The Czech Parliament has adopted a new Act on Public Procurement

Czech Republic

The Czech Parliament has adopted a new Act on Public Procurement

The Czech Parliament has adopted a new Act, No. 40/2004 Coll., on Public Procurement (the "Act"). The Act represents the transposition of certain regulations issued by the European Council, Parliament and Commission into Czech national law. 

 

The new Act defines:

1) New thresholds: 

  • the minimum threshold limit for public procurement is now set at CZK 2,000,000 (approximately  EUR 65,000) under the Act, however all relevant undertakings must have acted in a non-discriminatory and transparent manner in all cases; and
  • a new definition of public procurement, "above a certain limit" can be found in the Act. This new definition includes procurements ranging from EUR 130,000 (for public procurement organised by the Czech Republic and state budgeted organisations) up to EUR 5,000,000 (for construction works). The relevant financial boundaries, as set in Czech Crowns and governed by an independent Regulation, can be found published in the Official Journal.

2) Three types of public procurement: 

  • supplies;
  • services; and
  • construction works.

3) Four types of tender: 

  • open tender, meaning all suppliers may attend and take part;
  • closed tender, meaning only suppliers selected by the organiser of the tender (from 5 to 20 suppliers) may attend and take part;
  • negotiation proceedings including publishing, meaning only suppliers selected by the organiser of the tender (at least 3) may attend and take part. Suppliers are then invited to negotiate. Providers of telecommunication and transportation services, or energy and water suppliers, may use this type of tender at any time. Detailed conditions for use of this type of tender are stipulated by law; and
  • negotiation proceedings excluding publishing, meaning supplier(s) selected by the organiser of the tender are directly invited to negotiate. Detailed conditions for the use of this type of tender are stipulated by law.

3) Minimum deadlines:

 

Minimum deadlines for the submission of offers within the tender and the deadlines for publishing information concerning the results of the tender have been set by the new Act.

4) Basic criteria for the evaluation of offers: 

  • economic advantage of the offer; and
  • price.

The new Act also governs public tenders organised by entities controlled by public authorities and private persons where the public procurement is funded by more that 50% from public budgets.

The Act states that the selected providers of telecommunication and transport services, and energy and water suppliers are only governed by the Act in instances of public procurement work above the financial limits stated above and if the procurement relates to the supplier's main activities.

The Act allows for the organisation of a public tender by more than one entity or person jointly. This regulation is not applicable to providers of telecommunication and transportation services, and energy and water suppliers unless the public tender concerns services provided by a related party.

The new Act also allows providers of telecommunication and transportation services, and energy and water suppliers to conclude a so-called "framework contract" with participant(s) to the tender in which the basic contractual conditions for public procurement will be agreed for a certain period of time. Subsequent public procurement is then governed by the framework contract and an individual public tender may be organised in the form of negotiation proceedings, as described above.

The providers of telecommunication and transport services, and energy and water suppliers are entitled to refrain from organising public tenders in the case of public procurement services provided by related parties.

The Act also creates a list of qualified suppliers, to be maintained by the Ministry for Local Development, as a system for proving basic qualification requirements for public procurement.  On-line access is expected to this database that essentially creates an information system at the core of public procurement.

The providers of "above-limit" public procurement are obliged to publish information and details on the procurement in the Official Journal. Other public procurement information must also be published in the centralised information system. This requirement also relates to an annual plan covering public tenders, where the anticipated amount of public procurement in the relevant year exceeds EUR 750,000 for supplies and services, and EUR 5,000,000 for construction works.

The new Act expressly states that any actions in contradiction to, or in circumvention of the law, or made in bad faith, are invalid.

The new Act also regulates the procedural aspects of public procurement, including review by the relevant authorities, namely the Office for Protection of Economic Competition of the Czech Republic ("OPC"):

1)      persons filing objections to the OPC are now obliged to pay a bond (which under certain conditions is repayable) in the amount of 1% of the offered price (up to CZK 1 million);

2)      the fee for filing objections to the OPC is fixed at CZK 30,000;

3)      objections to the provider of the public procurement (and subsequently to the OPC) may be filed by any supplier ( for "above-limit" procurements) or by the participant to the tender (for other types of public procurement);

4)      sanctions against providers of public procurement have been increased from 1% of the price offered,  to 5%, or in a fixed form of up to CZK 10 million;

5)      offers within a public tender may also be submitted in electronic form incorporating an authorised electronic signature under a qualified certificate;

6)      the new Act defines precise deadlines for decisions of the provider and OPC on objections made.

The new law creates the possibility of organising settlement proceedings rather than administrative proceedings (as organised by the Commission), for "above-limit" public procurements organised by or for providers of telecommunication and transport services, or energy and water suppliers.

 

 

For further information please contact Richard Bacek on richard.bacek@cms-cmck.com or on +420 221 089 834