News

New Public Procurement Act as of 1 October 2016

On 1 October 2016, new Act No. 134/2016 Coll., on Public Procurement, became effective. Below is an overview of several selected changes the new legislation will bring.

In addition to streamlining the tender procedure and making it more efficient and effective, the new act should also decrease the administrative burden experienced by clients and suppliers. Greater flexibility given to clients in public procurement goes hand in hand with increased responsibility, as clients will newly have to adjust certain procedures internally.

The new act extends the list of basic principles: besides the equal treatment principle, prohibition of discrimination, and transparency, it newly stipulates the proportionality principle pursuant to which the client must set the parameters of the tender procedure so that they are commensurate to the nature and subject matter of the public contract. In practice, the application of this principle may adjust the amount of contractual penalties set forth by the client, terms of payment and others.

An interesting addition is the extension of the general exceptions from the applicability of the new act. Among others, the exception applies to public contracts for loans or borrowings. Another new exception applies to legal services provided in relation to representing the client in court and other proceedings, to legal services provided in preparing for the procedure, and in situations where the circumstances suggest that the matter in hand will become, in most likelihood, the subject of the procedure.

Legislators also specified the conditions for horizontal and vertical cooperation among contracting authorities (more detailed rules for so called “in-house” exceptions). The act newly introduces what is referred to as a “light regime”, allowing for more flexibility in public procurement including concession contracts for social and other special services defined in the appendix to the act (eg health and social care, hotel and restaurant services or legal services apart from the exception referred to above). The client is given a rather high level of flexibility in awarding these contracts in that they are, among others, allowed to modify the terms of the tender during the tender procedure provided the basic principles are not violated in doing so.

Additionally, the act defines an entirely new type of tender procedure referred to as the “procedure for innovative partnership”, facilitating cooperation between contracting authorities and the private sector in respect of innovations and research.

New institutes have been added in relation to preparing the terms of the tender, referred to as “institutes of preliminary market consultation” applicable when it is expressly stipulated by law that preliminary market consultation may be conducted with experts or suppliers with the aim of preparing the terms of the tender and informing suppliers of its plans, provided competition is not disrupted in doing so.

As for qualification criteria, the institutes of economic qualification in the form of a potential turnover requirement have been restored in the wording. The turnover requirement may be stipulated for the preceding reporting period at most and must not exceed double the anticipated value of the public contract.

Another vital change is the extension of reasons for disqualifying candidates from the tender procedure. It is newly also possible to disqualify candidates that have, in the past three years from the commencement of the procedure, committed serious or permanent errors in fulfilling previous contractual relations with any contracting authority that resulted in an early termination of the contractual relation, compensation of damage or other comparable sanctions. In addition, it is also possible to disqualify a candidate that operates as a joint stock company and has not issued exclusively shares in the book-entry form.

The treatment of the possibilities to amend concluded contracts has also been substantially modified. Clients as well as suppliers will most certainly welcome the de minimis category allowing clients to immediately extend the performance of tenders for supplies and services by 10% and construction work by up to 15%. If statutory conditions are met, it will be further possible to acquire additional supplies, services or construction work at up to 50% of the value of the original public contract. Substituting construction work items is also expressly permitted. Besides adding new institutes, the act has abandoned multiple existing ones, eg preliminary notices that have been mandatory up until now, mandatory evaluation committees or the list of entities forbidden from participating in tenders.

The new public procurement act brings a series of new additions and changes that, if applied correctly, will facilitate tender procedures and make them more transparent, and that will allow clients to proceed more efficiently in awarding public contracts. However, only future practice will tell whether the new wording has met its goals.

Ondřej Chmela ochmela@deloittece.com