Ukraine's Defence Procurement Overhaul: A Deep Dive into Transparency, Domestic Innovation, and Wartime Efficiency

A seismic shift is underway in Ukraine's defence procurement system. What was once a system facing significant challenges is being transformed by the nation's Defence Procurement Agency (DPA) and associated bodies into a model striving for unprecedented transparency, NATO-standard reforms, and robust investment in cutting-edge military technology. This overhaul is not just about wartime spending; it's a fundamental strategic realignment aimed at bolstering Ukraine's defence capabilities, fostering domestic industry, and ensuring long-term security, even as the nation confronts ongoing conflict.

Official announcements, reports from Ukraine's Ministry of Defence (MoD), the DPA, and independent analyses now paint a detailed picture of a nation rapidly modernising its defence structures.

The Imperative for Change: Context of the Procurement Reforms

The current transformation in Ukrainian defence procurement did not occur in a vacuum. Historically, the system faced considerable criticism. Before the full-scale invasion, Ukrainian defence procurement was often described as an outdated and inefficient structure, struggling with coordination and transparency. The need for secrecy sometimes served as a pretext to exempt the Ministry of Defence from the broader transparency that had begun to characterize other areas of Ukrainian public procurement, such as the ProZorro platform.

This led to chronic vulnerabilities, which escalated in 2023 with public scandals involving overpriced procurements and questions around intermediaries. Such issues, coupled with the urgent demands of a full-scale war, created an overwhelming societal and political demand for deep-rooted reforms. International partners also advocated for greater transparency and efficiency. In response, Ukraine embarked on a significant reorganization, leading to the establishment of new agencies like the DPA and the State Operator for Non-Lethal Acquisition (DOT), with clearer mandates and a focus on reputable leadership and transparent processes. The goal was to reduce corruption, streamline contracting, and leverage private-sector innovation effectively.

Q1 2025 Snapshot: Billions Committed to Modernisation

The impact of these reforms is evident in recent figures. In the first quarter of 2025 alone, the DPA signed contracts valued at over UAH 200 billion (approximately $5 billion USD). This significant financial commitment reflects a strategic focus on bolstering Ukraine's technological edge.

A substantial portion of this investment is targeted at critical areas: 279 contracts were signed in the sectors of drones, electronic warfare (EW), and ground-based robotics, totaling approximately UAH 77.2 billion (around $1.8 billion USD). The emphasis on unmanned systems is clear, with the Ministry of Defence planning to procure 4.5 million FPV drones during 2025 [Source from previous verified article: MoD News, March 10, 2025]. Overall, the MoD allocated UAH 104.2 billion (approximately $2.5 billion) to 76 domestic drone manufacturers in the 2024-2025 period. Investment in ground robotics is also seeing a significant increase.

Systemic Reforms: Transparency, Efficiency, and New Standards

The heart of Ukraine's defence modernisation lies in systemic reforms designed to enhance transparency, efficiency, and accountability:

• Slashing Intermediaries & Direct Contracting: A pivotal achievement has been the drastic reduction in the share of contracts passing through intermediaries, reportedly dropping from 81-82% in 2023 to just 12% in 2024. This shift towards direct contracting with manufacturers fosters better value and stronger partnerships.
• Cost Savings: Streamlined processes have led to significant cost reductions. For example, average prices for key ammunition types reportedly decreased by up to 23% in 2024 compared to the previous year. Broader procurement oversight by the Ministry of Defence also contributed to nearly UAH 180 million in savings and helped prevent violations in Q1 2025.
• Adoption of NATO Standards & Quality Assurance: Ukraine is actively working to align its defence procurement with NATO standards. This includes the development and implementation of a State Quality Assurance (SQA) system for defence goods and services, covering both domestic and foreign contractors. Legislative changes, such as the Law "On Defense Procurement," aim to harmonize rules with NATO and EU partner countries.
• New Digital Tools for Transparency: The DOT-Chain IT system is a key innovation, initially used by the State Operator for Non-Lethal Acquisition (DOT) and now being extended for drone procurement. This system is designed to streamline and digitize procurement processes, establish clear supply mechanisms, reduce delivery times from months to weeks, stimulate competition, and increase overall transparency.
• "Single Window" for Suppliers: The DPA has launched a "single window" on its website, simplifying access for manufacturers and suppliers to participate in procurement, speeding up the processing of proposals, and ensuring equal access.

Fostering Domestic Defence Industry and Innovation

A cornerstone of Ukraine's new defence strategy is the revitalization and expansion of its domestic defence industry. The reforms are directly aimed at shifting from a reliance on often cumbersome state-run entities to leveraging the agility and innovation of the private sector.

• The Rise of Private Defence Tech: Ukraine has seen a remarkable growth in private defence companies, particularly in areas like unmanned systems. Where only a few drone producers existed before the full-scale invasion, now hundreds of companies are active.
• Brave1: Accelerating Defence Innovation: The Brave1 defence technology cluster, established in April 2023, plays a crucial role in this ecosystem. Launched by several ministries and the General Staff, Brave1 provides grants (over $30 million disbursed across more than 500 projects by early 2025), facilitates testing, helps with codification, and connects developers with military end-users and investors.
  • Success Stories: Brave1 has been instrumental in areas like Unmanned Ground Vehicles (UGVs), where Ukraine went from nearly no manufacturing base to over 200 manufacturers and 300+ solutions. It has also supported the development of new interceptor drones and domestic missile programs.
  • Ecosystem Nurturing: Brave1 supports companies of all sizes, from garage startups to larger scale-ups, fostering an environment where innovative solutions can be rapidly developed and deployed. It's estimated that 1800-2000 new defence tech companies have emerged in Ukraine during the full-scale war.
• Increasing Domestic Production Share: Ukraine aims to significantly increase the proportion of defence equipment produced domestically. Reports suggest that for new, innovative technologies like drones and EW systems, up to 95% used by Ukrainian forces are locally produced.

International Cooperation

International collaboration is a vital component of Ukraine's defence modernization. The transparency and efficiency drive has made Ukraine a more attractive partner for international aid, investment, and joint ventures.

• Joint Ventures and Foreign Investment: Major international defence companies like Rheinmetall and KNDS are increasing their presence in Ukraine, opening production facilities and forming joint ventures. These collaborations aid in modernizing Ukraine's industry and standardizing armaments to NATO requirements.
• Innovative Funding Models: Ukraine is engaging Western partners through special programs to finance its domestic arms production. The "Zbroyari (armourers) Manufacturing Freedom" program had raised over $1.5 billion from nine Western donor countries by 2024 for investment in the domestic defence industry. The "Danish model," where partners fund direct purchases from Ukrainian producers, is another example.
• Alignment with Euro-Atlantic Structures: These reforms and partnerships are integral to Ukraine's broader ambition of Euro-Atlantic integration, demonstrating commitment to Western standards of governance and operational capability.

The DPA and DOT Merger

Arsen Zhumadilov, appointed Director of the Defence Procurement Agency in March 2025, is a key figure leading these reforms. His focus is on making procurement as efficient, transparent, and swift as possible.

A significant future step is the planned merger of the DPA (handling lethal aid) and the DOT (handling non-lethal supplies like food and clothing) after the end of martial law. A commission headed by Zhumadilov is preparing for this integration, which aims to reduce duplication, optimize management, and create a single, highly efficient logistics support system aligned with NATO recommendations for a unified procurement institution .

Ongoing Challenges and the Path Forward

Despite remarkable progress, Ukraine's defence procurement and industrial scale-up face ongoing challenges:

• Sustaining Reform Momentum: Ensuring the long-term independence and integrity of procurement agencies from undue influence remains crucial [1].
• Domestic Production Constraints: Local manufacturers grapple with issues like scarcity of certain components, the impact of mobilization on the workforce, protection of facilities from attacks, and the need for predictable long-term contracting and financing [Source from previous verified article: Jamestown Foundation, Feb 11, 2025; 15]. Outdated pricing mechanisms and intellectual property frameworks also require ongoing modernization [15].
• Strategic Planning and Coordination: Effective, long-term strategic defence planning tied to robust budget allocation is essential to provide clarity for manufacturers and avoid mid-year contracting delays [15]. Continued improvement in interagency coordination between the MoD, DPA, Ministry of Strategic Industries, and other stakeholders is also necessary [Source from previous verified article: Jamestown Foundation, Feb 11, 2025].
• Meeting Wartime Demand: The sheer scale of wartime demand for ammunition and equipment presents a continuous challenge, requiring a concerted effort to maximize both domestic production and international support.

A Resilient and Adaptive Defence Ecosystem

The transformation of Ukraine's defence procurement system is a dynamic and critical component of its national defence. By prioritizing transparency, efficiency, domestic innovation, and alignment with international best practices, Ukraine is not only strengthening its current defensive capabilities but also laying the groundwork for a resilient, modern, and internationally integrated defence sector. While challenges persist, the commitment to reform and the tangible successes achieved to date signal a profound and positive shift in Ukraine's approach to equipping its protectors and ensuring its future security.