Lawmakers take hands on approach to proposed new law on public tenders

Public tenders are one of the biggest business opportunities in the Czech Republic, and over recent years have been one of the most fraught. It’s estimated that the total Czech market for local councils, regions, state bodies and authorities for goods and services is worth an annual 600 billion crowns. And it’s now just big firms that rely on the work for a substantial part of the turnover, it’s also a lifeline for many small and mid-sized companies as well.

Photo: Khalil Baalbaki

But the operation of this massive market in the Czech Republic and much of the rest of the Europe has not been as smooth and unproblematic as many of the architects of a single European market might have dreamed. It is hard to escape the basic conclusion that many government, ministries, state companies, or councils simply don’t want to throw their markets open but prefer the traditional habit of preferring local or national preferred suppliers.

Sensitive areas, such as security and defence, are often excluded from the demand that public tenders are held. Specific rules for holding tenders, such as minimum contract sizes sparking competitions, are circumvented by chopping up the order into smaller sections. And then, there is the tendency of companies in certain areas to collude so that the competition is meaningless.

It’s with an eye to these flaws that the European Commission pushed for a set of new public tender rules in 2014 and gave member states two years to follow through with delivery. The rules basically set out the context for when public tenders must be held, how they should be set out, what sort of considerations can be used when choosing a supplier [for instance dropping turnover requirements which in the past penalised small companies] and obligations for using electronic tender notifications. The overall aim was more competition and less room for corruption. For example, there is an obligation to identify who took part in drawing up the tender, a basic step to preventing tailor made tenders or corruption.

And companies should not be banned from tenders for small mistakes or minor flaws in the documentation as they can be now. Town halls can, however, for example bar companies with whom they have previously had a bad or unsatisfactory experience over a contract. The Czech version of the rules should be presented to the lower house of parliament today. And although the Minister for Regional Development, Karla Šlechtová, has reportedly been lobbying for months and weeks for lawmakers not to introduce changes to the basic text, her urgings seem to have fallen on arid soil.

The business daily Hospodářské Noviny reported Tuesday that several dozen proposal for changes and amendments have already been prepared. Many of these fundamentally alter the basic aim of the original text to have a clear and relatively easy tender system in place. Some even head in the actual direction, preparing the ground for more goods and services to be ordered without public offers taking place.

The fate of these amendments will be interesting. And the speed at which the proposal passes through the intestines of the Czech parliamentary process will also be closely observed. The target for getting it through is mid-April, otherwise the European funds that contribute a handsome part to many of these tenders could be withheld by Brussels.