The Czech Republic has updated its laws on public procurement to bring them into line with European rules – but there are one or two things you ought to know

Public procurement law is close to the hearts of many investors and others involved in property and construction in the Czech Republic. It has long been of importance to their day-to-day business, not only since public authorities award construction projects, but also because other areas (such as maintenance or services contracts) are affected by these rules.

Public procurement was first regulated under a Czech law in 1994. But during the negotiations to join the European Union, officials in Brussels persistently called for more changes, arguing that Czech rules still fell short of EU norms. On the eve of accession, the Czech government agreed to overhaul public procurement law. It proposed an act on public procurement, the main objective of which was to ensure full compliance with the EU. This was adopted in December 2003 and took effect with accession on 1 May.

The main changes to Czech public procurement rules are as follows:

  • Procedures for awarding contracts. The act aligns Czech law with EU legislation on the types of procedure to be followed by an awarding authority.

Four main procedures apply: the open procedure, the restricted procedure, the negotiated procedure with competition and the negotiated procedure without competition. As a basic rule, the awarding entity is to choose between the open and restricted procedures, subject to the minimal value of the procurement as set out in the act. The authority can only opt for the negotiated procedure with or without competition if certain specific (and strict) conditions are fulfilled.

  • Qualification criteria and criteria for awarding contracts. One of the main improvements of the reform is that the qualification criteria for bidders are more detailed. Similarly, the act provides for more specific criteria for evaluating bids and awarding contracts and details rules on the participation of consortiums and subcontractors.
  • Procedure and sanctions. The act enhances the power of the relevant authorities to review public procurement procedures and to sanction non-compliance. For example, if somebody objects to a decision to award a contract, the awarding entity cannot conclude the deal with the chosen bidder for 60 days, or more if so required. Further, a review body can award interim relief to suspend either the award procedure itself or the implementation of any decision.

The act also extends the list of those who are entitled to bring an objection, but to deter non-selected bidders from bringing frivolous motions before the Office for the Protection of Competition they must pay a fee to do so.

  • New concept and terminology. The act is based on EU procurement legislation. To a limited extent it incorporates some of the changes anticipated by recent reforms to EU legislation. The act redefines some of the basic notions used in the old act.

Despite these changes it is apparent that the act failed to address some important issues. Most notably it failed to deal with public–private partnerships, public works concessions and service concessions, which are increasingly used in the Czech Republic. To remove the legal uncertainty surrounding the use of these concepts, the act will require additional amendments.

Amendments will also be needed because of the recent developments in EU procurement law. At the beginning of this year the Council of Ministers approved two EU directives aimed at the modernisation of European procurement rules. The Czech Republic must incorporate these directives into law before 2006.

One of the most important changes will be the introduction of the “competitive dialogue procedure”, which provides more flexibility to contracting authorities to negotiate with potential bidders. It also introduces provisions over electronic purchasing and, in particular, over reverse auctions. Last, but not least, the reform will see a number of other changes concerning, for example, framework agreements or selections and award criteria.

Alan Spanvirt works at the Prague office of Linklaters in the Czech Republic. This article was co-authored by Emma Wilson in Linklater’s London office.