On August 1, 2024, an amendment to the Public Procurement Act came into force, bringing significant changes in the area of review procedures, i.e., procedures that provide bidders and interested parties in public procurement with tools to challenge public contracting authorities in relation to the legality of public procurement procedures, whether in relation to the conditions of public procurement or subsequent actions within the process, such as in the case of exclusion of a tender, cancellation of the award procedure or in relation to the evaluation of tenders.
According to the explanatory memorandum, these amendments are aimed at improving the transparency, efficiency, and fairness of the public procurement process. However, in our opinion, it is debatable whether the following changes are capable of achieving these objectives, as we have already stated in our previous article.
In the following article, we will take a detailed look at the changes brought about by the amendment as of August 1, 2024.
1. Abolition of the institution of requests for correction
Prior to the amendment, Section 163 of the Public Procurement Act stipulated that "Review procedures under this Act shall be
- A request for remedy submitted to the contracting authority, the contracting entity or in person pursuant to Section 8 prior to the conclusion of a contract, concession contract, framework agreement or in a design contest,
- Supervision of public procurement."
The new Public Procurement Act no longer regulates the legal institution in the form of a request for remedy, and therefore one of the key changes is the abolition of the institution of requests for redress, since, according to the explanatory memorandum to the amendment to the Public Procurement Act, the relevant European directives do not require this institution and its deletion should ultimately simplify the public procurement procedure.
We would like to point out that, in our opinion, the institution of requests for correction was an effective tool, the use of which preceded the filing of objections themselves (except in certain cases, such as exclusion from a public tender), as a result of which the contracting authority could itself amend or modify the tender documentation and its procedure without it being necessary to lodge objections. In this way, particularly in cases of obvious shortcomings and errors, it was not necessary to lodge objections and thus burden both the contracting authority and the Public Procurement Office, which ultimately meant and means a prolongation of the process. At first glance, it may seem that the institution in question “slowed down” the public procurement process, but on the other hand, the request to remove errors was a far more effective and faster way of doing so, and interested parties and tenderers may be discouraged from lodging objections every time, including paying a deposit, even in cases where the procedure was previously much simpler.
This removes the intermediate stage of dispute resolution at the level of the tenderer and the contracting authority. We believe that the legislator should seek to streamline and speed up the public procurement process by addressing other problematic aspects of the process (e.g., the lack of a deadline by which the contracting authority must take individual steps) at the expense of review procedures, which further reduces the possibility of effective intervention in the process by tenderers and interested parties.
From 1 August 2024, tenderers and interested parties will be able to raise their objections exclusively through the Public Procurement Office (ÚVO), which will continue to be subject to a deposit requirement, exclusively in the process of awarding above-threshold contracts and below-threshold contracts for construction works with a PHZ of EUR 1,500,000 or more.
2. Cancellation of ex officio proceedings for the review of the actions of the audited entity
Within the framework of the review of the actions of the audited entity pursuant to Section 169 of the Public Procurement Act, a distinction will continue to be made between ex ante and ex post procedures, but in the case of ex ante procedures, i.e. in proceedings to review the actions of the audited entity prior to the conclusion of a contract, concession contract or framework agreement, prior to the conclusion of a design contest, prior to the award of a contract based on a framework agreement or prior to the conclusion of an innovative partnership procedure, the Office will no longer be entitled to review the actions of the audited entity on its own initiative.
It is important to note that this indirectly removes a tool for bidders and interested parties in public procurement who, in the process of awarding contracts where no objections can be lodged – i.e. contracts whose scope has unfortunately expanded significantly in recent years – were able to raise their objections at least through the Public Procurement Office, to which they could address their reservations and suggestions, and the ÚVO could then “adopt” such a suggestion from an interested party or participant and initiate proceedings on its own initiative. This will no longer be possible after 1 August 2024 as part of the “ex ante” control, and the range of effective remedies for tenderers and interested parties will be further narrowed.
3. Narrowing the scope of persons entitled to lodge objections
Objections under Section 170(1) of the Public Procurement Act may now be lodged exclusively by
- the tenderer
- the interested party whose rights or legally protected interests have been or could have been affected by the procedure of the audited entity, or
- the participant.
At the same time, in connection with the abolition of the institution of requests for redress, the submission of objections will not have to be preceded by the delivery of a request for redress to the audited entity.
Objections may therefore no longer be lodged by a person whose rights or legally protected interests have been or could have been affected by the procedure of the audited entity, or by a state administration body which certifies a legal interest in the matter, if the audited entity has been granted funds from the European Union for the supply of goods, the performance of construction works or the provision of services.
The amendment also clarifies the moment that is decisive for calculating the time limits for lodging objections. With reference to the above, the moment of receipt is replaced by the moment of delivery of the decisive acts of the contracting authority, which, in our opinion, will not affect the process of lodging objections in any way, as the sending and delivery of the contracting authority's decisive acts is carried out through the Electronic Public Procurement Information System (IS EVO).
4. Change in the threshold for lodging objections in sub-threshold contracts
As already mentioned above, the amendment introduces a change in the possibility of lodging objections in the case of sub-threshold contracts for construction works. While it was previously possible to lodge an objection in the case of contracts with an estimated value of up to EUR 800,000, this limit has now been increased to EUR 1,500,000. This means that it will no longer be possible to lodge objections for contracts with a value of up to EUR 1,500,000, and at the same time, it will not be possible to lodge a request for remedy in such public procurement, or in the period prior to the conclusion of the contract, thereby effectively excluding any effective instruments capable of remedying the situation prior to the conclusion of the contract. The legislator hopes that this change will simplify the public procurement process for “smaller” construction projects, but the question is at what cost?
The explanatory memorandum to the amendment to the Public Procurement Act in relation to the increase in the price threshold states that such a change is justified by the current economic conditions of the market and the constant rise in price levels. In this context, it is important to note that until recently (2021), it was possible to file objections to all sub-threshold contracts regardless of the subject matter of the contract, while this year's amendment introduced a rule prohibiting objections to construction works worth up to EUR 800,000. Within three years, the situation has changed so much that the legislator has increased this threshold from EUR 0 to EUR 1,500,000.
5. Possibility of remedying deficiencies in objections
The amendment added paragraph 12 to Section 170 of the Public Procurement Act, according to which, if the authority finds in the objection proceedings that the objections do not contain the signature of the applicant or the person authorized to act on behalf of the applicant, the authority shall invite the applicant to remedy the deficiencies within three working days of receipt of the request. However, it will be necessary to remedy the deficiencies within the time limit, because if the deficiencies are remedied after the time limit has expired, the authority will not take them into account.
This change is welcome, as the previous strict concentration in conjunction with the substantive nature of the deadlines caused considerable problems for entities, and many objections were rejected solely on the basis of formal deficiencies without any real possibility of the ÚVO reviewing the public procurement in terms of substance. Especially after such a fundamental curtailment of the review tools available to bidders, this change is only a small consolation for the proper control of public procurement procedures.
6. Change in the obligations of the audited entity in the objection procedure
The amendment to the Public Procurement Act removes the obligation of the audited entity to deliver the original documentation to the authority in response to objections, while also changing the deadline for delivering the complete documentation. Under the new rules, the complete documentation must be delivered within five working days of the date of delivery of the objections or notification of the initiation of proceedings.
At the same time, the rules relating to fines for failure to deliver complete documentation are being changed if the documentation is not submitted even within the additional period. The amount of the fine will now range exclusively from EUR 500 to EUR 30,000, and the authority will be entitled to impose the fine repeatedly. It has also been explicitly stipulated that the imposition of an administrative fine does not release the inspected party from its obligation to deliver the requested documentation.
7. Abolition of the possibility to review a decision to discontinue proceedings for the review of the actions of the inspected party
Before the amendment to the Public Procurement Act, it was possible to review a decision to discontinue proceedings for the review of the actions of the inspected party by a court on the basis of an action that had to be filed within 30 days of the date of delivery of the authority's decision.
The amendment to the Act deleted the relevant provision, and thus it is no longer possible to review a decision to discontinue proceedings to review the actions of the audited entity by a court.
8. Appeal proceedings
In relation to a decision in which the ÚVO finds a violation of this Act that had or could have had an impact on the outcome of public procurement, the Act provides for a new remedy, namely an appeal or appeal proceedings. An appeal may also be lodged within 15 days of delivery of the decision against which the appeal is directed.
The appeal will be decided by the President of the Office on the basis of a proposal from a special commission, although under certain conditions the Office may also decide on the appeal itself within the framework of so-called self-revision, i.e. if the authority grants the appeal in full and there are no grounds for discontinuing the proceedings and if the decision does not concern several inspected parties or if the other inspected parties agree.
The chair of the authority will be bound by the content of the appeal, except where the contested decision was issued on the basis of insufficiently established facts or is based on an incorrect legal assessment of the case and these justify a change to the contested decision.
However, the implementation of this remedy essentially removes the possibility of judicial protection, as the decision of the President of the Office to review a decision is not reviewable by a court, except for a decision imposing an obligation.
9. New rules on the imposition of fines
In relation to review procedures, there has also been a major change in the legal regulation of the rules for imposing fines for administrative offenses, including the amount of fines. According to the explanatory memorandum, the aim of imposing fines is to create effective mechanisms to encourage compliance with public procurement rules, as required by the European Union.
The biggest change in the imposition of fines is the change in the range of fines, due to the fact that the aim of the Public Procurement Act is to fulfill the doctrine of effectiveness, proportionality, and deterrence of sanctions for illegal direct award of contracts, and the sanctions imposed must comply with the principle of individualization.
Conclusion
The amendment to the Public Procurement Act, effective from August 1, 2024, brings fundamental changes, particularly in the area of review procedures, which are an important element in ensuring the protection of the rights and legally protected interests of all participants in public procurement. It is important to note that the Act still contains all review procedures arising from the Directive that apply to above-threshold contracts, i.e. contracts that are uniformly regulated within the EU. As we have already mentioned in the previous article, it is questionable whether the changes in question will speed up the process and make it more efficient, but it should also be noted that this will be largely at the expense of the possibility of applying a broader level of protection. We therefore do not view the legislator's tendency to constantly curtail the possibility of direct control under the Public Procurement Act in a positive light and believe that these changes will not have a significant negative impact on the level of transparency in public procurement in the future. We believe that this article will provide readers, especially those interested in and participating in public procurement, with at least basic information on the possibilities for redress and their rights in public procurement.
The team at Hronček & Partners, s. r. o. deals with public procurement issues on a daily basis, so we would be happy to hear from you, not only in relation to the possibilities of using review procedures under the Public Procurement Act.
