Ukraine's Defense Ministry procurement now under new system
This includes the Defense Procurement Agency, which buys weapons, and the State Logistics Operator, whose specialists handle food, clothing, and other necessities for the Armed Forces. Both agencies are young, formed since the full-scale invasion – not least thanks to the efforts of the Public Anti-Corruption Council at the Ministry of Defense of Ukraine. Impartial oversight is essential for the effective work of these agencies (i.e., transparent and accountable spending of public money). This is both a requirement of our current reality and another step towards reforming the security and defense sector to NATO standards.
The supervisory boards of both agencies will include both state representatives and independent members. Independent members will be selected from candidates from Ukraine, USA, UK, Poland, Germany, France, Denmark, Lithuania, Norway, Turkey, and the Czech Republic. This is also important, as the agencies' work should be monitored by representatives of NATO member countries with experience in defense procurement. These supervisory boards will have quite real levers of influence.
For instance, the Defense Procurement Agency's supervisory board will be able to approve strategies and financial plans, control the effectiveness of the director's work, and form a pool of deputy directors. Now we just have to wait for the competition and look at the profiles of those chosen to understand their qualifications and competencies.
NAKO was the first NGO to start promoting the implementation of corporate governance standards in the defense sector. We've been involved in Ukroboronprom [an association of multi-product enterprises in various sectors of the defense industry of Ukraine – ed.] reform since 2017. We demanded the creation of a supervisory board for the concern and even refused to cooperate for a short time in 2018 when President Poroshenko was slowing down the processes of its creation.
Even after achieving our goal and finally getting a board with one foreigner – American Anthony Tether, a former Pentagon official – we insisted on changing the rules of the board's operation. After all, it remained largely a formality between a real corporate governance body with proper access to information and decision-making levers. For example, the President of Ukraine continued to appoint and control the Director General of Ukroboronprom.
Besides the supervisory board, another corporate governance standard that we managed to advance in the defense industry was conducting an annual independent audit of Ukroboronprom according to international standards. Not surprisingly, the results of the first audit were negative. However, since then, the audit has been repeated annually, gradually bringing financial reporting to a new level.
Now, albeit belatedly, the main thing is that representatives of civil society are really involved in all these processes.
