Kubrakov’s Final Accord: the DREAMy Project “On the Principles of Reconstruction” – the Controversial “Reform” 5655
Shortly after the resignation of Deputy Prime Minister Oleksandr Kubrakov, the Ministry of Infrastructure released the draft law “On the Principles of Ukraine’s Reconstruction.” The document is attributed to the “working group on developing legislative initiatives for Ukraine’s reconstruction.” However, this draft law essentially continues the policy of the old ministry team, which throughout its tenure lobbied for the controversial urban planning reform (5655) that benefits developers. Bypassing the president, who has not signed this initiative for two years, the lobbyists decided to go through the Cabinet of Ministers. This resulted in a government decree that is a clone of law 5655, which they attempted to pass hastily and which received negative feedback from the National Agency on Corruption Prevention (NACP). Now, the new draft law “On the Principles of Reconstruction…” is another attempt by the same lobbyists, just through a different approach.
A separate role in the draft law is given to the Dream electronic system. The authors present this system as a “single window” for reconstruction projects that “will allow tracking of manipulations.” But is that really the case?
Fixed and market prices in construction estimates do not prevent corruption. To ensure anti-corruption activists don’t notice anything, they will inflate not the prices but the quantity of materials. This makes detecting corruption more difficult, as it requires the construction project itself. And where can one find it?
According to the law, it should be public in the Unified State Electronic System in the construction sector. But in four years (!) not a single document has been published. The government believes that this requires the approval of the copyright holder. The law does not stipulate this. The draft law “On the Principles of Ukraine’s Reconstruction” proposes to legalize this arbitrariness – a clear echo of 5655.
The project can also include unnecessary expenses by inflating the extent of the damage. For example, a school might need 15% restoration, but the documents could state it is half-destroyed.
Photo illustrative. Ukrinform
They will profit from the “difference in damage” rather than the price of materials. No Dream system will help here. The same situation applies to road repairs, where more rebar can be laid, and the piles can be longer than required by standards. The price might be market-based, but what will the actual materials and their quantities be? This is classic: “marble and granite in the project – sticks and Styrofoam in reality.”
Dream will only detect corruption that is not hidden, although in the media, this “single window” is positioned as an effective tool meant to strengthen the new project of the relevant ministry.
Screenshot from BBC News featuring the position of Dream’s Head, Viktor Nestulia (in Ukrainian)
To detect what was attempted to be hidden, we need not a “dreamy” system, but a real system of construction control through regular on-site inspections.
In construction, checking significant types of work is possible only when the so-called hidden works inside the structure are still open. Major corruption cannot be seen in an electronic system. Here’s why.
“Officials decided to steal on Prozorro with inflated prices and ensured the win of ‘their’ contractor” is a very simplified view of the schemes. For this to happen, two other public procurements must take place, with the winners agreeing to further budget misappropriation.
First, there must be tenders for the project development, where a designer who will include inflated prices must win. Then there will be tenders for project expertise, where an expert organization that will overlook the inflated prices must win. But that’s not all.
To launch the scheme, the State Inspectorate for Architecture and Urban Planning (DIAM), which supposedly has zero tolerance for corruption, must “miss” the violations.
DIAM is responsible for major construction projects and has the right to check compliance with state building norms, including the correctness of cost estimates, when issuing permits. Currently, some small construction projects fall under local self-government control as part of decentralization, but according to the Ministry of Recovery’s “experiment,” everything built with public funds should be controlled only by DIAM.
Price inflation schemes have been and still are present. If this happens, it means that there has been cooperation for years between state construction customers, designers, experts, and DIAM. Otherwise, this would not occur.
In fact, other schemes are very similar. They only add control by author’s and technical supervision during construction. And state architectural control is carried out by the same DIAM. Author’s supervision is linked to the designer already involved in the previous scheme. Working with technical supervision is no different from working with other construction participants. Thus, whether it’s price inflation for materials or manipulation of the quantity and quality of materials during construction, these schemes are equally complex. And Dream will not see anything besides price inflation for materials.
Reconstruction also includes restoring destroyed housing. Ukrainians who lost their homes will receive certificates for apartments. Dream, as a “single window,” will not see housing construction under these certificates. There will be no financial control here at all, creating an opportunity for another scheme.
Destroyed housing in Chernihiv. Photo by Suspilne
If extra work and materials are included in a project within Dream (and the system does not detect them), they can then be used for housing construction under certificates. This might be a neighboring construction site. Essentially, the resources allocated in the Dream project could also be used to build housing that private developers will sell for certificates. Someone will profit from this, and the “single window that allows tracking of manipulations” will not see it.
What is the situation with control at different stages of construction, and what are the “reformers” changing?
The rules for reconstruction should have been developed by the profile ministry, the Agency for Development, and the profile committee on state organization, local self-government, and regional development, chaired by the head of “Servants of the People,” Olena Shuliak, the author of the urban planning “reform.”
In winter, an event called “Dialogue with the Market” took place, where the leadership of the State Agency for Reconstruction and Shuliak met with developers. The main topic was services for project design, project expertise, and technical inspection.
Both Shuliak and the head of the Agency, Mustafa Nayyem, along with his deputies, emphasized that the quality of project documentation is the biggest problem in the reconstruction process. As mentioned earlier, project documentation can be a source of schemes.
Leadership of the Reconstruction Agency and Member of Parliament Shuliak. Photo by Pragmatika.Media.
Is it possible to quickly minimize these risks?
The State Inspectorate has the right to check submitted documents for compliance with legal requirements when issuing construction permits (Law “On the Regulation of Urban Development Activities”). But there is a nuance: this is only a right (!), not an obligation (as it falls under discretionary powers).
The government should have detailed by decree what exactly and how the State Inspectorate is obliged to check before issuing a permit. Preparing such a draft government decree is the function of… the Ministry of Infrastructure, which was headed by… Kubrakov. Instead, he engaged in governmental “experiments.”
Corruption risks were not eliminated and left to the discretion of ordinary inspectors. It would have been sufficient to establish an obligation in the permit issuance procedure to check compliance with regulations during project development and its examination. There will be no “extra pressure on business during wartime” – it is enough to state that such a check is mandatory only for construction funded by public money.
Shuliak and Kubrakov constantly assure citizens of the professionalism of the State Inspectorate employees. Why have they not been obliged to conduct inspections for several years?
By the way, the need for changes is also mentioned in the Anti-Corruption Strategy, which provides for mandatory checks of the documentation submitted for permits and accountability for improper inspection by officials. But the main thing here is the fundamental change in the control system by law enforcement at this stage of construction in the reconstruction process.
Currently, State Inspectorate inspectors can turn a blind eye to violations embedded in the project. If they are not obliged to control it, there is no punishment for criminal negligence. If it were an obligation, it would fall under the jurisdiction of NABU, as it concerns a very high-value crime subject. This would significantly reduce corruption risks at the initial stage of construction.
However, instead of strengthening control at the legislative level, the authorities plan its complete abolition. The “reformers” devised that permits should be issued “automatically” based on the existence of a project and a positive expert conclusion. At the same time, the level of automation of checks and blocking in case of violations is even lower than it currently is. Issues currently checked by the State Inspectorate, according to the urban planning “reform,” are to be checked by expert organizations, which raise several concerns.
The First Deputy Head of the Agency, Andriy Ivko, presented a unified methodology for conducting tenders for the reconstruction of civilian objects, which is part of a large project to standardize all regional service procurements.
It includes correct measures: competitive procedures, publication of all available and important information in the tender, a published contract, and all appendices, including the contract price. To prevent “tailoring” for specific contractors, the Agency sets the proposal evaluation criterion at 100% price without non-price criteria.
It is easy to convince Western partners of the institution’s anti-corruption efforts by demonstrating transparency in public procurement. But let’s look at how these tenders are conducted.
Let’s take the latest significant design procurement. In Prozorro, this is the development of project documentation for the palace of culture in Borodyanka.
Here, the contract and the design assignment provide for two in one: both project development and its examination, where the customer will be the designer.
Task for Project Development, Including Ordering Expertise by the Project Organization
According to the law, such a combination of design and expertise in a single procurement is permitted. However, if we aim for corruption-free reconstruction, and especially under the principle of “better than before,” granting the designer the right to order the expertise represents a significant corruption risk.
Unlike public construction clients, designers are not required to conduct public procurement to select an expert organization. This isn’t just about saving budget funds but about manually choosing an organization that will guarantee a positive project conclusion regardless of the number of violations.
Thus, the Reconstruction Agency is destroying one of the control mechanisms.
However, the main thing in the tender mechanism for preventing corruption is different: theoretically, it is impossible to prevent corruption if the criterion for winning the procurement of design, expertise, author’s supervision, and technical supervision is the lowest price.
Building an object is a holistic process composed of many components. Embezzlement occurs not in the procurement of the aforementioned works and services but through the results of their execution.
When it comes to preventing corruption, the first thing to consider is this: a dishonest designer, expert, or engineer will strive to win the tender not for the budget payment but for the opportunity to receive a bribe for their work in creating a corruption scheme to embezzle funds directly in construction. They can always underbid to surpass honest competitors who don’t count on bribes and cannot lower the price below cost.
Without changing public procurement legislation, it is impossible to ensure corruption-free reconstruction. Saving a couple of percentage points of the total construction estimate on design, expertise, and subsequent supervision creates the prerequisites for organizing safe and reliable schemes for embezzling tens of percent of public funds.
It is worth reminding that in the Association Agreement with the EU, Ukraine committed to implementing a directive of the European Parliament and the Council on public procurement, which sets separate requirements, particularly for architectural services. It mandates conducting an architectural competition procedure to select the best project if the construction cost exceeds 230 million UAH (at the current exchange rate). The contract for design should be awarded not to the architect willing to do it cheapest but to the author of the best and most economically advantageous project.
An honest contractor is the key to the absence of schemes. However, fair tenders will help only when planning to embezzle on inflated material costs. If embezzlement is on unnecessary work or material quality, their contractors will underbid and win. Lack of proper control in construction is also a path to schemes.
If you remove discriminatory tender requirements but overlook deficiencies in design and control, it will only change the main corruption schemes. Poor-quality construction will replace the high price. Reconstruction will be cheaper, but what should last 100 years might start to fall apart in 10-20 years.
In construction, the client and contractor are responsible for the quality of everything. Everything must comply with norms, controlled by author’s and technical supervision. And all these subjects are controlled by the State Architectural and Construction Control.
The role of the client is one of the key ones. When the government builds an object, and budget funds are embezzled, officials cannot throw up their hands. The sums here are colossal, and NABU should be involved.
Actually, the duties of the client in the law need to be detailed. But instead, the draft law “On the Principles of Reconstruction” completely removes even such duties as ensuring construction according to the project and with quality materials. The “reformers” have left only the duty to hire a licensed contractor and certified author’s and technical supervision.
Donors will be told that corruption has been defeated. Officials are not to blame. It’s all about “bad private contractors.” And NABU will be out of the loop for reconstruction control.
Author’s supervision is related to design, which is actively involved in corruption schemes. Therefore, in such cases, it will not really control. The Ministry of Infrastructure’s project proposes that this supervision can be appointed not by the project author but by the owner of the property rights to the project documentation.
This will lead to a situation where neither the project author nor the architect overseeing the author’s supervision will bear responsibility. The first one embedded corruption opportunities in the documentation, but they will not be related to subsequent construction violations. And the second one is only obliged to control the execution of the finished project and is not responsible for the project’s mistakes.
The existing technical supervision system also cannot solve the problem, as mentioned above.
With state architectural and construction control, the situation is even worse.
According to the criteria set by the Cabinet of Ministers, even the largest construction projects are classified as medium-risk, and planned inspections on them cannot be scheduled more often than once every three years. That is, the construction may be completed faster. Therefore, there should be random unplanned inspections.
But all inspections ceased immediately after the start of the “Great Construction” in 2020.
The Shmyhal government prohibited inspections “to combat corruption,” and when the State Inspection was established, checks were banned during the war. The Accounting Chamber has highlighted this issue.
Moratoriums on inspections were introduced earlier (for instance, in 2014), but at that time, only private construction inspections were banned, while the control over state and municipal construction projects was actually strengthened.
Kubraky’s legislative initiative responds to this situation but in a peculiar way. The “experiment” proposes to weaken the remaining controls. Currently, the public can record violations at construction sites, and based on their reports, the State Inspection has grounds for an unscheduled inspection. This provision is now at risk of being removed.
When issuing a certificate of readiness for operation, the State Inspection certifies that the object meets the project requirements. However, there is no obligation to verify this compliance. This issue of discretionary powers was supposed to be addressed by the government but it hasn’t happened.
The government has only provided for the control of document availability according to a checklist. There is no mention of quality control of the construction. This is analogous to a pre-digital version of Dream, where you can browse documents and look at pictures but cannot verify if the construction actually matches the documents.
It wasn’t always this way. Inspectors used to have the right to thoroughly check everything until the launch of the “Great Construction” project.
The “Great Construction” project, like reconstruction, involves large sums of money. Hence, proper control and NABU’s jurisdiction are of no interest to the authorities here.
To understand the government’s intentions for reconstruction, it’s equally important to note what is missing in the reconstruction law. Digitizing the recovery process is impossible without digitizing the construction itself, which is based on BIM technology.
According to the EU BIM Task Group, using BIM design (BIM – Building Information Modeling technology) leads to savings of 10 to 20% in construction costs, ensuring not only savings but also significant acceleration of construction through automation in organization. In some European countries, BIM is already mandatory for public construction projects, and others are gradually adopting it.
In our context, this would provide an additional anti-corruption effect because, firstly, it allows for the automation of project expertise processes, eliminating current risks of project manipulations. Secondly, it elevates construction control to a completely different level of transparency.
Some project organizations in Ukraine have long been using BIM because it is a requirement of Western private investors for monitoring their investments.
For us, the introduction of this technology remains a promise. The government approved the Concept for its implementation, and the corresponding project has been awaiting parliamentary consideration for several years. However, it has been put on hold by the committee led by Shuliak, who verbally supports digitalization.
Screenshot from the “Servant of the People” Party Website
Disappointing Conclusions
The legislative changes actively promoted by the Ministry of Infrastructure under the recently dismissed Vice Prime Minister are not about combating corruption in reconstruction but about restructuring corruption schemes into safer and more concealed forms, hidden from prying eyes. In this process, the Dream system is not playing the role of an anti-corruption dream but rather a mirage before the public and Western partners.
Specially for “Glavkom”
