“Tatyana Korotka has been a deputy business ombudsman since 2015 and has over 20 years of experience in governance and development of the public and private sectors. During the Great War, the Business Ombudsman is responsible for the work of a new direction on policy and recovery. The unit focuses on legal, political and engineering expertise to solve the problems of Ukraine’s post-war recovery. To be better”, — write on: ua.news
Tatyana Korotka has been a deputy business ombudsman since 2015 and has over 20 years of experience in governance and development of the public and private sectors. During the Great War, the Business Ombudsman is responsible for the work of a new direction on policy and recovery.
The unit focuses on legal, political and engineering expertise to solve the problems of Ukraine’s post-war recovery. Analytical work was conducted directly with business representatives and local authorities to better understand the situation and needs, as well as to promote integrity in the field of recovery.
What slows down reconstruction projects, what problems arise in energy defense construction projects, how reputational and legal mistakes of state bodies can create huge problems for the post-war reconstruction of Ukraine – read in the first part of Tetyana Korotka’s exclusive interview for UA.News.
Key issues in business appeals
According to statistics, the Business Ombudsman Council has the top three topics: tax issues, problems related to the work of law enforcement agencies and local authorities. Moreover, tax issues, as a rule, are more technical issues that, although they require a qualified approach and knowledge, they are solved more easily (and more often), because everything can be confirmed with facts, documents, and figures.
At the same time, a new trend related to reconstruction during the war is emerging. I will immediately note that everyone understands restoration projects differently. For some companies, it is when the “shahed” destroyed the premises, as recently happened in Lviv with an entire logistics complex, and it is necessary to rebuild it in the same way as before the damage. For others, it is participation in the reconstruction of critical infrastructure, water supply systems and other life support in populated areas. And for someone, replacing windows is also a restoration. So, there is no single concept of what constitutes “restoration.” Together with the team, we move in this area, so to speak, by touch.
Business problems in energy defense construction projects
We decided that it makes sense to systematically work in this direction after a company in a difficult situation approached us last year. After one of the first massive rocket attacks on critical infrastructure, in the summer of 2022, the government, the president and the heads of local military-civilian administrations appealed to the private sector to urgently install protective structures. In some places, procedures for purchasing services were carried out very quickly. Not all companies could participate in them in a qualified manner, because it was necessary to have experience, equipment, and resources. The government, in turn, promised to compensate for everything.
So, our applicant is a company that specializes in the construction of industrial facilities and was the market leader in its area before the war. The local administration turned to her for help. And so it happened that part of the energy facilities with which this company worked were nationalized while the reconstruction was ongoing. The applicant found himself in a situation where the new managers of the nationalized companies did not sign the acts for all the properly performed works. As a result, for the owners and managers of the business, the legal situation became a big problem due to the work for 12 million hryvnias that was not properly accepted. (partially signed documents), which may become an additional trigger for law enforcement agencies in the future. Our applicant found himself in a situation of legal vacuum: none of the stake holders takes responsibility to finally sign the acts.
This appeal became a starting point for us to pay attention to such questions. Because in order to speed up the procedures, the government at that time canceled the state examination. It was not even necessary to collect documents, because it took time. But in the future, companies found themselves in a situation where such “gaps” created risks of interaction with law enforcement agencies (we do not take cases of possible abuse – these are not our clients). First of all, we pay attention to large-scale, expensive projects. Because the political situation may change, and companies will still have a problem.
We have been working with this issue for a year. A special critical infrastructure system report was issued, which also identified other issues that may arise in such situations. Some of these issues have begun to be resolved.
Tatiana Korotka, deputy business ombudsman
However, the applicant company I mentioned does not have any legal protection mechanism. Previously, we submitted proposals to the Ministry of Energy to solve this case in a legal way, but to no avail. Perhaps the Ministry of Justice will help us and we will create, for example, a commission to collectively accept (or reject) the completed restoration work. Otherwise, our applicant company “hangs in the air” – and it is not the only business with such problems.
Legal vacuum with legal succession of debts
Other questions also arise. We were approached by a foreign company that, for an international loan, was developing a technical task for the Ministry of Internal Affairs for the purchase of “System-112”, how it should be developed. The foreign consulting company performed its part of the work, but did not receive the corresponding payment. It is an extremely large sum of millions. The funds did not arrive due to the fact that during the development of “System-112” it was transferred to another department, and then to another one, and the other department did not become the legal successor for the debts.
A situation of legal vacuum has arisen again: the department is responsible for the “System”, but is not responsible for the debts. Of course, this created tension. After all, the government of the applicant’s country of origin, which provided these loan funds, helps Ukraine. And the company did its job. At the same time, this company may not have collected all the necessary documents 100% either, but in part of the Ukrainian and not the Western bureaucracy. Because from the point of view of the Western bureaucracy, they were all right (we analyzed these documents). And the ambassador representing the country of origin of this business referred the company to our Business Ombudsman Council.
We conducted an investigation and realized that there is a “white spot” for such cases in Ukraine. Because there is a statute of limitations, when it is impossible to restore the company’s payables even through court. And what to do in such situations? After all, it undermines the confidence of companies that could be involved in reconstruction.
Tatiana Korotka, deputy business ombudsman
The state should prepare for large-scale reconstruction
We have several more cases that can be attributed to the field of reconstruction during the war in a direct or broader sense. Currently, we have 11 such cases in operation, all of them are quite expensive. Theirs total cost over UAH 2 billion. For comparison, over 14,000 cases worth UAH 24 billion passed through the Business Ombudsman Council over 10 years. By comparing the scale, you can understand what to expect next.
When a really big post-war reconstruction begins, and the country will need not only financial, but also engineering, innovative, and technological help, private companies, having a negative experience, will not be interested in such projects.
In addition, in case of mistakes by government authorities at all levels, we will have huge reputational and legal problems. All of this will have political implications for how we move forward. These issues need to be dealt with.
Tatiana Korotka, deputy business ombudsman
How to solve problem cases at the state level
For companies that are already in trouble, solutions need to be found. And this, most likely, will require some non-standard political approach. Perhaps this will be a decision of the National Security and Defense Council, based on which they will act in relation to specific cases and companies.
Regarding the systematicity of the solution. It is in our report that we make suggestions for ways to address the problems of wartime recovery. We do not write specific laws or clauses to be introduced. Our task is to show the way and to ensure that it is followed. In general, there are different directions: somewhere – laws, and somewhere – regulatory acts.
For example, one of our recommendations right now is for recovery procurement. We welcome the fact that the Recovery Agency, with whom we have signed a memorandum, has created a Prozorro-based Centralized Purchasing Organization for recovery-related projects. We welcome such a decision, but we see that there are “bottlenecks” that need to be addressed in the concept itself.
Tatiana Korotka, deputy business ombudsman
For example, in relation to corporate governance. It is planned that the organization will meet OECD corporate governance standards, but the head has already been appointed. It is clear that they are in a hurry and are only piloting this project. But for the future, in order not to touch the basements of mistrust, it would be good to do everything right at once.
Or preparation of complex cases. For example, we prepared a political document “Policy Paper” — an analytical note with the main streamlines of this direction. We are discussing this document and plan to present it in November. For now, our team is trying to understand if there is any feedback from the market. Because it is the market that will use this document. After all, we do not participate in purchases, but only observe the processes from above. On the other hand, companies that have already applied or are interested in procurement know what nuances to pay attention to. We will discuss them all and only after that present the “Policy Paper” so as not to question the idea itself in advance.
It is worth emphasizing that the Recovery Agency is open to cooperation and listens to our experience. Even if we see some flaws in the system and point them out, I am sure that the Agency will work on it. This is very important, because not all bodies respond to recommendations in the same way. The recovery agency shows openness and interest in making sure things go right. They understand that if at least one case is publicly scandalous, it will undermine confidence in all subsequent processes.
What slows down recovery projects
One of the reasons why companies do not want to participate in state public projects is related to a certain inconsistency. In the Ukrainian market, there is a state methodology for setting construction wages, which is the basis for estimates submitted to public tenders. Although it was adopted not so long ago before the war, it does not correspond to today. According to this method, the base salary level of a worker of a certain category at the construction site is calculated. Moreover, this level of basic salary differs in different regions. And the calculation of the estimated salary of other employees is based on this indicator.
However, for the money calculated according to the formula, it is now impossible to find employees. In other words, the regulatory level of salaries does not correspond to the market situation. In addition, there are different risks in different regions, they cannot be taken into account in the same way (construction in the Kharkiv region and in the Chernivtsi region have different levels of risks). Therefore, companies that have dared to participate in such tenders are forced, indicating in the estimate documents, to find ways, due to the increase in the cost of materials or services, to pay the appropriate wages. But this is not transparent and has corresponding legal consequences for this business.
Of course, this is also known to law enforcement officers who work with the business of this industry. Therefore, any company can become the focus of their investigation. On the other hand, if you have legal, normal wages, which are quite high in construction (and sometimes comparable to the European level), then this can be an incentive for people to return from abroad.
That is, the inconsistency of the method of setting salaries creates distortions in the market, does not encourage not only national companies, but also international business to participate in reconstruction projects. We consistently raise this issue at the level of Prime Ministers of Ukraine. To our credit, they are always on our side with appropriate management decisions. We are currently working on this issue with the Ministry. There are ideas to abolish regulation in general, but business is against it. The lack of regulation for public projects will create even more risks of pressure from law enforcement.
Tatiana Korotka, deputy business ombudsman
This is a “bottleneck” in the involvement of honest companies in the implementation of restoration projects, and this problem must be solved. Because all restoration, no matter how we understand it, is connected with construction.
We have specific cases that we used in our argument. I will cite one of them. It seems that there was a certain procurement in KMDA, and the companies sent a written request to set normal wages, otherwise they will not participate in the tender. It is already a fact — the business itself is interested in changes.
We cooperate with the Confederation of Builders of Ukraine (KBU). They conducted an anonymous survey of companies in which their respondents confirmed that transparent pay is a problem. And we cannot wave it away. Because this is a bottleneck for further large-scale reconstruction.
Let me remind you about the next Ukraine Recovery Conference, which is planned in Poland. As far as I understand, the government is already actively developing projects and documentation that they want to present at this high-level international platform to attract interested companies, state support institutions, export and credit agencies.
And what will these foreign companies face when they start implementing these projects here? Yes, they will bring key personnel, but our people will work on the construction site or lay pipes: Ukrainians or, perhaps, migrants.
This is also a question. The country needs to think about softening the migration policy, prepare society for what in People from abroad will come to Ukraine. After all, we will have an attractive country for life and development. And I believe that we will be part of and within the borders of the European Union.
Read also:
How digital services update Ukrainian sports: explains the Deputy Minister of Youth and Sports Vitaly Lavrov