Recently, law enforcement agencies have been actively conducting procurement inspections, especially when it comes to tenders with state institutions or enterprises. One of the typical complaints that are heard after searches or reports of suspicion is the so-called supply of goods at inflated prices. But how exactly do law enforcement agencies determine price inflating and what methods can the defense use?
Analysis of law enforcement claims
A typical plot of criminal proceedings regarding price gouging looks like this: law enforcement officers claim that officials of the enterprise, abusing their official position, purchased goods at prices significantly exceeding market prices. Qualification: Art. 191 of the Criminal Code of Ukraine (embezzlement, embezzlement of property or seizure of funds). Most often, such accusations are made in the field of construction, procurement of medical equipment, food products, and computer equipment.
The common points of these cases are, firstly, that all proceedings begin with a comparison of the contract price with prices from open sources. Conclusions about overpricing are usually based on the results of a commodity or forensic economic examination conducted by the prosecution at a state expert institution.
How is overpricing determined?
The main evidence in such cases is a forensic economic or commodity expert examination that compares the contract price with the “market price.” However, when verifying such conclusions, the defense should pay attention to the following:
- Evaluation methodology:Experts often use irrelevant or generic methodologies that do not take into account specific delivery conditions. This may include transportation costs, delivery terms (EXW, DDP), additional warranty terms, and specifications.
- Object for comparison:Experts often use price information from aggregator sites, such as hotline.ua, for comparison. However, hotline.ua is an aggregator of price offers, which does not guarantee the availability of goods at this price or the possibility of prompt delivery. In procurement, especially state procurement, participants assume risks regarding the availability of goods, terms and conditions of delivery. Accordingly, contract prices may be justifiably higher than the price on aggregator sites.
In one of the cases, we contacted the hotline.ua portal with a legal request to confirm the availability of supplier offers for a certain period, but in response, the site's representatives noted that they have a limited period of information storage. Although often the information from this site is the main one used by law enforcement officers.
Is it possible to determine market prices in procurement terms?
Determining market prices in the context of a specific procurement is a task that cannot always be accomplished unambiguously. The price of a product is formed under the influence of various factors, including: delivery terms, logistics costs, warranties and certification, as well as the urgency of contract execution.
Many analytical materials and case law indicate that the concept of “market price” is conditional and varies depending on the specific conditions of the tender. Therefore, an expert opinion that ignores the specifics of the transaction may be questioned by the defense.
Protection tips
In criminal proceedings regarding overpricing of defense costs, it is worth initiating an alternative expert examination yourself. This means that the defense must find experts who can provide an objective analysis of the price, taking into account all the details of the specific purchase. If you have an alternative expert opinion that refutes the position of the prosecution's expert examination, this will become an important argument in your case.
The key factor in successful defense in such cases is thorough preparation and interaction with independent experts. It is very important to provide the expert with all documents that reflect in detail the specifics of the purchase: contracts, specifications, correspondence regarding the terms of supply, documents on the costs of delivering the goods, warranty obligations and certificates of conformity. This will allow the expert to make the most accurate and objective conclusions, which may differ significantly from those presented by law enforcement agencies.
It is worth checking the methodology used by state experts separately, as it can often be irrelevant or incomplete. If the expert assessment does not take into account the specifics of the transaction or the specific costs of performing the contract, it can be effectively challenged. Therefore, through careful collection of evidence and proper work with experts, the defense has every chance to refute the accusation of price gouging.
