Lack of transparency in the procurement process remains a concern for U.S. companies. While the Czech government has publicly stated its commitment to fair, transparent tenders, rumors of corruption remain commonplace, and the Czech media regularly follow high-profile tenders gone awry. U.S. firms active in the market have identified several tenders where they believe the process was corrupt and in many cases government tender decisions were overturned due to allegations that the process was not conducted fairly. Additionally, government decision-making is notoriously slow and due to a lack of transparency. Tenders are frequently delayed or cancelled with little political will to reissue it again later.
As a member of the EU, the Czech Republic is subject to the rules of the WTO Agreement on Government Procurement. The Czech government’s current procurement law requires public tenders for government and government financed procurements exceeding $83,333 (2 million CZK) for supplies/services or $250,000 (6 million CZK) for construction. Tenders are publicized in the local daily press, particularly the Hospodarske Noviny (Economic News) and Mlada Fronta Dnes newspapers, as well as in the Obchodni Vestnik (Trade Gazette) published by the Czech government. All public tenders are to be listed at Vestnik Verejnych Zakazek, in Czech only), and all international public tenders are simultaneously published in English at the EU’s Tender Electronic Daily. Major manufacturers of a particular product are usually notified directly.
In most cases, U.S. companies bidding on Czech government tenders must have their products approved for the EU market (see Trade Standards section). U.S. companies that find local Czech partners for joint bids can compete on tenders for environmental, engineering, financial, and management consulting services. Bid bonds from one- to five- percent may be required for large-scale contracts. An emphasis on total value (rather than low cost) has lessened the disadvantage that U.S. companies once faced against lower-cost domestic and European firms.
Both the Czech national government and major municipal governments make increasing use of bonds to pay for infrastructure improvements, but this approach is still far less common than in the United States.
U.S. companies bidding on foreign government tenders may also qualify for U.S. Government advocacy. Within the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters in competition with foreign firms in foreign government projects or procurement opportunities. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agency officials expressing support for the U.S. exporters directly to the foreign government. Consult the Advocacy Center’s program web page on trade.gov for additional information.
EU Regulations
The public procurement market in the EU is regulated by three Directives. In 2014, the EU adopted new legislation in this area bringing the total up to four Directives. For additional information on EU regulations pertaining to public procurement, please refer to Doing Business in the European Union: 2022 Country Commercial Guide for U.S. Companies report.
Defense Procurement
The Czechs have pledged to increase defense spending from the current level of about 1.2 percent of GDP to 2 percent by 2024. U.S. Government, EU, and other international funds are available to help finance purchases.
The Ministry of Defense (MoD) can issue a “direct call” tender when it is in the government’s interest to use only one source for a purchase or procurement; however, this practice is seldom used. Through this system, the MoD is allowed to submit a Letter of Request (LOR) for a Letter of Offer and Acceptance (LOA) which is a government-to-government agreement identifying the defense articles and services the U.S. Government proposes to sell. This enables the Czech MoD to forego the tender process while maintaining transparency. The “direct call” is characterized as being like U.S. Government sole-source contracting, but it lacks defined selection criteria, raising concerns about procedural transparency.
Lately, the Czech MoD has started to conduct a market research phase for defense acquisitions, during which it gathers data on capabilities, pricing and availability of various competitors’ products prior to making an internal decision on which products warrant a request for proposal or LOR for LOA.
There is a provision that allows U.S. firms to contract directly with the Ministry of Defense without the need for a Czech intermediary. The purpose of the provision was to improve transparency and bring cost savings to the system. However, the ministry has found ways around this ruling, such as including requirements for all documentation to be in the Czech language, thereby making the use of a local intermediary not a requirement but highly recommended. The ministry still opts to use intermediary companies for two reasons: it is easier to handle receipt of goods and customs clearance, and for cases that require national funding, the ministry cannot obligate funds until the items are delivered in full. Intermediary companies allow the ministry to pay in installments and settle upon final delivery.