Law Governing Socially Responsible Public Procurement in the CR

The legal framework governing responsible public procurement in the Czech Republic is based upon and fully corresponds to the European legislation.

Despite absence of legal barriers, the Czech Republic contracting authorities mostly do not make use of the opportunity to address social or societal issues as part of their public procurement. Bids are mostly evaluated solely based upon the lowest price. So far, the development and implementation of responsible public procurement has been prevented by low awareness of the benefits, and by other barriers, such as the public procurement system and culture in place, ignorance of legal regulations, unclear responsibility, and low motivation. As a result, such a situation does not lead to improved effectiveness of public fund spending.

Directive 2014/24/EU

Responsible public procurement has a considerable leverage in the European public procurement legislation, specifically in the Directive 2014/24/EU of the European Parliament and of the Council dated 26 February 2014 on public procurement and repealing Directive 2004/18/EC (hereinafter Directive 2014/24/EU).

The Europe 2020 strategy is one of the key starting points of the entire directive on the award procedure. It is a strategy for intelligent and sustainable growth supporting inclusion, because public procurement, as a market tool, play a key role in the strategy. The directive on award procedure explicitly supports responsible public procurement in the preamble and several other places. Specifically, in sections 2 and 47, which focus on the following:

  • the need to bring the existing rules for public procurement up to date so as to increase the efficiency of public funds; particularly, to make the participation of small and mid-sized enterprises in public procurement easier so that contracting authorities are able to improve their use of public procurement to support societal objectives,

  • using public procurement to attain intelligent, sustainable growth supporting inclusion, and to ensure efficient use of public funds,

  • use public procurement in the most strategic manner possible to support innovation via purchases of innovative products, construction work, and services; this plays a key role in improving the efficiency and quality of public services, and in addressing major societal issues.

These general starting points concerning support for socially responsible public procurement were reflected in several articles of the directive on the award procedure. Key is Art. 18 Par. 2, which requires that during their performance of public contracts Member States take appropriate measures to ensure economic operators comply with their respective obligations concerning environment, and social and labour law, which follow from the Union law, national law, collective agreements, or provisions provided under the international social and labour law, and law on the environment, indicated in Annex X of the Directive on the award procedure.

Act on Public Procurement

The public procurement in the Czech Republic is regulated by Act No. 134/2016 Coll., on public procurement (hereinafter Public Procurement Act), which transposes the Directive 2014/24/EU indicated above into Czech law.

Following the model of the Directive on the award procedure, the Public Procurement Act allows, and supports in several places, socially responsible public procurement.

Using socially responsible public procurement, contracting authorities may attain desirable societal objectives in several ways, most frequently by making use of a special condition included in the performance of the public contract, or by using a quality evaluation criterion.

Some provisions of the Public Procurement Act:

Public Procurement Act Provisions Focus Note

Art. 37 Par. 1 Letter d) of the Public Procurement Act

Special performance condition

In accordance with Art. 37, Par. 1 Letter d) of the Public Procurement Act, contracting authorities may designate conditions for taking part in the award procedure, among other things, as special conditions for the performance of public procurement. In particular, this concerns the impact the subject of the public contract has on the environment, social consequences of the subject of the public procurement, economy aspects, or innovations.

Art. 114 and Art. 116 of the Public Procurement Act

Evaluation

Based upon Art. 116 Par. 1 of the Public Procurement Act, to evaluate the economic benefits of bids based upon quality, contracting authorities are obligated to determine criteria that express qualitative, environmental, or social aspects related with the subject of the public contract. In accordance with Par. 2, social, environmental, or innovation aspects may serve as such a quality criterion.

Art. 38 of the Public Procurement Act

Contracts reserved to particular suppliers

Under the act, if designated conditions are fulfilled, the participation in the award procedure may be reserved only to suppliers which employ at least 50% with physical disabilities at sheltered job positions. Thus, under the Public Procurement Act, the participation in the award procedure may not be reserved to sheltered workshops and economic operators whose chief objective is social and professional inclusion of persons disadvantaged in a manner other than due to a physical disability—despite the fact Directive No. 2014/24/EU allows that. In appropriate cases, and while respecting the Public Procurement Act, these operators may be favoured in the evaluation (the quality criterion under Art. 116 Par. 2 Letter d) of the Public Procurement Act: social, environmental, and innovation aspects.

Art. 48 Par. 5 Letter a) od the Public Procurement Act,

Art. 48 Par. 8 of the Public Procurement Act

Exclusion of participant for non-eligibility

These provisions concern exclusion of participants in the award procedure, and the supplier selected, for their non-eligibility. Art. 48 Par. 5 Letter a) of the Public Procurement Act governs entitles the contracting authority to exclude a participant in the award procedure should the performance of the public contract offered by this participant led to a breach of regulations on the environment, social or labour law regulations, or collective agreements—but does not impose any obligation to do so. Contracting authorities may exclude a participant under this provision only if the contracting authority is able to demonstrate such a breach. The purpose of this reason based upon which participants are excluded is to allow contracting authorities to prevent conclusion of contracts with suppliers which breach regulations in their performance of public—the maintenance of these regulations is in the public interest—and thereby prevent any potential distortion of competition. Art. 48 Par. 8 of the Public Procurement Act then designates an obligation—and not only entitlement—to exclude a selected supplier from the award procedure if the contracting authority can demonstrate, among other things, reasons for exclusion in keeping with Art. 48 Par. 5 Letter a) od the Public Procurement Act,

Art. 113 Par. 4 Letter a) of the Public Procurement Act,

Assessment of abnormally low bid price

In its request for justification of abnormally low bid price, contracting authorities are obligated to require the participant in the award procedure to confirm—in addition to justification of the abnormally low bid price—that it will ensure obligations following from legal regulations on the subject of the public contract are maintained, along with any labour-law regulations and collective agreements concerning employees who are going to take part in the performance of the public contract in question.

Art. 94 of the Public Procurement Act

Labels

If a contracting authority requires environmental, social, or other characteristics as part of public contracts, it may require a label in the tender dossier as certification of the fact that the performance offered corresponds to such requirements on the part of the contracting authority. Such a procedure is allowed provided the contracting authority’s request corresponds to the subject of the public contract, and that the label was assigned based upon objectively verifiable and non-discriminatory criteria by a person who is not subject to the supplier’s determining influence. The requested label must be suitable to define the public contract’s characteristics. Labels may include, for instance, an eco-label, Fairtrade certificate, etc.

Art. 106 of the Public Procurement Act

Direct payments to subcontractors

In the tender dossier, contracting authorities may determine conditions, under which due portions of the payment for the performance of the public contract will be paid directly to subcontractors. The purpose of allowing direct payments to subcontractors is, in particular, support for small and mid-sized enterprises. Contracting authorities must designate this condition directly in the tender dossier, so that suppliers count on such direct payments while working on their bids. This is because another option exists: in their tender dossiers, contracting authorities may also designate rules to assess requests made by subcontractors, and the mechanisms of direct payments made to subcontractors, including an option on the part of the suppliers to challenge direct payments to subcontractors. This legal provision does not provide any specific form of contractual conditions used to implement payments to subcontractors. Therefore, it is up to the contracting authority—should it make use of this option—to define specific manner in which such payments will be implemented, and set up a mechanism between the contracting authority, contractor, and subcontractor.

Art. 30 Letter b)

Exception from the Public Procurement Act

This is an exception from the Public Procurement Act granted for the provision of performance by the Prison Service of the Czech Republic to the Czech Republic. The purpose of this exception, which concerns under-limit public contracts only, is to support employment of prisoners in the so-called economic activity centres.

 

Guidelines – Government Resolution on Responsible Public Procurement

Based upon the developments in public procurement and the demand on the part of the Public Administration and regional authorities for methodical support in the area of socially and environmentally responsible public procurement, the government of the CR adopted a resolution No. 531 dated 24 July 2017 (hereinafter „Resolution“) . The Resolution comprises Guidelines for the Application of Responsible Public Procurement and Commissioning Applied by the Public Administration and Local Authorities (hereinafter „Guidelines“).

They are new, comprehensive Guidelines that contribute to the commitment on the part of ministries, regions, villages and other entities, to consider environmental and social issues—and whenever possible even broader social issues—in their commissioning of goods and services, and to provide transparent information on such commissioning to the public. Their actions are to serve as inspiration for other public institutions and private entities alike. The new Resolution was submitted by the Minister of the Environment and the Minister for Labour and Social Affairs, and abolished the outdated Government resolution from 14 June 2010 No. 465, which concerned solely the application of environmental requirements in public procurement and commissioning carried out by the Public Administration and local authorities.

Now, the CR government recommends that social issues or even broad-impact social aspects be considered in addition to environmental concerns, and that transparent information be provided to the public. Moreover, methodologies related to the Guidelines do not have to be approved by the government, something which will allow for greater flexibility when adopting, updating, and expanding them to include additional information. Such a comprehensive approach will ensure new developments in technology and legislation are taken into account, along with new trends and approaches in the area, and will be much friendlier the methodology users, i.e., the Contracting Authorities which practice socially and environmentally responsible commissioning.