The Ukrainian Arms Manufacturers’ Council and the League of Defence Enterprises of Ukraine have urged the Ministry of Defence and the Defence Procurement Agency to amend the rules for fulfilling defence contracts to account for downtime at defence companies caused by frequent air-raid alerts. This is stated in the organisations’ Facebook post.
According to the organisations’ calculations based on the “Kyiv Digital” air-raid alert log, from 27 August to 29 September alerts fell within 61.8 hours of the standard working schedule. That is almost eight working days in just over a month. These figures relate only to the capital. Actual losses of working time depend on a company’s location, its schedule and its technological processes. In addition to the alert itself, manufacturers need time to shut down equipment safely, move staff to shelters and, after the all-clear, resume work.
At the same time, delivery dates set out in contracts remain unchanged unless the customer agrees to postpone them. For late performance, manufacturers may be charged a daily penalty, and after 30 days an additional fine of 7%.
The Arms Manufacturers’ Council notes that under such conditions, funds intended for purchasing components and fulfilling subsequent orders have to be diverted to paying penalties and covering legal disputes.
To address the problem, the organisations have prepared proposals to amend Cabinet of Ministers of Ukraine Resolution No. 1275. They envisage introducing a single mechanism for confirming downtime caused by air-raid alerts and assessing its impact on the timelines for fulfilling specific contracts.
Under the proposed approach, the customer would be able to verify the duration of air-raid alerts using official data, while the company would confirm the time taken to halt and restart production through relevant reports and entries in production records.
Each request is proposed to be considered on an individual basis. The manufacturer must justify which specific production process was halted, how long the interruption lasted and how it affected the fulfilment of contractual obligations.
The Arms Manufacturers’ Council said it has repeatedly raised the issue at meetings at the Ministry of Defence of Ukraine and has sent the ministry official letters with proposals for changes. The organisation is ready to contribute to further work on the mechanism and expects concrete decisions that will make it possible to take confirmed production stoppages into account when determining delivery deadlines.
Cabinet of Ministers of Ukraine Resolution No. 1275 of 11 November 2022 sets out the specific features, procedure and conditions for defence procurement during martial law, including for state customers in the defence sector and authorised military units and institutions. It regulates, among other things, procurement procedures and the conclusion of state contracts (agreements).