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Difficulties facing foreign bidders in Czech tenders

July 20, 2018

Foreign contractors’ participation in public procurement tenders in the Czech Republic has been steadily growing over the years, especially in cases where the client – in the Czech legal parlance the “Contracting Authority” – seeks a specific item that may be procured only from a narrow range of suppliers. Contracting Authorities (CAs) which fail to adapt tenders to international suppliers risk receiving a low number of or even zero bids. If, on the other hand, the CAs accommodate potential foreign contractors in terms of making preparation of potential bids easier, they also increase the likelihood of receiving a fitting bid. Despite the undisputed benefit for all parties, the CAs have not yet fully learned to lay down the appropriate frameworks for their tender process thus exposing foreign suppliers with certain difficulties that we discuss below.

As a preliminary point, it should be noted that in the Czech legal environment the awarding of public contracts is regulated by the Public Procurement Act (hereinafter referred to as the "PPA"), which transposes the relevant European procurement directives. The English version (not always fully amended) of the PPA is publicly available at the following address: http://www.portal-vz.cz/getmedia/ac061a0a-d8c1-4ff1-b8d2-691aa89269b1/Zakon-c-134_2016-Sb-o-zadavani-verejnych-zakazek.pdf.

The rules laid down by the PPA ensure participation and a level playing field within the single internal market for all suppliers from the EU Member States. The Czech public procurement regulation is based on European Union legislation, so the basic rules for awarding over-the-limit tenders are common to all EU Member States. To ensure awareness of foreign suppliers about the extent of public procurement at the EU level, there exists the so-called TED (Tenders Electronics Daily) which mandatorily publicizes all standard over-the-limit tenders throughout the EU thus ensuring that foreign contractors have the opportunity to learn about Czech tenders without having to follow individual profiles of Czech CAs.

In general, the CAs may not restrict bidding to suppliers based in an EU Member State. Contradictory to this principle would be, for example, a procurement condition that would exclude participation of a foreign contractor only because it is not a domestic supplier (e.g. by explicitly demanding that the supplier must be a Czech legal entity). However, participation of foreign suppliers in Czech tenders may be limited by other, indirect, means which may cause serious complications to foreign suppliers, while these may not be in direct contradiction to the PPA. The following areas constitute some of the most often used problematic aspects in a tender procedure.

I. Language: If the CA assumes foreign suppliers' participation it should make sure that the tender documentation is issued in a corresponding language version, i.e. most frequently in the English language. Likewise, it is desirable to allow submissions of bids in English. Where CAs do not do so, involvement of foreign suppliers will be much more difficult and potential foreign bidders will face significant increase in the cost of participating in the tender because of the need to procure translations, both of the tender documentation and their actual bid including required documents. There is, in principle, no way that a foreign contractor can effectively protest against the lack of working language version or language-related requirements as to the bid. At present, most of the CAs profiles where tender documentation are mandatorily published and through which electronic communication can also be carried out, including the submission of a bid, are already accessible not only in the Czech language but also in the English language version.

II. Binding form contract:The tender documentation in most cases includes a contract for the supply of the item being procured that is prepared in accordance with the Czech law and which cannot be, in practical terms modified. The bidders are obliged to accept this contract in the form issued within the tender documentation, which may lead to conflicts with the legal order of the foreign supplier's headquarters, or their standard business conditions & terms. Foreign contractors should be aware that if the CA was prudent and expected that foreign contractors will participate in the tender, this contract would include a provision accepting at least some of the supplier's business conditions even if the applicable law in cases of a dispute remains Czech. Similarly, as a measure of support for participating foreign suppliers, the CAs may also defer to use certain international standardized contract forms, such as FIDIC which are widespread, and which the foreign contractors are more likely to be familiar with than with the Czech law.

III. Qualification documents: Foreign suppliers participating in the Czech tenders usually face the most difficulties in connection with demonstrating their required level of qualification. Problems arise especially when demonstrating their basic eligibility, which is mandatory for all over-the-limit tenders. The general rule states that the potential contractor demonstrates qualification attained abroad by documents according to the law of the country in which it was attained. This means that suppliers headquartered abroad demonstrate their qualification typically with documents issued in their country of establishment. However, this rule cannot be used in all cases. The fundamental capacity to participate in a tender is also demonstrated to a large extent not only with respect to the supplier's country of residence but also by documents that are specific only to the Czech Republic, i.e. documents issued by the Czech authorities. A contractor/supplier that is not familiar with the Czech law may face considerable difficulties in identifying and obtaining the specific documents proving their basic eligibility in relation to the Czech Republic. Please note that the CAs cannot deviate from requiring submission of these documents and, even at their greatest discretion, will not be entitled to allow suppliers any leeway in this respect. In specific instances, the suppliers may be able to substitute a qualification document for the purpose of submitting their bid in the form of an affidavit. This information may not be always explicitly stated in the tender documentation as this possibility arises directly from the law, which of course the potential bidder cannot know in detail. There also exist an exception where the CA may expressly exclude the possibility of submitting an affidavit instead of a specific document. Finally, the bidder selected to conclude the contract with the CA will be also required to submit the originals of all documents demonstrating their qualification, on top of the copies that were submitted during the tender procedure. Foreign contractors are advised to use the e-Certis information system for foreign suppliers that provides for a better orientation with regard to the required documents. Using this system, contractors may find out what documents and certificates are specifically required by various CAs in tenders placed within the EU, and to simply locate them and obtain all the necessary information about them. The information system is maintained in all EU member states languages ​​and is available at the following address: https://ec.europa.eu/growth/tools-databases/ecertis/. Starting on 18 October 2018, the CAs will be primarily required to request documents registered in the e-Certis system. The e-Certis system also allows the supplier's to submit a special form of an affidavit, the so-called Single European Certificate, instead of qualification documents where applicable.

IV. Communication: Also effective from October 18, 2018, all communication between the CAs and potential suppliers will be mandatorily carried out only in electronic form. This means that bids or any other documents in the course of the tender procedure (such as the originals of the qualification documents) will no longer be allowed to be submitted in hardcopy. CAs will be obliged to accept bids exclusively in electronic form, via an electronic interface. This also implies that suppliers will posses an electronic signature in order to preserve the authenticity of the communication or the document sent. Suppliers will therefore have to adapt to this situation. A specific feature of the Czech legal environment are the “data boxes,” (a closed government-run system of electronic communication accounts issued to entrepreneurs, legal or natural persons, established (living or licensed) or operating in the Czech Republic) through which electronic communication in the sense of the PPA is also carried out. The standard means of electronic communication in the Czech tender will therefore include an electronic tool and a data box. E-mails will not be excluded, but this method of communication will not be equivalent to the secured and certified channels using the combination of an electronic tool and a data box, so its use may not be recommended.

This list briefly highlights some of the most frequent problematic areas connected to participation of foreign suppliers in Czech tenders. Czech tenders may have their own specifics, but the substance of the above-the-limit tendering rules is based on EU legislation and is therefore uniform across the EU, so foreign suppliers cannot really avoid them. Foreign suppliers are always advised to carefully study the terms of the tender documentation and to seek professional advice where it may be necessary in order not to unnecessarily complicate the preparation of their bid or compromise their chances at being awarded the public contract.

Mgr. Monika Prudilova