In recent years, numerous school and hospital renovations have been carried out using European Investment Bank (EIB) funds, amounting to billions of hryvnias. To ensure these renovations are completed, a safeguard mechanism is in place – contract guarantees. Contractors must deposit 5% of the contract amount in a bank and can only retrieve it upon full completion of the project.
For example, in 2024, procurement was announced for UAH 97 million for the renovation of the “Ivushka” kindergarten in Pidgorodne (Dnipropetrovsk region). However, the contractor barely did any work over the course of a year, leading to contract termination. As a result, Pidgorodne recovered nearly UAH 5 million through the contract guarantee. This is a positive case, where we provided some assistance.
However, negative examples are more common. The Troitskyi Village Council provides a clear example of how such schemes operate:
1. In 2019, a procurement was announced for the renovation of the Privolchanska School using EIB funds, amounting to UAH 27 million. All work was to be completed within a year, and a contract guarantee was established for the same period.
However, the contractor failed to meet the deadline, and while the contract was extended, the guarantee was not.
2. In 2021, an additional procurement worth UAH 2 million was awarded to the same contractor to ensure project completion.
3. By 2022, the renovation was still unfinished, and the Troitske Village Council terminated the contract.
However, the contractor did not face financial penalties since the Council had failed to extend the contract guarantee. Meanwhile, law enforcement agencies initiated a case concerning inflated prices.
4. In 2023, another procurement was issued for UAH 7 million. Upon analyzing the pricing, we found that many items were overvalued by 80% compared to market prices. Based on our findings, law enforcement began investigating the price inflation.
Due to the actions of Troitskyi Village Council Head Oleg Chuprina and procurement officer Iryna Grechka, additional procurements worth UAH 9 million were required, and there is a high likelihood of significant price inflation.
All of this has been funded by EIB credit, which the state will eventually have to repay.
Overpricing is a systemic issue within the Troitske Village Council.
For instance, in a 2024 contract for insulating the Pysarevska Gymnasium using EIB funds, we also identified inflated costs. A partial verification of 18 items showed that while their total market price was UAH 2.8 million, the documented cost was UAH 5.9 million — a 110% inflation.
For example, 150mm mineral wool insulation was purchased at UAH 541/m², whereas the market price is UAH 182/m², nearly three times lower. Similar price inflations were found for metal roofing, beams, and insulation materials, with markups close to 200%.
Most government bodies remain indifferent to these inflated prices.
The village Council silently approves completion reports with grossly overestimated costs, the Ministry of Community and Territorial Development ignores the issue, and the State Audit Service neither detects nor investigates these violations.
Only the police and NABU have made any attempt to document them.
However, when the European Commission and the European Investment Bank eventually scrutinize how their funds have been spent, they will likely be shocked by the inaction of most government institutions.
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This publication was produced with the financial support of the European Union and National Endowment for Democracy (NED). Its contents are the sole responsibility of Civil Control Platform and do not necessarily reflect the views of the European Union and NED.