More weapons, fewer intermediaries: Defense procurement agency in 2024 – key numbers
On January 1, 2024, the Defense Procurement Agency became the sole organization within the Ministry of Defense structure responsible for procuring weapons and military equipment for the Armed Forces of Ukraine. This launched the defense procurement reform, as the system required radical changes due to its inefficiency and excessive bureaucracy.
The Agency immediately faced enormous challenges. It had to transform the system fundamentally while meeting the urgent needs of the military without delay at the same time, as well as fight for the institution's very existence due to numerous attempts to stop or harm its activities. Despite this, the DPA achieved its goals last year.
Reduction of intermediaries' role and direct contracts
In 2024, the DPA managed to significantly reduce or at least maintain average prices for critical ammunition types despite the steady upward price trend due to the global shortage of explosives and high demand for ammunition.
For example, in 2024 compared to 2023, the average price in contracts concluded by the Agency decreased by 15% for 155-mm shells; 23% for 152 mm, and 16% for 125 mm. This saved billions of hryvnias, which were directed toward purchasing additional weapons for the Armed Forces of Ukraine.
A key factor that allowed the Defense Procurement Agency to stabilize and even reduce prices in the weapons and military equipment market was the reduction in intermediaries' share. While transitional contracts concluded by the Agency in 2023 had special importers accounting for 82% of contract values, in 2024 this figure dropped to 12%.
The largest part of contracts’ value this year is attributed to Ukrainian weapons production. The Agency's direct import share has also increased significantly, including, in particular, direct contracts with manufacturers.
The DPA has already concluded 50 contracts with global weapons manufacturers from 13 countries. These include direct agreements with Bulgarian manufacturers, which seemed impossible until recently. There are deals with corporations such as Rheinmetall, KNDS, and many others that cannot be disclosed.
There are only a few possible cooperation models with special importers that the DPA publicly offers. For example, when they supply weapons from countries where the Agency cannot work directly, taking on themselves all associated risks; or when they use their own funds or work under tolling arrangements.
Efficient use of allocated funds
The Agency assumed budgetary commitments for 100% of its annual $7.62 billion budget for weapons and military equipment procurement; 99.2% of the amount was paid to suppliers. This was achieved despite 25% of the total budget allocated to the DPA only in October.
The remaining 0.8% of funds is not critical and arose from technical reasons beyond the Agency's control (due to goods delivery outside the payment period on December 30 and 31 and because payment for certain goods can only be made after full contract execution).
Recently, questions about the Agency's ability to utilize its annual budget have sparked intense discussions. It can be assumed that information about significant funds remaining in DPA accounts was used to cast doubt on our ability to use them by the year-end and justify the transfer of $573 million to the State Border Guard Service of Ukraine. However, even if these funds had not been removed from the Agency's budget, the year-end remaining funds would not have been larger. The need for advance payments for already concluded DPA contracts for the next year significantly exceeded this amount. Currently, contracts that could have been paid in advance in 2024 will be advanced in 2025. However, due to the funding deficit caused by this decision, the DPA must set extremely strict contracting priorities.
Development of Ukrainian weapons production
2024 became a year when the Ukrainian defense industry significantly increased its capabilities. This path gives our country the opportunity to be self-sufficient in repelling armed aggression.
Last year, the Defense Procurement Agency funded contracts with 155 Ukrainian weapons manufacturers. Their share exceeded 90% of contracts’ value in UAV procurement, and almost reached 50% in EW. The share of Ukrainian manufacturers in ammunition procurement for artillery, mortars, and tanks continues to grow.
However, a massive error that occurred with the supply of Ukrainian-manufactured mortar rounds showed what can happen when the lion's share of certain items is ordered from a single state manufacturer. Recently, the Ministry of Defense approved an order to transfer technical inspection functions in the domestic market from military representations of the Ministry of Defense to the DPA. It is important that immediately following this decision, changes were made in the relevant regulatory framework governing our work. Under such conditions, stories about confirming deliberately "inflated" production capabilities will not be possible.
In 2025, the Agency will diversify supply risks by concluding 2-3 contracts with manufacturers and reliable suppliers for each critical item. All necessary work for this has already been completed.
Supply rhythm
In 2024, the Agency delivered weapons to the Armed Forces of Ukraine worth over $4.51 billion. Equally important, weapons and military equipment worth about $1.15 billion will be delivered in the first quarter of 2025 using 2024 financial resources. This will ensure continuous supply for the Armed Forces at the beginning of the new budget year.
International cooperation
We paid significant attention to establishing direct connections with NATO countries' procurement agencies. We have already signed cooperation memorandums with agencies from five countries: Danish (DALO), Estonian (ECDI), Norwegian (NDMA), Turkish (SSB), and Italian (ADI).
For us, this primarily presents an opportunity to exchange information about the weapons market and building procurement processes. By utilizing their experience and adapting it to our wartime realities, we can quickly build the right strategy.
One of the important achievements of the Ministry of Defense and Agency teams was the successful implementation of the "Danish model," when other countries purchase weapons for the Armed Forces of Ukraine from Ukrainian manufacturers. Denmark financed contracts with Ukrainian weapons and military equipment manufacturers for a total of 535 million euros, including the production of long-range drones contracted by the Agency. All these weapons have already been delivered to our military.
Cooperation with Denmark was meant to become a success story – there could be no mistakes on this path. And it succeeded, as Sweden, Norway, and Lithuania also joined the model. The Agency's cooperation with partner countries is built on principles of utmost transparency. We provide them with information about manufacturers, their production capabilities, and confirm delivery of finished products.
Institutional changes
Despite continuous contracting, last year we completely changed the Agency's organizational structure, creating 5 offices, each responsible for a separate weapons category: ammunition; UAVs and EW; ground equipment; air defense and aviation; and special equipment.
The new organizational structure enabled concentration of expertise in specific types of weapons, synchronization with the General Staff, and systematic cooperation with manufacturers, particularly regarding taking into account current battlefield conditions in their product manufacturing. Thus, each office became a mediator between the military and manufacturers, considering the needs of the former and capabilities of the latter.
Considerable effort was made to maximize contracting security. This includes price monitoring, contractor verification, inspection of warehouses and production capabilities, analysis of logistics routes, and compliance control. Each contract conclusion is preceded by extensive work so that when a request comes from the General Staff, we are ready to conclude a contract within days.
Supervisory board
A long-awaited step was the creation of the DPA Supervisory Board, which began its work in December 2024. It includes independent members Kateryna Kuznetsova, Łukasz Stolarski, Patrick Auroy, and state representatives Taras Chmut and Yuriy Dzhygyr. This is truly a highly professional board composition capable of strengthening the Agency's work and providing independent control and a new level of dialogue with international partners. The key now is the Ministry of Defense's readiness to ensure effective work of the Supervisory Board and align its powers with Ukrainian legislation and global corporate governance standards.
Summary
Throughout most of last year, the Defense Procurement Agency had to work under conditions of uncertainty. This greatly affected our team's work, which, despite everything, has already changed the landscape of defense procurement in Ukraine, establishing clear market rules and building a sustainable institution completely free from political influences in service of the Armed Forces of Ukraine. The result – more weapons, fewer intermediaries, and increasingly higher trust in Ukraine from international partners. Having contracted weapons worth hundreds of billions of hryvnias, we have also learned how to overcome artificial obstacles that prevent quickly converting money into weapons for our military. Therefore, this year we will again initiate numerous changes in the regulatory and legislative framework that will simplify manufacturers' operations and help significantly accelerate weapons delivery to the front.
