Audit Uncovers ₴5.4 Billion Overpayment in Ukraine’s Secret Weapons Budget

Internal audits found Ukraine’s Defence Procurement Agency overpaid billions, signing inflated weapons contracts despite cheaper offers from competing firms.

Internal government audits reviewing the Ukraine’s Secret Weapons Budget procurements made by Ukraine’s Defence Procurement Agency have uncovered dozens of contracts signed with companies at inflated prices, despite the availability of lower-cost offers from competitors.

This was reported in an article by The New York Times, cited by Censor.NET.

Ukraine has built a defence industry that produces thousands of artillery shells, armored vehicles, and drones of various models and capabilities.

As billions of dollars flow to domestic manufacturers with the financial support of European donors, a significant portion of the spending remains shrouded in wartime secrecy.

This concerns analysts and activists, who argue that Ukraine has made only limited progress in curbing its long-standing history of corruption in military procurement, the article says.

Procurement audit

One of the issues worrying auditors reviewing military spending is Kyiv repeatedly signing contracts with companies whose offers were higher than competitors’ without providing explanations.

Internal government audits, reviewed by The New York Times, uncovered dozens of contracts signed at inflated prices despite the availability of lower-cost bids from competitors.

The audits also revealed cases of delays or incomplete deliveries and advance payments for weapons that were never delivered.

The New York Times notes that awarding contracts to participants who submitted the highest bids does not, by itself, indicate corruption or waste. However, the audits highlight the challenges Ukraine faces as it shifts from reliance on allies’ armaments toward domestic production and international arms markets.

Government auditors reviewing procurements carried out by Ukraine’s Defence Procurement Agency from the beginning of 2024 until March this year did not accuse anyone of embezzlement, although some contracts were referred to law enforcement for assessment.

However, their 465-page report found that dozens of contracts for artillery shells, drones, and other weapons were not awarded to the bidders with the lowest price offers.

The difference between the lowest bids and the contracts actually awarded by the Agency amounted to at least 5.4 billion hryvnias, or 129 million dollars.

“They are overpaying for unknown reasons and without justification,” the publication quotes Tamerlan Vakhabov, a former advisor to the agency, which is a unit of the Ministry of Defence.

In the midst of war, he said, “there is a lack of political will to do it properly.”

What the DPA says

In a statement, the agency’s director, Arsen Zhumadilov, noted that lower bids are sometimes rejected because “they may not meet the required quality standards, delivery timelines, payment terms, or other key criteria.”

According to him, the agency has recently revised its contracting practices to ensure fairness. The official added that last year the agency began gradually phasing out contracts with intermediary companies that were earning markups on sales.

Purchases through intermediaries

Until last year, a significant portion of procurements was carried out through intermediaries, most of whom earned a 3% markup on sales, according to a separate audit of procurements up to July of last year. The agency involved such intermediaries in 83% of contracts instead of purchasing directly from suppliers.

The article states that the audit uncovered numerous contracts that led to delays or incomplete deliveries, as well as cases of advance payments to companies that never delivered the weapons.

They also found contracts signed with companies without prior verification of their production capacity.

EMPR