Prague 7’s massive tender for new City Hall merely ‘testing the waters’

Now 16 months after Prague 7 called a tender to secure new headquarters for the district’s town hall comes a twist in the case: what had previously been presented as a classic public tender has been recast as mere “market research.”

This comes as a shock, since it was considered the biggest real estate tender now underway in the Czech capital: the cost of constructing a new building for Prague 7, including interest on the loan the district would need to take out, is estimated at over Kč 1 billion. And yet, as Czech Position previously reported, the process itself has been among the most deeply flawed of all such tenders.

Prague 7’s lease on the office space for which it now pays Kč 10 million per year, or roughly three percent of its annual budget of Kč 334 million, expires in 2012. District representatives discussed the tender on Monday afternoon (April 23) and put the issue to a referendum. If approved, the decision would have been left up to the districts’ residents — but it was rejected.

Major developments thus far:

• Shortly before Christmas 2010, an invitation for bids to house Prague 7 City Hall offices was published. The requirements: land or an existing building of approximately 10,000 square meters, including space for a polyclinic and cultural center with a hall large enough for 500 people. The parameters changed significantly, from the requirements to the selection criteria, for example accessibility and price, and the names of the bidders themselves remained secret.
• Prague 7 City Hall received 11 bids, and shortlisted five contenders.
• In selecting a new headquarters, the councilors relied on a single expert at the company Cautor Consulting, which won the contract without having to compete for it. According to its website, the company specializes in two main areas: giving financial advice, especially when restructuring a business in the Czech Republic, project management or mergers and acquisition; and consulting services regarding securing grants from all available sources. How the Prague 7 City Hall would fit into either category is unclear.
• In early September 2011, councilors approved two buildings as suitable for the new headquarters: building B of PPF Real Estate’s Argentinská hvězda (Argentine Star) project, and Mercury Tower, belonging to the firm Argentinská 38; this is in turn 90 percent owned by the Austrian company REWO with the remained held by the Cyprus-based company Miracle Diamond. PPF has been asking Kč 762 million and the price tag on Mercury Tower was Kč 845 million.
• At the end of October 2011, Prague 7 signed a contract with BDO tax, which was to develop a model of financings for the two projects that were left in the competition.

Not long ago, it seemed that the tender was coming to a close — in the autumn Prague 7 was obliged to seek a legal opinion as to whether the competition itself was being carried out according to the law, and the result wasn’t pretty. But although numerous problems were uncovered, the district found no “reason why it should reassess or revise the ongoing selection process.”

In December 2011, however, representatives from the opposition TOP 09 party called upon the Czech competition watchdog, the Office for Protection of Competition (ÚOHS), to investigate whether the tender process was being done in accordance to the law; the findings of ÚOHS show that some aspects indeed were not. ‘Some market research was carried out, and the outcome will be reflected in other decisions.’

Last week, Czech Position asked Prague 7 spokesman Martin Vokouš if the district was considering cancelling the tender, as TOP 09 and the Greens (SZ) have called for. The answer was unexpected. “The Prague 7 district has not organized any competition so far. Some market research was carried out, and the outcome will be reflected in other decisions,” he said. 

If Prague 7 is merely performing “market research,” why did it not say so 16 months ago? Does the district intend to declare a proper tender only after conducting “thorough” market research, and when there is only one bid on the table? Or is it simply a signal that the district mayor, Marek Ječmének (Civic Democrats, ODS) is looking to de facto cancel the tender without having to admit the process has failed – yet again? Logically, you cannot cancel something that has not yet been announced.

Prague 7 has in fact been looking for new headquarters for more than 17 years now. The previous tender ended in fiasco in 2010; just ahead of signing the purchase contract, the competition was canceled. The saga continues.