What’s missing from the new public tenders law

Perhaps no new Czech law has been anticipated with such great hopes — both justified and idealistic — as the amended law on public tenders. The legislation aimed at cutting out corrupt practices from public contracts came into force on April 1. But while the law  is certainly a step in the right direction, as indicated by the rush to churn out tenders under the provisions of the old law by the end of March, it is still far from ideal.

But before detailing the biggest shortcomings of the new package of rules, here’s a quick summary of what has been improved under the new  provisions:   

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• New rules require tender issuers to publish a larger amount of information about public tenders;
• The financial and economic requirements issuers can demand have been limited;
• With just a few exceptions, the number of bidders cannot be limited. Previously, the number of offers was typically limited by the use of lotteries and or on the basis of qualification criteria;
• Toughening of sanctions and penalties that the Office for Protection of Competition (ÚOHS) can impose;
• Tenders can be scrapped without legal consequences in cases where all the offers received are given a low evaluation.

Clearer rules should attract more bidders

These measures will bring greater transparency to public tenders. “A section of suppliers and deliverers did not participate in public tenders because they knew they had no chance of success, and could only win in a fair competition,” commented lawyer Daniel Weinhold, who headed the expert group Platform for Transparent Public Tenders, which participated in the drafting of the amended law.

Tender issuers should also benefit from the new rules. “If the process of issuing tenders is non-transparent, even if the issuer does not introduce corrupt practices they still get fewer offers. A system that enables selection not according to the most transparent method leads to losses both on the sides of issuers and suppliers,” Weinhold explains.

Prior to the drafting of the amendments, the platform proposed 39 specific measures. “Roughly two thirds were worked into the new law on public tenders, and a third will be accommodated in other laws,” Weinhold says. Those other laws include a public administration bill that is supposed to protect civil servants from political pressure and should be presented to the government before the end of the year.

Sector suppliers and a ministerial promise

The new rules from which sector suppliers are exempt include the obligation to publish contracts and prices agreed with subcontractorsSo what are the shortcomings of the amended law? The rules for so-called sector suppliers, firms operating in the utilities sectors: gas, municipal heating, electricity and water, have been criticized for being way too soft. Suppliers of goods and services in these areas have essentially been spared from nearly all the new measures supposed to guarantee transparency of public tenders. For them, the new law hasn’t changed anything fundamentally.

“The government’s original version of the amended law counted on the new measures being applied to all suppliers. However, sector suppliers were removed during the approval process,” Weinhold said.

“According to my information, an amendment to the bill relating to sector suppliers was introduced by the [lower house of parliament’s] economy committee just before the bill was put to the vote, and the Chamber of Deputies voted in favor of that version,” Dan Ťok, head of construction firm Skanska’s Czech operations, told Czech Position.

The new rules from which the sector suppliers are exempt include the obligation to publish contracts and prices agreed with subcontractors. For example, Ťok points out that issuers of sector tenders can even avoid calling a public tender altogether for contracts with a value under Kč 126 million if they can claim emergency circumstances. “The Platform for Transparent Public Tenders [of which Skanska is a member] is demanding at least a reduction of the limit over which a public tender must be called,” Ťok said.

After the amended law was passed, Minister for Regional Development Kamil Jankovský (Public Affairs, VV) promised to toughen the rules for sector tenders before the new law came into effect. However, this did not happen. “At the current time the Ministry of Regional Development is not working on an amendment which would change the position of sector suppliers,” ministry spokeswoman Jana Jabůrková told Czech Position after the  law came into effect. 

The ministry says it is not taking steps in this area because it says it expects the EU to issue new guidelines for sector suppliers. “Generally, we propose evaluating the state of the law on public tenders after a certain time of the new law being in effect and firstly analyze the new EU guidelines and subsequently formulate what should be done,” Jabůrková said.