Why are home restoration prices increasing and who does the significant sum end up going to?

During the last tender for the renovation of a house at 151 Soborny Avenue in Zaporozhye, an increase in prices was revealed. The cost of construction materials was inflated by at least UAH 14 million, with the total tender amount of UAH 147.7 million.

This is evidenced by procurement monitoring statement of resources, which was carried out by the anti-corruption center “Institute of Legislative Ideas” and submitted a corresponding appeal to the State Audit Service of Ukraine. Interestingly, the difference between the expected purchase cost of UAH 162.1 million and the actual contract value of UAH 147.7 million is also UAH 14 million.

In particular, they plan to purchase paint removers 11 times more expensive - 2.2 thousand UAH per kilogram, while the selling price on the website is 195 UAH. An aqueous solution of sodium nitrate and carbonate will cost eight times more - 21.9 thousand UAH/m3 instead of 2.6 thousand UAH, as was taken into account in the estimates of other purchases. Crushed stone, mounting foam, aerated concrete blocks, elastic mixture, water repellent and diamond wheels are almost twice as expensive in the estimate. These nine positions together accounted for 14 million UAH (see screenshot).

The house at 151 Soborny Avenue is one of the most expensive restoration projects in Zaporozhye. According to government estimates, the cost of reconstruction of the damaged five-story building should have reached UAH 339 million. It is interesting that against the backdrop of inflated prices in the estimates, the contractor claims savings of UAH 70 million. However, contracts for UAH 295.4 million have now been concluded (see infographic).

It was previously noted that two entrances and 24 apartments in the building were destroyed. The tender proposal for the second phase deals with the repair of 12 restored apartments and 21 partially damaged apartments.

According to preliminary calculations by the media, the estimated cost of restoring one apartment (based on 24 declared ones) is more than 300 thousand dollars. For this money you can buy several apartments in new buildings in any city in Ukraine.

Why in Ukraine “squares” of damaged housing become gold for the budget and to whom utility companies are draining hundreds of millions of hryvnias, we will look into it below.

“Restoring a home costs more than new construction.”

The acting mayor of Zaporozhye, Anatoly Kurtev, stated that restoring a house costs more than new construction. But he recommended not to consider it apartments, because it is “a complete complex of houses.”

This sounds about the same as when buying housing in a new building, asking the developer not to take into account the cost of building an entrance or roof in the price of the apartment.

What's wrong?

The scandal with the reconstruction of a five-story building with 15 entrances in Zaporozhye arose from the moment of procurement of design work with an expected cost of 10 million UAH. During the open bidding with features, the only participant won was Anstroy Project LLC, which reduced the price by only 47 kopecks from the expected one. After publicity, the cost of manufacturing the project was reduced by another 301 thousand UAH.

It is interesting that the founders of LLCshka are Artem Ichetovkin, Elena Shuvaeva and Pavel Cherny, with whom Anstroy and Zaporozhstroygroup are also associated. The latter began to earn money from the beginning of a full-scale war. In general, these firms have already tendered about UAH 150 million in 2023, taking part in procurement with special features.

Scandal-2 happened during the first tender for the first stage of reconstruction for 138 million UAH. Ukrainian Investment Technologies LLC won the bidding for one participant, offering a price only 46 thousand UAH lower than expected. Even then, the contractor included in the estimate the cost of bricks that were twice as expensive as the market price, pipes that were three times more expensive, and a concrete mixture that was 70% more expensive. According to Our Money, the overpayment on just a few items reached UAH 1.7 million. In today's language, this is a hundred FPV drones or several vehicles for the front.

But already with a thousand drones and a dozen SUVs from the showroom for the front, one can measure the overestimation of prices by UAH 14 million in estimates for the second stage of work on the same house in Zaporozhye. The purchase was again limited to one participant. As expected, the contractor is the same - Ukrainian Investment Technologies LLC.

The enterprise is more than seven years old, but it began to earn money only in 2023 - with the restoration in Zaporozhye. Moreover, as the only procurement participant. This year, LLC tendered UAH 285 million for just one high-rise building in Zaporozhye.

Such luck in the enterprise's budget procurement coincided with a change in manager and owner. A few days before the tender, Taras Konoval became the head of the LLC, and at the same time the chief accountant, instead of Valery Zasoba, and Vladimir Komar became the owner instead of Marina Kirakozova.

In general, the company changed its owner three times in 2023. This situation may, for example, mean that the real owner of the LLC is a different person than is represented in the registers, and all that it risks is the authorized capital of 30 thousand UAH.

In addition, a large number of rented equipment and subcontractors may indicate that the contractor has never had such volumes of work before. Thus, on subcontracts - Stroitelnaya Perspektiva LLC, Ukrstroyengineering LLC, Elektroadvokat LLC, sole proprietorship, equipment rental - from BIAS PJSC, ALEFBUD-21 LLC, sublease - from Elit-Proektstroy, which a week before submitting documents, I signed a lease agreement with TECHNO-LEADER LLC.

According to the documents, the reconstruction of the house should be completed by December 2024, but they promise much earlier.

Meanwhile, over 19 thousand apartment buildings have been destroyed or damaged in Ukraine. Such a pace, cost and such large overstatements in the restoration of housing, parallel attempts to build city halls will not help maintain the trust of international experts. And accordingly, financial support for the country. We can already see in the example of the delay in allocating 50 billion euros.