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Let´s Bid in the Czech Republic

August 2009 - Corporate & Commercial. Legal Developments by Wolf Theiss.

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Public procurement is a significant part of the Czech economy and constitutes more than 17% of its GDP. Public procurement is regulated by Act No. 137/2006 Coll., on Public Contracts and Act No. 139/2006 Coll., on Concession Contracts and Concession Procedure (Concession Act).

The above mentioned Acts comprehensively regulate public procurement in the Czech Republic and are primarily based on new European law. The specific objective of the Czech law is to ensure the effective and efficient handling of public funds. The Czech public procurement market is fully open to suppliers from any foreign country, thus foreign suppliers can take part in any Czech tender.

The relevant legislation is accessible on the website maintained by the Ministry for Regional Development and is available in English (http://www.portal-vz.cz/).

Public Contracts

Based on the estimated value of a public contract, such contract can be classified as an above the threshold public contract, a below the threshold public contract or a public contract of minor value. Based on the subject matter, a public contract can be classified as a supply, service, or construction works contract. Such classification of public contracts is important for choosing between more or less formalized legal procedures regulated by the Act on Public Contracts, and to decide whether or not the Act must be used for awarding the public contract, or to determine the necessity of publication of the tender notice, or for choosing the type of procurement procedure. We can provide an example of a public contract of minor value, which the contracting entities do not have to award according to the Act. However, the contracting authority must comply with the principles of transparency, equal treatment and non-discrimination.

Contracting Entities

The law defines three categories of contracting entities: (i) contracting authority, (ii) subsidized entity, and (iii) utility entity (utilities). Different contracting entities must comply with different requirements (e.g. different thresholds) and conditions when awarding public contracts.

A contracting authority is the Czech Republic, a state allowance organization, a regional self-governing unit, and a body governed by public law. Typically, it involves a ministry, other administrative authorities, courts, regions or municipalities.

A subsidized entity is a legal or natural person awarding an above the threshold public contract on construction works and related services that is covered by more than 50% from financial funds provided by the contracting authority, even through another person. Typically, it involves anyone who has received subsidies from the contracting authority.

A utility entity (a sector contracting entity) is primarily a natural monopoly (a legal or natural person) performing the relevant activity (as defined by law) in gas, heat, electricity, water management industry, etc. A utility entity awards only above the threshold public contracts according to the Act, and generally is regulated by less strict awarding rules.

Information System on Public Contracts

The Information System on Public Contracts centrally collects information on public contracts and concessions. It is free of charge to access the system on http://www.isvz.cz/, where, among other things, you can find information about ongoing tenders.

Procurement Procedure

Procurement procedure leads to the award of a public contract. The contracting entity selects the most suitable tender and concludes the public contract with the winning supplier. The open procedure is the prevailing type of procurement procedure. The notice of open procedure is an invitation to all suppliers to submit their tenders and to demonstrate the fulfilment of qualification requirements. Other types of procurement procedures include (i) the restricted procedure, (ii) the negotiated procedures, (iii) competitive dialogue (which allow the reduction of the number of suppliers, who will be invited to submit tenders) and (iv) simplified below the threshold procedure.

Qualification Requirements

The aim of assessing the qualification requirements of the supplier is to ensure that an evaluation committee evaluates only the tenders of such suppliers that are able to fulfil the subject of the public contract. For this purpose, the contracting entity sets the basic qualification requirements (e.g. clean criminal record), professional qualification requirements (relevant registration e.g. in the Commercial Register or a professional organization membership), financial and economic qualification requirements (e.g. liability insurance), and technical qualification requirements (e.g. references - a list of the performed significant contracts).A foreign supplier demonstrates the fulfilment of qualification requirements according to the law in the country of its registered office. Such documents may be replaced by an affidavit of the supplier where the country of the supplier does not issue them. The foreign supplier submits evidence demonstrating the fulfilment of qualification requirements in its original language together with a certified translation into the Czech language.

PPP Projects

PPP projects may be awarded as public contracts under the Act on Public Contracts (so-called quasi-concessions) or as concessions under the Concession Act. In both cases, certain economic risks relating to the use of the subject matter of the PPP project are transferred to a supplier. The main difference between the quasi-concession public contract and the concession is a source of income of the supplier: in the case of concession, the supplier benefits from the use of the construction or the provision of services; and in the case of a quasi-concession public contract, the tender price for the construction or provided services is primarily paid by the contracting entity.

Supervision of Compliance with the Act

A supplier, whose rights have been harmed as a consequence of an alleged infringement of the law by an action of the contracting entity, can submit to the contracting entity reasoned objections against such action. If the contracting entity does not meet the objections, the supplier may submit a complaint to the Office for Protection of Economic Competition.

 

This article was already published in "Doing business in the Czech Republic" 2009/2010.

 

For further information, please contact Lenka Krutakova, Wolf Theiss, Tel. +420 234 765 111, lenka.krutakova@wolftheiss.com

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