Letter to parliamentarians on Registry of Contracts vote

Dear Ms./Mr. Member of Parliament,

We write to express our appreciation for your vote to establish a Registry of Contracts. If properly implemented, the Registry of Contracts will help increase the accountability of both public officials and companies, which should help improve the value of each crown spent in the procurement process.

The AmCham’s goal is to help the Czech Republic become a top ten EU economy. One of key factors in achieving that goal is effective public procurement. Procurement in the Czech Republic accounts for a higher percentage of GDP (14.4% (Eurostat, 2013)) than in most EU countries. That is not a good or bad thing; it just means that the country is more dependent on procurement generating a high return for every crown spent than other economies. Generating value in procurement requires good planning, competitive bidding, and accountability for decisions and management of the entire process until project completion. The Registry of Contracts will improve public access and trust of decision-making, and will influence the quality of planning and bidding indirectly. For the procurement process truly to be effective, the registry needs to be supplemented by improvements in other parts of the procurement process. 

On Wednesday, Parliament began debate on one of those components, the Act on Public Procurement. This reform is intended to implement a recent EU Directive. In fact, most of what the EU requires was included in a previous reform. This proposal will make it easier for public authorities to spend money, and more expensive for companies to use the appeals process. We do not believe either will improve the effectiveness of procurement process, and, if poorly implemented, could have the opposite effect.

Despite some comments to the contrary, it does not appear it is excessively difficult to spend state money. Last year, public procurement amounted to CZK 40,480 per citizen, the second highest amount since 2007(Ministry of regional Development). The issue, therefore, should not be how to make it easier for the state to spend more money. The issue is whether the government received the best value for this high investment? This is hard to quantify, because few procurements set concrete objectives to be achieved with the spending. Some indicators, however, seem to suggest the money could have been better spent. Single-bid procurements comprised 19% of the total procurements (Eurostat). 18% of procurements were issued in no-bid procurements (Eurostat). And 82% of procurements were determined by price alone (Eurostat)- a sign that public authorities did not plan sufficiently to establish the economic value of what they purchased. The type of environment that creates those numbers is almost guaranteed to create suspicion and a sense of injustice.

As a consequence, the number of first-instance proceedings by the Competition Office reached its highest mark since 2007. The increase was substantial: in 2007, first instance proceedings totaled 321; in 2014, they numbered 981 (UHOS Annual Reports, 2007-2014). The greatest increase has been in investigations initiated ex officio (without complaint by a bidder). In 2013, 173 ex officio proceedings were initiated; in 2014, 347 were started (UHOS Annual Reports). That means that 35% of all new proceedings were the result of the Office acting independently of complaint. This means that the new rules increasing the deposits paid by complainants may not solve the Office’s capacity issues as much as predicted.

When you consider how procurement law reform can support the Registry of Contracts you just helped to create, we suggest you consider one other number: 104 days (Eurostat). That is the average length it took from the submission of a bid in 2014 to the award of a contract. That is simply too long for effective governance. The number is not the result of a bad law; it is the result of a lack of trust in the process. The greatest delays now are the result of challenges- legal or otherwise- to the decision-making capacity of public authorities. You could shorten the process by eliminating or reducing the ability to challenge decisions. The current proposal does that in two ways: by increasing the threshold for application of the law (it is estimate that more than half of all procurements would be outside the Act) and making it more expensive to appeal against decisions. Neither will improve the quality of decision making, and both could reduce the quality of public services and increase unfairness. We would propose to prevent the possible damage these proposals might incur by 1) introducing a requirement to publish a request for bid prior to decision for all under the threshold procurements and 2) finding a fairer solution to the issue of frivolous complaints than raising the cost of filing.

We would very much like to work with you to create a public procurement that emphasizes quality planning and decision-making, while also increasing public trust in government decision-making by permitting greater access to those decisions. Public procurement is, in fact, one of the greatest export policies any government has: by creating a competitive bidding process with measurable objectives, governments can reward companies that innovate (ie. create more value per crown spent). We are ready to assist you in any way we can to achieve such a procurement process.