Zelensky signs law on defence procurement
14 March 2024 14:06
President of Ukraine Volodymyr Zelenskyy has signed Bill No. 10454 on amendments to the Law of Ukraine “On Defence Procurement” to improve the legal regulation of pricing in defence procurement during the martial law regime. This was reported by Kommersant Ukrainian 
The bill was adopted on 22 February 2024. Today, the law has been returned to the Verkhovna Rada with the President’s signature.
Among other things, the law regulates the problem of different interpretations of the rules on the profits of defence companies. In particular, it stipulates that the profit of an enterprise in defence procurement and non-competitive procedures cannot exceed the profit ceiling set by the government.
The law thus eliminates the legal conflicts created by Government Resolution No. 335 of 20 March 2022 (cancelled in July 2023). This resolution introduced new rules for price calculation, but it did not address the profit of companies that enter into defence contracts with the government. This led the State Audit Service to believe that there should be no profit for companies in such contracts at all.
Background of the problem
Due to previous inconsistencies, the State Audit Service treated the profit included in the price of the MoD contracts with defence companies as a loss to the state budget and demanded that it be returned. According to the Service, companies’ profits can only be included in the price of contracts starting from July 2023, when the government adopted a relevant resolution. The companies insist that without profit, they have no way to increase production. These disagreements have led to the State Audit Service being accused of blocking the work of important defence companies, such as Luch Design Bureau, which produces the domestic Neptune missile.
The government and the Verkhovna Rada sided with the defence companies, as the activity of the State Audit Service was indeed causing problems in the military-industrial complex. In addition to the Cabinet of Ministers’ resolution, there was also a resolution of the Verkhovna Rada (No. 10071), which effectively cancelled the conclusions of the Service.
