So what’s up with DABI?
Why has the president’s promised reform of construction control stalled? Who continues to “supervise” the State Architectural and Construction Inspectorate and collect bribes from the market?
The State Architectural and Construction Inspectorate (SACI) issued zero declarations of readiness for operation of apartment buildings in Kyiv in September-October 2020. During the same period, the body, which has been in the process of liquidation for six months, refused to put 17 real estate objects in the capital into operation.
On March 13, two weeks before the introduction of total quarantine, President Volodymyr Zelenskyy stated at an away meeting of the government: “I will now say three words that the entire construction business has been waiting for. We are liquidating SACI.”
The Cabinet of Ministers adopted the corresponding decisions on the same day. Instead, the government created three bodies: the State Urban Planning Inspectorate (SUI), the State Urban Planning Service (SUS), and the State Agency for Technical Regulation in Urban Planning (SATRP), which were to take over the functions of architectural and construction control and supervision. Although DABI is in the process of liquidation, the authority to issue permits to start construction and certificates of readiness for buildings remains with the inspectorate until the formation of the DSSM is completed. The staff of the latter is only being formed.
“The process of obtaining public services will be transparent and convenient, with minimal influence from officials,” Zelensky promised in March. However, the situation with corruption in the field of construction supervision has only worsened. EP interlocutors claim that the “5 dollars per square meter” scheme (this is how much developers paid for permits at the beginning of construction and the same amount for documents on the commissioning of the facility) has turned into “15 dollars”, but even this does not always help to resolve the issue.
Since March, the state control and supervision bodies in the construction sector have been headed by individuals affiliated with former informal supervisors and interested players. The consequence of DABI’s inaction has been a delay in issuing permits for the facilities of the presidential project “Big Construction”.
In addition, DABI makes decisions that contradict the law. Market participants say that the events surrounding the reform of state supervision in the construction sector are the main obstacle to the work of the industry, which showed the greatest growth in 2019 and remains in the black even during the 2020 crisis. Why is the construction sector on the verge of collapse? Who is “supervising” DABI? What steps will help resolve the conflict and what does Saakashvili have to do with it?
Pseudo-reform blocks the construction industry
Oleh Dunda, a member of the parliamentary committee on the organization of state power, local self-government, regional development and urban planning, spoke at the “Construction and Development” forum about his dialogue with one of the former heads of DABI about corruption in the structure.
“I asked him: ‘What are you doing? Why did you set such rules?’ To which I received the answer: ‘You don’t like it? Go to another DABI.’ I said: ‘There is no other DABI.’ And he said to me: ‘So.’
According to Dunda, the monopoly in issuing permits gave rise to the “corruption nest” that still exists in the industry. The most high-profile case of corruption at DABI in recent months, People’s Deputy Olena Shulyak calls the case with the largest residential complex of “Ukrbud” “Charivne Misto”, which was transferred to “Kyivmiskbud” in October 2020.
“The process of resuming construction work should be formally legalized by making changes to previously obtained permits, but DABI does not make them. This is a two-minute job, but for some reason it is seriously stretched in time. Practice shows that this is done to obtain an illegal benefit,” says Shulyak.
As a result, the investors of the “Charivny Misto”, who have not yet recovered from the bankruptcy of “Ukrbud”, are facing new delays. In September, a temporary investigative commission (TSK) began work in the Verkhovna Rada to investigate corruption in the bodies of state architectural and construction control and supervision.
Andriy Puziychuk became the head of the TSK. According to him, under the guise of DABI reform, the work of the industry is being completely blocked.
“Corruption in DABI has reached unprecedented proportions. Honest companies cannot obtain permits for construction and commissioning of facilities. But “greenhouse” conditions have been created for illegal developments. Currently, DABI does not have the authority to stop work on such facilities,” Puziychuk said.
MP Ivan Yunakov adds that DABI transferred the processing of documents for objects of SS2 and SS3 (objects with the highest complexity category) to Kyiv, thus creating a “single window” (DABI liquidated regional divisions, all applications are processed in the central office).
Serhiy Pylypenko, General Director of the Kovalska Industrial and Construction Group, reminds that changes are stalling due to the lack of a reform concept. “The market no longer accepts the concept that the president and prime minister presented in the spring.
We are losing time. There will be losses that we will feel in 2021: unissued permits, uncommissioned objects,” he said. According to the State Tax Service, in 2019, construction companies transferred more than UAH 10.8 billion to the state and local budgets. For the first nine months of 2020, the amount was UAH 7.8 billion.
Who stood in the way of reform?
Why has the reform of one of the most corrupt state structures stalled despite the fact that it was taken under control by the top figures of the state? According to Yunakov, resistance to the reform is created by individuals interested in the existence of schemes.
“There are many interested parties and shadow structures who are doing everything to preserve the established schemes. Since the reform is not moving and tariffs are rising, they have already attracted some reformers to cooperate,” the deputy says.
In an interview with EP, Yunakov said that in the last five years, there has been a struggle in DABI between two groups: the Gorov brothers and Alexei Kudryavtsev. Yuriy Gorovy was the “watcher” of DABI and the State Geocadastre under Prime Minister Volodymyr Groysman, and Kudryavtsev headed DABI in 2015-2018.
“These two groups were fighting each other. If someone was removed from office, it means that the other group was winning,” Yunakov assured. However, Kudryavtsev, in a comment to the EP, denied the accusations against him.
Shulyak adds that influence groups in the construction market still exist, and there are many of them. In March, the government appointed Yuriy Vasylchenko as the head and at the same time the liquidator of DABI. In May, he was transferred to head the State Urban Planning Inspectorate.
Bogdan Fedorenko became the temporary acting head of DABI. In October, at a meeting of the State Construction Committee, deputies received information that Vasylchenko from the Interior Ministry and Fedorenko from DABI periodically meet with Oleksandr Sergienko, a former DABI employee, whom market participants called Kudryavtsev’s man and attributed to him the creation of corruption schemes in the inspection. On October 21, the SBU conducted searches at DABI and accused its officials of large-scale illegal issuance of permits and certificates of facility readiness to construction companies.
To conduct transactions, the defendants in the case used controlled “consulting” commercial structures. Private companies acted as intermediaries between developers and DABI officials during their negotiations to obtain documents. On October 22, the government removed Fedorenko from office and dismissed Vasylchenko along with the head of the State Service for Urban Development, Oleksiy Bashkirov.
Secretary of the State Security Committee Yunakov says that the SBU searches and the dismissal of the leadership of the supervisory and control bodies have significantly shaken the confidence of the “schematic operators”. “The industry is blocked. According to rumors, the shadow back offices have not been working for several weeks. Everyone is waiting to see how the latest events with the searches and dismissals of the top officials of the architectural and construction control bodies will end,” the deputy said.
President’s Office Factor
When a large piece of the construction pie is at stake, not only middle-level officials but also key figures in the state are involved in the process. The purges in the industry bodies took place in parallel with the dismissal of Serhiy Trofimov from the post of Deputy Head of the President’s Office.
It was he who was responsible for the construction industry, territorial development and the Ministry of Regional Development in the OP. The previous redistribution of those responsible for supervision and control over construction took place after the dismissal of the Head of the President’s Office Andriy Bohdan and Prime Minister Oleksiy Honcharuk in February 2020.
Is Trofimov’s dismissal connected with the personnel purges in DABI? Yunakov suggested this possibility. Shulyak replied that she did not have such information. According to Yunakov, the redistribution of power among influence groups will occur until a qualitative reform is carried out in the construction market.
What is offered
The government acknowledges that there is a problem with the DABI reform.
“The reform process has been delayed… This happened due to a number of circumstances, including a significant number of responsible persons and participants, inconsistency of the legislative framework, huge resistance from the old system, and certain personnel issues,” said Oleksiy Chernyshov, Minister of Community and Territorial Development.
Since the reform has failed, the deputies propose that the government cancel the resolutions on the liquidation of the State Anti-Corruption Bureau and the creation of three bodies. The deputies argue that this decision will be temporary and will not play into the hands of corrupt officials.
“The resolutions were adopted in violation of the law “On the Regulation of Urban Planning Activities”. The TSC was unable to find out where the newly created organizations are located. They don’t even have phone numbers,” laments the head of the commission, Puziychuk.
After that, it is proposed to hold a transparent competition for the head of the DABI. The inspection should be headed by an independent and professional leader. The deputies initiate a meeting with Prime Minister Denys Shmyhal to determine further steps in the reform of the DABI. The deputies will propose to the government to transfer the functions of construction control to private hands. This concept was developed by the Office of Simple Solutions and Results, headed by Mikheil Saakashvili.
It was agreed upon at the National Reform Council.
“The draft law provides for the creation of an institute of legal entities for construction control. Among other innovations is the transition to a single window for approval of construction documentation,” says the office’s expert Maria Irgovtsiy.
The text of the draft law has not yet been submitted. Georgy Tshakaya, an expert at the Office of Simple Solutions and Results, noted that 93 out of 190 countries covered by the Doing Business program use third-party services in the field of construction regulation.
“Where there are private hands, there are no monopolies,” Saakashvili said at a meeting of the National Reform Council.
The initiative was supported by both deputies and developers.
“We advocate for the absence of central authorities that ‘shear our construction sheep.’ There is no wool left on it,” says Pylypenko.
Yunakov suggests looking at the problem more broadly: “One of the solutions is to create a social contract between all stakeholders: society, business, the state, banks and insurance companies. With a system of checks and balances.
But we must understand that this must be supported by correct and complete urban planning documentation and modern building codes.” In the meantime, the Ministry of Digital Affairs has created a register of construction activities.
“We were unable to find the register of construction activities when we took up the issue of corruption in the industry. The register was in private hands abroad. Its owners developed a script that automatically understood who could take money from and who could not,” said the Minister of Digital Transformation, Mykhailo Fedorov.
“We took the register to Ukraine, added the ability to report the start of work without the participation of an official, but later realized that the data in the register was changing. We could not record who still had access to the register, so we “killed” it and launched a new register on October 5. Now changes can be made to it only using an electronic key,” Fedorov said.
Author: Oleksandr Kolesnichenko
