Governance in times of war: Public procurement in Ukraine

Abstract

Wars increase the importance of government functions, yet they also constrain their ability to fulfill these functions. In particular, wars hinder economic activity, thereby limiting governments’ capacity to raise the revenues required to maintain stability and meet the heightened needs of citizens. Effective governance is therefore severely undermined in times of war. However, empirical research on how wars affect government procurement is limited. We address this gap by exploring procurement dynamics using over one million public purchases of goods and services in Ukraine between January 2021 and October 2022, corresponding to the Russian invasion of the country. We document a large fall in the total number of purchases since the invasion and an increase in the share of successfully completed procurements. This higher success rate comes at the cost of efficiency, with the government paying more to source their goods. This can be attributed to the decline in the share of government purchases via online auctions and the reduced competition. Thus, the prioritization of the quick acquisition of goods and services forced governments to sacrifice cost-effectiveness. In summary, the war did not lower the successful purchasing of private goods and services, and transparency was not decreased. However, the trade-off of speed and transparency for greater costs may become increasingly problematic with the growing budget constraints resulting from the war. This article contributes to our understanding of the Ukrainian government choices during the early phase of the war. The results also highlight the importance of ensuring procurement efficiency and transparency when the war ends as reconstruction efforts will require substantial increases in government procurements.