Rada resolves conflict between the State Audit Service and defence companies
22 February 17:43
The Verkhovna Rada of Ukraine has adopted a law that will eliminate discrepancies in the interpretation of defence companies’ profits and, accordingly, simplify defence procurement for the state. “259 MPs voted in favour, reports 
This refers to the draft law 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 (No. 10454).
It is intended to resolve differences between state authorities in the interpretation of profits of defence companies earned during martial law on state contracts for closed procurement.
In particular, the law stipulates that the maximum level of profit in the price structure of defence products will be set by the Cabinet of Ministers. Only if there are no restrictions from the Cabinet of Ministers will the supplier include the profit.
This provision will apply to all contracts concluded during martial law starting from 24 February 2022.
Background to the problem
Due to previous inconsistencies, the State Audit Service treated the profit included in the price of contracts between the Ministry of Defence and defence companies as losses to the state budget and demanded its return. 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.
