no experience in public procurement to participate in the tender. These are:
- KhZZIZ – a company that received orders for almost UAH 2 billion in a year, although in 2023 its public orders did not exceed UAH 150 million.
- UKRTAC.UA, a company involved in a smuggling scandal that received orders worth UAH 2 billion in 2024, compared to UAH 10 million in 2023.
But the real “surprise” was two new companies, NEXTGEN LTD and Fortress of Protection, which had no previous experience in public procurement.
In particular, NEXTGEN LTD is a company that was engaged in transportation until the summer of 2024, and its authorized capital was only UAH 500. “Fortress of Protection is a company that was founded in 2023 and was engaged in construction. On January 1, 2025, these companies took orders for more than UAH 3 billion.
After the press and domestic producers (including KhZPZIZ) raised a fuss, the DOT decided to cancel all recent procurements, including the procurement worth billions, but not the ones where these gaskets won. In its publication, the DOT tried to blame domestic producers, saying that their facilities could not cope with the volume of orders, and that the gaskets “did not have licenses from the Ministry of Internal Affairs.”
Thus, instead of supporting Ukrainian manufacturers of bulletproof vests, the DOT actually brought companies with no experience and problematic documents to the market and allowed them to take more than UAH 3 billion from the budget.
Monopoly procurement of footwear: is it possible to reduce prices?
Another tender that raises questions concerns the purchase of footwear for the army. This year, the State Defense Department conducted a procurement worth UAH 2.6 billion, and the bulk of the contracts were awarded to Talanlegprom LLC, which has been a monopoly supplier for several years.
Facts:
- The prices for winter boots for the army have decreased, but this was due to the “enlargement of lots”, which makes it difficult for small businesses to participate.
- The tenders were made in such a way that small companies could not compete for the contract, as there were requirements for experience in fulfilling similar contracts worth at least 30% of the purchase price.
Chinese hot water bottles for the Armed Forces: risky savings or negligence?
The DOT also signed a contract with MIK LLC for the supply of 300 thousand sets of chemical hot water bottles made in China, with a total value of UAH 9.45 million. This decision raised many questions about the safety of the products.
Why were there doubts? According to the technical requirements of the Ministry of Defense, the temperature of hot water bottles should not exceed 50°C. However, Chinese hot water bottles heat up to 65°C, which poses a serious threat to users, especially in extreme field conditions.
Despite the complaints and warnings, the DOT did not cancel the contract, citing the existence of a certificate of conformity, which casts doubt on the very certification of these goods. Ukrainian producers who offered products with better characteristics but at a higher price did not win the tender.
Food scams for the army: millions for low-quality products
In 2024, a new scale of corruption in the supply of food to the Armed Forces of Ukraine was revealed. Firms affiliated with officials of the State Defense Department organized schemes to misappropriate budget funds through fictitious tenders.
Facts of abuse:
- YUG PROD TORG LLC signed two contracts worth UAH 1.5 billion, including the supply of 333,340 daily field kits worth UAH 185.8 million.
- At the same time, half of these funds – UAH 92 million – have probably already been misappropriated by members of the criminal group, which increases the likelihood of receiving products of dubious quality.
The tender was planned in such a way that the winner was YUG PROD TORG. Given that previous attempts to purchase these sets failed due to poor product quality back in 2022, a serious question arises: why did this tender go through despite the obvious violations?
Millions for underwear that doesn’t warm: who will be held accountable for the failure?
In 2024, the army faced new problems due to low-quality winter gear. The Federation of Employers of Ukraine asked the DOT to check new batches of winter underwear for the military after the military found that the clothing did not meet standards and could be dangerous to use in cold conditions.
The Ministry of Defense spent more than UAH 60 million on these contracts in three tenders: Textile Innovations LLC (UAH 120 million), Comfort Trade LLC (UAH 115 million), and TechForm LLC (UAH 125 million).
The winter kits do not provide sufficient warmth and have a low level of water resistance. Nevertheless, even with numerous complaints, the tenders were successfully held, and the army received products that could harm the health of soldiers.
This is not the first time that suppliers of winter clothing for the army have violated quality standards. Last year, similar problems led to losses of tens of millions of hryvnias.
So how can public funds be spent on goods that do not meet safety standards in times of war, when every hryvnia counts? Will any of those who allowed this situation to happen be held accountable?
We are witnessing numerous cases of price gouging, non-transparent tender procedures and manipulations with the supply of vital goods for the army. All these issues require a detailed investigation and bringing those responsible to justice.
The worst part is that, given these schemes, the Ukrainian military may be left without the necessary equipment at a critical time. Will Zhumadilov, who is unable to put things in order in the DOT under his control, be able to improve the situation in the AOZ?
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