Public Procurement

Author:	Markéta Peňázová , Ambruz & Dark, advokáti, v.o.s
Date:	1. 6. 2007

 

Subjects managing public funds must comply with the rules regulating utilisation of these funds when concluding public contracts. The aim of the public procurement regulation is to ensure that public funds are used economically, effectively, transparently, and without discrimination.

From 1 July 2006, the new Public Procurement Act is in effect in the Czech Republic, which implements European public procurement directives effective from April 2004 [1]. Compliance of the Czech public procurement regulations with Community law is, among other things, a precondition for drawing on EU structural funds.

The new Public Procurement Act is to be observed in connection with awarding public contracts falling under the scope of the Act by the contracting authorities, whom the Act divides into three categories: public contracting authorities (the Czech Republic, allowance organisations, bodies of the Czech Republic, regions, municipalities or their parts, etc.), subsidised contracting authorities (entities that award certain public works contracts whose value exceeds statutory limits and of which more than 50% is subsidised by a public contracting authority), and sector contracting authorities (entities conducting activities in the gas, water, energy, transportation, and postal services sectors). Sector contracting authorities are bound to observe the Act only in connection with relevant activities and in the case of above-the-threshold public contracts. The Act also allows contracts to be awarded through a central purchasing body or in association with other contracting authorities.

A public contract is a written contract on the provision of supplies, services or works for a consideration. A public contract has to be awarded in public procurement conducted in compliance with the rules stipulated in the Act. Breach of the rules stipulated for awarding of public contracts renders the respective public contract invalid. The Act stipulates general exceptions from its applicability, which means that contracting authorities are not obliged to comply with the Act, e.g., in the case of security interests or defence of the country, humanitarian aid, transactions with securities, lease or acquisition of existing real estate, etc.

The Act uses the object of the public contract to distinguish between public supply contracts (for acquisition of an object), public works contracts (for construction works or building construction), and public services contracts (a residual category for public contracts that are neither public supply contracts nor public works contracts).

According to the estimated value of a public contract, which does not include VAT and which is determined by the contracting authority prior to commencement of the award procedure under the Act, the Act distinguishes three categories of public contracts. The first category is above-the-threshold public contracts, in which the estimated value of the object of the contract equals or exceeds the financial limits set out in the Act, which limits differ based on the object of the contract and nature of the contracting authority. The limits stipulated in the Act are to be reviewed (by an amendment) approximately once every two years in accordance with the limits published in the Official Journal of the EU, according to the changes in the euro exchange rate. The European public procurement directives apply to the above-the-threshold public contract. The second category represents below-the-threshold public contracts that exceed CZK 2 million but do not reach the financial limits set for the above-the-threshold public contracts. General rules stipulated by the Treaty establishing the European Community (such as non-discrimination) apply to the below the threshold public contracts. The Act further defines small-scale public contracts for which the Act does not stipulate any binding procedures; only the general principles such as transparency, equal treatment and non-discrimination are to be observed.

The Public Procurement Act sets forth six types of award procedures: open procedure, restricted procedure, negotiated procedure with publication of a notice, negotiated procedure without publication of a notice, competitive dialogue (new) and simplified below-the-threshold procedure. In an open procedure, the contracting authority invites an unlimited number of bidders to submit bids and to demonstrate qualifications. In an open procedure, the contracting authority may introduce a dynamic purchasing system: an entirely electronic process for making commonly used purchases generally available on the market. In a restricted procedure, the contracting authority invites an unlimited number of bidders to prove their qualifications and then invites selected qualified bidders to submit bids. In a negotiated procedure with publication of a notice, the contracting authority invites bidders to file a request for participation in the award procedure and to demonstrate their qualifications, and then invites selected qualified bidders to submit bids, which are then negotiated. In a negotiated procedure without publication of a notice, the contracting authority announces its intention to award a public contract directly to one or more selected bidders. The public contracting authority may use competitive dialog for particularly complex performances only, in respect of which the contracting authority itself is not able to specify the technical requirements of the contract. Its aim is to develop one or more suitable alternatives capable of meeting the requirements of the contracting authority. In a simplified below-the-threshold procedure the contracting authority invites in writing at least five bidders to submit bids and to demonstrate qualifications. The contracting authority is obliged to publish the written notice in an appropriate way.

The Public Procurement Act stipulates a range of public contracts that can be awarded in individual types of award procedures and the conditions and method of use of the award procedure in question.

The Public Procurement Act regulates in detail the course of individual types of award procedures, such as the content and provision of contract documentation; provision of tender security; time limits for submission of bids and their content; electronic submission of bids; and, in general, the evaluation of the bids based on selected criteria. A basic criterion for the award of a public contract is the economic advantage of a bid or the lowest bid price. At the beginning of the award procedure the contracting authority has to publish the basic criterion and any additional criteria, and the weight that will be attributed to each criterion. The new Act also regulates electronic auctions, which can be used in an open procedure, restricted procedure, or negotiated procedure with publication of a notice as a means of evaluation of bids. The Act further regulates assignment of a public contract and conclusion of the contract or cancellation of an award procedure.

The award procedure is commenced by publication of a public contract by means of an information system for award of public contracts (www.centralniadresa.cz). Above-the-threshold public contracts are also published in the Official Journal of the EU, as it is necessary to ensure that all interested bidders in the EU have the opportunity to participate.

At the beginning of an accounting period, the contracting authorities are obliged tentatively to announce public contracts that they intend to award during the next 12 months and in respect of which they intend to shorten the term for submission of bids. Groups of supplies or categories of services whose estimated value amount to at least EUR 750,000 shall be stated in the announcement. In respect of public works contracts, the contracting authorities are obliged to announce tentatively only above-the-threshold public contracts without undue delay after the approval of the intention to award the contract.

Suppliers, i.e., bidders for a public contract, must meet the qualification requirements stipulated by the Public Procurement Act. Suppliers may apply for registration in the list of qualified suppliers kept by the Ministry for Regional Development. Suppliers registered in this list no longer need to provide the contracting authorities with documentation demonstrating the fulfilment of qualification criteria. Their qualifications and the fact that they meet the conditions stipulated in the Act may also be demonstrated by presenting a certificate issued within the system of certified suppliers, or an extract from a foreign list of suppliers.

Surveillance over compliance with the rules on award of public contracts was entrusted to the Office for the Protection of Competition. The submission of a motion proposing examination of conduct of a contracting authority in connection with public procurement is subject to a surety payment.

Breach of the obligatory award procedure for a public contract is subject to a penalty of up to 5% of the tender price or up to CZK 10 million (according to the type of breach). In the case of a repeated breach of the obligatory award procedure, the penalty may be doubled.

In the case of disputes concerning the conduct of the sector contracting authorities in respect of above-the-threshold public contracts, the European Commission has the authority to conduct conciliation procedures under Council Directive No. 92/13/EEC of 25 February 1992 upon the request of a bidder and with the consent of the contracting authority.

Useful web links

Statute book of the Czech Republic
Ministry for regional development of the Czech Republic
Information system for award of public contracts