Dash to beat new Czech public tender rules

Despite rush to issue public tenders before amended law took effect on April 1, loopholes remain and will also undoubtedly be exploited

Politics & Policy|Companies
Kateřina Menzelová | 10.04.2012
The end of March saw a figurative race by public bodies to issue tenders under the older and ‘more flexible’ rules

Despite the fact that stricter regulations governing Czech public tenders aimed at stamping out corrupt practices came into force on April 1, the old rules will continue to influence “the game” for some time yet. What’s more, it appears the new regulations are not completely resistant to manipulation. Czech Position attempted to track what went on with public tenders just before the April 1 deadline.

The Ministry of Regional Development (MMR) still does not have exact figures of how many so-called limited public tenders — a process whereby the number of bidders in a tender is limited before the selection process proper is held — were held in the first quarter of this year. However, according to the ministry’s estimates, between 100 and 130 such tenders with a total value of between Kč 10 billion and Kč 12 billion were held during that period. In the first quarter of 2011, in all 99 limited public tenders with a total value of around Kč 8 billion were held.

Just in time!  

The Ústi nad Labem region announced six tenders on the last working day of March, in all of which lotteries are to be used The data available clearly indicate that certain organs issuing tenders were in a big hurry to announce tenders prior to April 1 in order for those tender processes to be governed by the old, more “benevolent” regulations.

“A growth in the number of tenders issued is apparent prior to every change in the relevant laws. Subjects try to use the familiar processes rather than tackling the new regulations,” MMR spokeswoman Jana Jabůrková told Czech Position.

The best known aspect off the new public tender rules is the end of the dubious practice of narrowing down the number of bidders through a lottery. A look at the Public Procurement and Concessions Portal reveals that a number of public organs were fully occupied with arranging tenders with lotteries before the ban of the practice.    

Tenders in which lotteries are to be used and which were issued on March 30, the last day possible, include contracts to renovate and enlarge drains and sewage systems in the municipalities of Příseka, Jablonná, Strmilov, Březnice and Dřínov. The Ústi nad Labem region — which along with the Central Bohemia region made most use of the lottery system — announced six tenders on the last working day of March, in all of which lotteries are to be used.    

The new version of the law on public tenders not only puts an end to the practice of limiting the number of offers through a lottery, it is now no longer possible to demand bidders to fulfill certain economic conditions such as proving a certain level of liquidity, not having debts over a certain level, or other specifications that could be selectively used to select or rule out or select specific bidders.  

Uncontrollable criteria

One tender issued in the Central Bohemia region just a few days before April 1 is a prime example of selective use of criteria. The tender is for the construction of a new building at the hospital in Mladá Boleslav with an underground garage, kitchen, residential hall and a training center. Those interested in bidding for the contract estimated to be worth around Kč 322 million including VAT have until May 2 to put in offers.

As is the usual practice in the Central Bohemia region, the number of offers to be considered is to be limited to five. The bidders are to be ranked on the basis of compliance with the following 11 conditions:       

  • Number of similar buildings constructed costing a minimum of Kč 300 million (excluding VAT) which included a car park on one level; 
  • Number of similar buildings constructed costing a minimum of Kč 200 million and which comprised a kitchen costing at least Kč 30 million (excluding VAT);
  • Number of similar buildings built, costing at least Kč 250 million (excluding VAT), within the grounds of a healthcare facility;
  • Number of similar buildings constructed costing at least Kč 100 million with a green roof measuring at least 1,000 meters squared;
  • Number of similar buildings constructed costing at least Kč 40 million (excluding VAT) which included a compressor unit and oxygen production station;
  • Standard liquidity, overall debt reaching value of founding capital, income from construction production, environmental protection and quality control during construction.

Czech Position requested a lawyer to assess these criteria for selecting finalists. “Technically, it’s of no consequence whatsoever if a garage is built costing Kč 100 million or Kč 300 million. As for the kitchen, for the purpose of reference what’s important are the dimensions and type, not whether it was part of a building built at a cost of Kč 50 million or Kč 200 million. It’s a mystery why bidders must show they have implemented a construction project costing at least Kč 250 million on the grounds of a healthcare facility. Why was this figure set? And the environmental aspect is completely at odds with the law because it is not a condition for qualification under the law on public tenders, thus the number of finalists cannot be limited on this basis,” said the lawyer, who chose not to be named.

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The government is hopefully making good progress

As a small business owner, it was impossible for me to submit bids for public tenders for even the smallest of tenders because of ludicrous requirements under the old regime as the ones stated in the article. The most frequent requirement is for balance sheets to be in the hundreds of millions of koruna just to supply anti-virus software licenses.


This was obviously done in order to exclude 99% of bidders. I think the author is correct in saying that there are armies of lawyers across the country trying to find loopholes in the new regulations to continue restricting potential bidders. It should be indeed interesting to see how future bid requirements are structured.

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