{"id":15171,"date":"2026-08-20T14:07:34","date_gmt":"2026-08-20T12:07:34","guid":{"rendered":"https:\/\/audit-invest.com.ua\/?p=15171"},"modified":"2026-09-08T14:55:49","modified_gmt":"2026-09-08T12:55:49","slug":"vyrobnycha-sobivartist-oborona-remont-bpla-reb-kalkulyatsiya","status":"publish","type":"post","link":"https:\/\/audit-invest.com.ua\/en\/articles\/blog\/vyrobnycha-sobivartist-oborona-remont-bpla-reb-kalkulyatsiya","title":{"rendered":"Production cost in the defense sector: Repair of defense products and manufacturing of unmanned systems and EW equipment"},"content":{"rendered":"

<\/p>\n

\n

<\/p>\n

\n

\"Liubov<\/p>\n

Prepared by:<\/strong><\/span>
\n
\nLiubov Shvechykova<\/strong>,
\nSenior Accountant at Audit Invest<\/span>
\n<\/span><\/div>\n<\/div>\n

<\/p>\n

\n

Table of Contents<\/h3>\n
    \n
  1. Regulatory Framework: What Applies and What Is Suspended<\/a><\/li>\n
  2. Profit Component in Price: Position of the Ministry of Economy and Formulas<\/a><\/li>\n
  3. Cost of Repair Works for Defense-Related Goods<\/a><\/li>\n
  4. Cost of Unmanned Systems, EW Equipment, and Active Countermeasure Systems<\/a><\/li>\n
  5. What a State Contractor Must Consider<\/a><\/li>\n<\/ol>\n<\/div>\n

    The price of a state defense procurement contract is established not under general rules, but under a specific, wartime legal framework. We examine which resolutions are in force and which are suspended, how to categorize costs, what maximum profit margins can be included in the price, and which expenses are prohibited from inclusion in the prime cost of unmanned systems and electronic warfare equipment.<\/span><\/i><\/p>\n

    Regulatory Framework: What Applies and What Is Suspended<\/h2>\n

    The mechanism for calculating and establishing the prime cost of goods, works, and services for the repair of defense goods was approved by Resolution of the Cabinet of Ministers of Ukraine No. 309 of March 17, 2021.<\/span><\/p>\n

    <\/p>\n

    \n

    IMPORTANT! <\/strong>For the duration of martial law, provisions regarding the determination of the state contract (agreement) price based on calculation-estimating materials established by the Procedure approved by CMU Resolution No. 309 and the Procedure approved by CMU Resolution No. 363 of March 3, 2021, “Issues of Defense Procurement,” do not apply. The first paragraph of clause 49 of Procedure No. 363 is also suspended.<\/span><\/p>\n<\/div>\n

    Accountants should refer to the following list of regulatory legal acts:<\/strong><\/p>\n

    \n\n\n\n\n\n\n\n\n\n\n\n
    Regulatory Legal Act<\/th>\nScope of Regulation<\/th>\n<\/tr>\n<\/thead>\n
    CMU Resolution No. 309 of March 17, 2021<\/strong><\/td>\nBasic Procedure for establishing and adjusting the expected cost of defense goods, works, and services under non-competitive procedures<\/td>\n<\/tr>\n
    CMU Resolution No. 363 of March 3, 2021 “Issues of Defense Procurement”<\/strong><\/td>\nPlanning, placing, adjusting defense procurements, and reporting<\/td>\n<\/tr>\n
    CMU Resolution No. 335 of March 20, 2022<\/strong><\/td>\nPayment for goods, works, and services to meet the needs of the security and defense sector during martial law<\/td>\n<\/tr>\n
    CMU Resolution No. 1275 of November 11, 2022<\/strong><\/td>\nSpecifics of carrying out defense procurements during the period of martial law<\/td>\n<\/tr>\n
    CMU Resolution No. 256 of March 24, 2023<\/strong><\/td>\nPilot project on procurement of domestic unmanned systems, EW equipment, and active technical intelligence countermeasure systems<\/td>\n<\/tr>\n
    Article 30 of the Law of Ukraine “On Defense Procurement”<\/strong><\/td>\nLegislative regulation of defense procurement terms<\/td>\n<\/tr>\n
    Ministry of Economy Letter No. 3302-07\/51034-03 of July 17, 2024<\/strong><\/td>\nClarification regarding the profit component in state contract prices<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

    Profit Component in Price: Position of the Ministry of Economy<\/h2>\n

    In Letter No. 3302-07\/51034-03 dated July 17, 2024, the Ministry of Economy of Ukraine addressed the issue of the profit margin included in state contract (agreement) prices.<\/span><\/p>\n

    \n

    1. Resolution No. 335: Contract Price Based on Cost Calculation<\/strong>On March 20, 2022, Resolution No. 335 was adopted, defining the specifics of forming contract prices based on cost calculations for defense sector needs. At the same time, this resolution stipulated that for the period of martial law, the Procedure approved by CMU Resolution No. 309 <\/span>is not applied.<\/strong><\/p>\n

    <\/p>\n

    \n

    KEY TAKEAWAY: <\/b><\/p>\n

    Sub-clause 1 of clause 1 of Resolution No. 335 establishes that the contract price is determined based on cost calculations prepared by the state contractor. At the same time, Resolution No. 335 <\/span>does not establish a fixed profit rate<\/strong> and contains no conditions capping the profit margin calculated by the contractor when preparing a contract price proposal.<\/span><\/p>\n<\/div>\n<\/div>\n

    \n

    2. Resolution No. 363: Clause 49 and the Profit Formula<\/strong>Resolution No. 309 did not define profit limits. However, the section “Concluding State Contracts (Agreements) under Closed Procurements” of the Procedure approved by CMU Resolution No. 363 dated March 3, 2021, contains clause 49, according to which profit within the price constitutes:<\/span><\/p>\n

    <\/p>\n

    PROFIT FORMULA (clause 49 of Procedure No. 363):<\/strong>
    \n<\/span><\/span>1%<\/strong> of the domestic entity’s expenses on purchasing components (semi-finished products), specialized machinery\/equipment, works (services) from other entities + <\/span>30%<\/strong> of the remaining costs within the production prime cost of defense goods, works, and services. Taxes and duties are excluded from the profit calculation.<\/span><\/div>\n

    When Resolution No. 335 was adopted, the previously established statutory provisions regulating contractor profit restrictions (approved under Resolution No. 363) were not amended, nor were any new profit caps or regulations introduced.<\/span><\/p>\n<\/div>\n

    \n

    3. Resolution No. 1275: What Has Been Suspended<\/strong>Following the government’s adoption of Resolution No. 1275 on November 11, 2022, the Procedure approved by Resolution No. 363 remained valid and was not repealed. However, Resolution No. 1275 suspended clauses 64\u201367 of Procedure No. 363 for the duration of martial law (these rules remained active until amendments to Resolution No. 1275 were enacted, most recently on July 18, 2023).<\/span><\/p>\n

    The Specifics of Defense Procurement during Martial Law, approved by CMU Resolution No. 1275, clarify that a military unit, agency, or institution may also act as a state defense customer if authorized by a primary state defense customer to carry out defense procurements and conclude state contracts.<\/span><\/p>\n

    <\/p>\n

    \n

    PLEASE NOTE! <\/b><\/strong>Sub-clause 1 of clause 3 of CMU Resolution No. 1275 establishes the non-application of provisions concerning the determination of state contract prices based on calculation-estimating materials.<\/span><\/p>\n<\/div>\n<\/div>\n

    <\/p>\n

    Article 30 of the Law “On Defense Procurement”: Three Pricing Rules<\/div>\n

    According to Part 3 of Article 30 of the Law of Ukraine “On Defense Procurement”, the following rules apply when pricing state contracts entered into during martial law:<\/span><\/p>\n

      \n
    1. The price of a state contract for the supply of goods, performance of works, and provision of services to meet the needs of the security and defense sector includes all expenses, including taxes, duties, and statutory mandatory charges, as well as the contractor’s profit;<\/span><\/li>\n
    2. If procurement is performed under a non-competitive procedure or without statutory procurement procedures, the profit level within the contract price cannot exceed the maximum profit margin established by the Cabinet of Ministers of Ukraine at the time the contract is executed;<\/span><\/li>\n
    3. If the Cabinet of Ministers of Ukraine has not established a maximum profit margin, the price of goods, works, and services under non-competitive procedures is determined in accordance with the contractor’s proposal, taking into account that contractor’s calculated profit.<\/span><\/li>\n<\/ol>\n

      Cost of Repair Works for Defense-Related Goods<\/h2>\n

      The prime cost of repair works for defense goods includes costs incurred directly by the state contractor, as well as expenses incurred for work performed by third-party business entities.<\/span><\/p>\n

      <\/p>\n

      WHAT IS INCLUDED IN THE PRICE:<\/strong><\/strong>
      \n<\/span>The contract price for defense-related goods, works, and services includes all taxes and duties, general production costs, administrative, operational, and other expenses related to production and performance, as well as the contractor’s profit (supplier fee).<\/span><\/div>\n

      Repair cost calculations are compiled based on technical defect assessment findings conducted when the defense item is admitted for repair.<\/span><\/p>\n

      Cost Calculation Items for Repairs:<\/h3>\n
      \n

      Expenses are grouped into the following cost calculation categories:<\/p>\n

      <\/p>\n

      \n\n<\/p>\n\n\n
      \n
      01<\/div>\n

      Raw materials and supplies<\/td>\n

      		\n
      02<\/div>\n

      Purchased semi-finished products, components, and third-party production works\/services<\/td>\n

      		\n
      03<\/div>\n

      Fuel and energy<\/td>\n

      		\n
      04<\/div>\n

      Direct production labor wages<\/td>\n<\/tr>\n

      <\/p>\n

      \n
      05<\/div>\n

      Additional wages<\/td>\n

      		\n
      06<\/div>\n

      Social security contributions<\/td>\n

      		\n
      07<\/div>\n

      General manufacturing overhead<\/td>\n

      		\n
      08<\/div>\n

      Other expenses<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n

      <\/p>\n

      \n

      LIABILITY:<\/b><\/strong><\/p>\n

      The state contractor bears full legal liability for the calculation accuracy, cost justification by item, and the validity of all supporting documents. Detailed cost itemization forms are determined by the state customer and provided to state contractors.<\/span><\/p>\n<\/div>\n

      Cost of Unmanned Systems, EW Equipment, and Active Countermeasure Systems<\/h2>\n

      The costing mechanisms for unmanned systems, electronic warfare (EW) equipment, and active countermeasure systems are governed by CMU Resolution No. 256 of March 24, 2023, and CMU Resolution No. 1275 of November 11, 2022.<\/span><\/p>\n

      Price Calculation and Maximum Profit Margin<\/h3>\n

      According to clause 8 of Resolution No. 256 and clause 5 of Resolution No. 1275, domestic contractors negotiating a defense contract for the manufacture and supply of unmanned systems must provide the defense customer with a price calculation in accordance with Annex 1.<\/span><\/p>\n

      <\/p>\n

      \n

      MAXIMUM PROFIT MARGIN \u2014 25%:<\/strong>The contractor’s profit margin in the contract price may not exceed <\/span>25 percent of the production prime cost<\/strong> of the goods, works, and services. Statutory taxes and duties are excluded from the profit calculation base. The contractor bears full responsibility for the accuracy of the calculation. When procuring an individual component of an unmanned system, clause 2 of Annex 1 does not apply.<\/span><\/p>\n<\/div>\n

      Expenses EXCLUDED from the Price Calculation of UAVs and EW<\/h3>\n

      Under clause 9 of Resolution No. 256, price calculations include all taxes, duties, and <\/span>general manufacturing, administrative, operational, and other expenses<\/strong> directly related to producing unmanned systems, <\/span>except for the following non-allowable expenses:<\/strong><\/p>\n