Czech Republic: amendment to the Public Procurement Act

Czech Republic

The new amendment to the Czech Public Procurement Act (the “Act”) will be effective from 1 April 2012. The amendment’s key principle is “the best consideration for the best price”. The crucial changes introduced by the amendment are as follows:

Reduction of financial thresholds

The thresholds for public supply contracts and public service contracts are to be reduced to CZK 1 million/ EUR 40,000 (from CZK 2 million/ EUR 80,000) and construction work contracts to CZK 3 million/ EUR 120,000 (from CZK 6 million/ EUR 240,000). The contracting authorities have a duty to publish a preliminary announcement of their intent to hold a public tender, including the reasons behind the intention, at least one month prior to the initiation of public tender proceedings. Practically, this means that a much broader volume of public contracts will be contracted through the public tender process. It creates new possibilities for business entities to participate in public procurement. Moreover, business entities (potential bidders) will have more time to prepare their bids.

Qualification requirements for suppliers

The amendment provides for the removal of the supplier’s obligation to submit documentation proving economic and financial qualification criteria (such as the supplier’s financial capacity to provide consideration). Furthermore, the contracting authority will no longer be able to ask the bidders for ISO or other certificates. The technical qualification criteria in respect of relevant experience can be evidenced only by references and relevant contracts. As a result, bidders will have to face a less rigorous administrative burden.

Special authorisation for “significant” public tenders

A new concept of “significant” public tenders with a stricter regime is to be introduced. The thresholds are CZK 300 million/ EUR 12,000,000 if the contracting authority is a state body, or CZK 50 million/EUR 2,000,000 if the contracting authority is a local or municipal body. The contracting authorities are required to obtain a special authorisation from its supervisory authority, as well as from an evaluation committee.

Cancellation of the public tender in the case of a sole bid

If the contracting authority only receives one bid, the public tender process will have to be cancelled. This means that the public tender process should always be based on competition between at least two bids.

Publication of subcontractors

The winners of a public tender will have a duty to release details of subcontractors supplying more than 10 percent of the price, or 5 percent of the price in the case of significant public tenders. As a result, it will no longer be possible to hide the identity of suppliers of public tenders who receive the price for the public tender.

Increased supervision

The Act doubles the potential fines for both the contracting authorities as well as the bidders, increasing the fines up to a maximum of CZK 20 million (EUR 800,000). The Act also increased the Competition Authority’s supervisory powers.

The reform is one small step towards greater transparency. However, several issues (including the release of ownership structure, anonymous shareholders and silent partners) remain unresolved, and further amendments to the Act in the near future may be expected.

Law: Act No. 55/2012 Coll., Amendment to the Public Procurement Act