CoST Beneficial Ownership Standards (UA0062)

• The Case for Open Contracting in Infrastructure (May 29, 2019)

Event: Introduction of the Construction Sector Transparency Initiative (CoST) international standards in order to ensure the accountability of procurement organisations and open access to information during publically funded construction work.; Implementation timeframe: 2017; Entities responsible: Ministry of Infrastructure, Ministry of Regional Development, Ministry of Economic Development, Ministry of Finance, Ukraine State Roadway Agency (Ukravtodor).; Partners: Transparency International Ukraine and Eidos Centre for Political Studies and Analysis non-governmental organisations, Advisory Steering Group of the Construction Sector Transparency Initiative (CoST), other civil society institutions and international organisations (by consent). Expected results: Ensuring the: Implementation of four pilot projects by the Construction Sector Transparency Initiative (CoST) regarding the disclosure of data on construction sites, major renovations and road infrastructure reconstruction, and the publication of reports on the data by a group of independent experts (first half of the year 2017). Adding of other construction sites using public funds to the standards for information disclosure of the Construction Sector Transparency Initiative (CoST) (March 2017). After the successful implementation of the four pilot projects of the Construction Sector Transparency Initiative (CoST), filing of proposals on the required amendments to regulations aimed at enhancing the efficient of use of public funds by applying the information disclosure standards of the Construction Sector Transparency Initiative (CoST) (second half of 2017). Approval of a mechanism to apply the standards of the Construction. Sector Transparency Initiative (CoST) at the level of by-laws in order to ensure transparency of the use of public funds during the construction of infrastructure and to improve the accountability of procurement organisations (December 2017).

6. Introduce the Construction Sector Transparency Initiative standards

Commitment 6. Introduce the Construction Sector Transparency Initiative standards

Commitment Text:

Introduction of the Construction Sector Transparency Initiative (CoST) international standards in order to ensure the accountability of procurement organizations and open access to information during publically funded construction work.

Expected results: Implementation of four pilot projects by the Construction Sector Transparency Initiative (CoST) regarding the disclosure of data on construction sites, major renovations and road infrastructure reconstruction, and the publication of reports on the data by a group of independent experts (first half of the year 2017). Adding of other construction sites using public funds to the standards for information disclosure of the Construction Sector Transparency Initiative (CoST) (March 2017). After the successful implementation of the four pilot projects of the Construction Sector Transparency Initiative (CoST), filing of proposals on the required amendments to regulations aimed at enhancing the efficient of use of public funds by applying the information disclosure standards of the Construction Sector Transparency Initiative (CoST) (second half of 2017). Approval of a mechanism to apply the standards of the Construction Sector Transparency Initiative (CoST) at the level of by-laws in order to ensure transparency of the use of public funds during the construction of infrastructure and to improve the accountability of procurement organizations (December 2017).

Responsible Institutions: Ministry of Infrastructure, Ministry of Regional Development, Ministry of Economic Development, Ministry of Finance, Ukraine State Roadway Agency (Ukravtodor).

Supporting Institutions: Transparency International Ukraine and Eidos Center for Political Studies and Analysis non-governmental organizations, Advisory Steering Group of the Construction Sector Transparency Initiative (CoST), other civil society institutions and international organizations (by consent).

Start date: December 2016..                                     End date: August 2018

Commitment Aim:

The commitment intends to introduce the Construction Sector Transparency Initiative (CoST) international standards. The commitment aims to open access to information about publicly funded construction work. It entails the implementation of four pilot projects by CoST standards and the publication of reports by independent experts. It would add CoST standards to other construction sites that use public funds. The commitment also requires the filing of proposals on the required amendments to regulations introducing CoST standards. In addition, the commitment involves approval of a mechanism to apply CoST standards at the level of government decrees.

Status

Midterm: Substantial

During the first year of the action plan, this commitment demonstrated substantial progress. Construction Sector Transparency Initiative (CoST) standards have been implemented in the four pilot infrastructure projects. [103] Independent experts wrote CoST reports on these pilot projects, and the government has made them available online. [104] In December 2016, the Ministry of Infrastructure planned for four additional pilot projects. [105] CoST Ukraine drafted recommendations to amend government regulations. [106] However, by the end of midterm, these bylaws had not been adopted. For more information, please see the 2016–2018 IRM midterm report. [107]

End of term: Complete

During the second year, the government completed implementation of the commitment. Construction Sectory Transparency Initiative (CoST) Ukraine launched an online portal. [108] The portal provides CoST standards information about projects of three state companies and three local authorities. The state companies are Kyiv road maintenance company Kyivavtodor, [109] nationwide road maintenance company Ukravtodor, [110] and electricity infrastructure maintenance company Ukrenergo. [111] The local authorities are Lviv Oblast State Administration, Sumy Oblast State Administration, and Ternopil Oblast State Administration. The portal discloses information about 3,331 construction projects worth over UAH 46 billion in public funds. The portal presents information in map and table formats. [112]

A CoST Ukraine representative noted an exemplary 93 percent disclosure rate by Ukrenergo. [113] However, a civil society expert from Transparency International Ukraine noted a low disclosure rate by Ukravtodor. [114] Relatedly, the CoST portal listed eight projects financed by international financial institutions (IFIs) during 2016–2018. [115] However, among them, the project Go Highway, financed by IFIs, was not listed. [116] The CoST Ukraine representative confirmed a lack of information about IFI-supported Ukravtodor projects but emphasized the transparency regarding the Ukravtodor projects that utilize public funds. [117]

In the legislative domain, on 20 December 2017 the Cabinet of Ministers issued decree #1100. [118] The decree introduced amendments to regulation #835 [119] on mandatory open datasets. It obligated Ukravtodor to publish data on construction, reconstruction, and the repair of public automobile roads of state significance (public roads of regional, national, and international scale) according to CoST standards. Consequently, CoST standards have been legally institutionalized. In addition, the government mandated the central government agency responsible for road construction policy at the state level to disclose extensive information on the use of public funds.

The government completed implementation of this commitment. The government implemented four planned pilot projects and four additional pilot projects. It published two expert reports, and it also filed and adopted legal amendments introducing CoST standards as mandatory for Ukravtodor.

Did It Open Government?

Access to Information: Marginal

The government introduced Construction Sector Transparency Initiative (CoST) transparency standards as mandatory for Ukravtodor and several other state companies. Local authorities proactively joined the initiative. These actions constituted a step forward in opening the government. However, stakeholders raised several concerns. In particular, despite the genuine political support from the minister of infrastructure and Ukravtodor’s proclaimed commitment to openness, the latter has gradually become more closed and provided contradictory and unverifiable data. [120] (Ukravtodor reports directly to the Cabinet of Ministers and therefore is accountable only to the Cabinet.) According to the representative of CoST Ukraine, despite government efforts and international financial institutions (IFIs) support, after 2016, Ukravtodor refused to provide access to documents about IFI-funded road construction and repair. [121] The CoST Ukraine representative concluded that UAH 2 billion of public funds taken as a loan by the Ukraine government from IFO are spent in a nontransparent way. [122] However, Ukravtodor is publishing the protocols of its Technical Council. [123] These disclosures provide technical, not financial, information.

Carried Forward?

To scale up the successful pilot cases, Construction Sector Transparency Initiative (CoST) Ukraine and other civil society groups should combine advocacy efforts. Together, they should work to convince the government to further introduce advanced CoST standards into Ukrainian legislation for all related national and local authorities. The government could introduce monitoring and assurance mechanisms to ensure the accuracy of the published information. Comprehensive reform of construction management and monitoring of infrastructure need to be introduced. This could be done both through legal acts and an integrated information technology product that can enable better tracking of infrastructure projects. The data on the CoST portal needs to be published in the format that allows easy cross checking with the data on public procurement and public spending available on ProZorro and E-data portals respectively.

[103] “The Interim Report on the Realization of the Action Plan for the Implementation of the Open Government Partnership Initiative in 2016–2018,” Civil Society and Authorities: Governmental Website, accessed 13 September 2017 (link no longer accessible as of 25 April 2018) http://civic.kmu.gov.ua/consult_mvc_kmu/uploads/attach-3467-910681586.doc.

[104] “Pilot Projects,” CoST Ukraine, https://costukraine.org/en/projects/.

[105] “The Interim Report on the Realization of the Action Plan for the Implementation of the Open Government Partnership Initiative in 2016–2018.”

[106] “CoST Recommendations,” CoST Ukraine, https://costukraine.org/projects/rekomendatsiyi-cost/.

[107] “Ukraine Mid-Term Report 2016–2018,” Open Government Partnership, https://www.opengovpartnership.org/documents/ukraine-mid-term-report-2016-2018-year-1/.

[108] “CoST Portal: Transparent Infrastructure,” CoST Ukraine, http://portal.costukraine.org/.

[109] Kyivavtodor, http://kyivavtodor.kievcity.gov.ua/content/pro-nas.html.

[110] Ukravtodor, http://ukravtodor.gov.ua/ukravtodor/pro_nas.html.

[111] Ukrenergo, https://ua.energy/about/.

[112] “CoST Portal: Transparent Infrastructure,” CoST Ukraine, accessed 20 September 2018, http://portal.costukraine.org/.

[113] Natalia Forsiuk (CoST Ukraine), interview with IRM researcher, 23 August 2018.

[114] Victor Nestulia (Transparency International Ukraine), interview with IRM researcher, 6 August 2018.

[115] “IFIs projects,” CoST Ukraine, http://portal.costukraine.org/proekti/ukravtodor/proekti-mfo/.

[116] “Slavomir Novak: ‘The Initiated Project Go Highway Is the Foundation for Integration between Ukraine and EU,’” Ukravtodor, http://ukravtodor.gov.ua/press/news/slavomir_novak_initsiiovanyi_proekt_go_highway_ye_osnovoiu_intehratsiinykh_protsesiv_mizh_ukrainoiu_ta_yes.html.

[117] Natalia Forsiuk (CoST Ukraine), interview with IRM researcher, 23 August 2018.

[118] “Cabinet of Ministers of Ukraine. The Regulation on 20 December 2017 #1100, The Government Portal,” Unified Web-Portal of Executive Authorities of Ukraine, https://www.kmu.gov.ua/ua/npas/pro-vnesennya-zmin-do-polozhen.

[119] “Cabinet of Ministers of Ukraine. The Decree on 21 October 2015 #835, The Government Portal,” Unified Web-Portal of Executive Authorities of Ukraine, https://www.kmu.gov.ua/ua/npas/248573101.

[120] Natalia Forsiuk (CoST Ukraine), interview with IRM researcher, 23 August 2018.

[121] Natalia Forsiuk (CoST Ukraine), email exchange with IRM researcher, 18 October 2018.

[122] Ibid.

[123] “Protocols 2018,” Ukravtodor, http://ukravtodor.gov.ua/4489/tekhnichna_rada/protokoly_2018_zasidannia_tekhnichnoi_rady_derzhavnoho_ahentstva_avtomobilnykh_dorih_ukrainy.html.