Amendment to the Public Procurement Act

The main reason for these changes is the need to implement the new European Foreign Subsidies Regulation (Regulation (EU) 2022/2560) into Czech law (hereinafter also referred to as the “Regulation”). This Regulation responds to a situation where subsidies from third-country governments have not been subject to regulation, unlike state aid provided by EU Member States. Foreign-subsidised companies could thus have an advantage in acquisitions or public procurement.

The amendment to the Public Procurement Act (PPA) therefore introduces new obligations and rules for contracting authorities and suppliers to ensure the proper application of the Regulation in practice. At the same time, some financial thresholds in procurement procedures are being increased to reduce the administrative burden on public contracting authorities. In the following overview, we analyse the main changes, their significance, and their practical impact for public procurement authorities.

Main changes in the Public Procurement Act

The PPA amendment introduces several significant adjustments. First, there are changes responding to the new rule for foreign subsidies in public procurement:

Tender period

If a procurement procedure is subject to an investigation by the European Commission regarding notified foreign subsidies, the tender period under Section 40(2) of the PPA is extended by the time the preliminary review or in-depth investigation of the notified foreign financial contributions by the European Commission is ongoing. This may temporarily suspend the procurement process until the Commission issues its opinion.

Supplier's option to withdraw during an investigation

Under the new Section 40(3) of the PPA, participants in a procurement procedure may withdraw from the procedure during the tender period if the European Commission has initiated an investigation into their notified foreign subsidies. The contracting authority will send information about the initiation or termination of the in-depth investigation to the participants without undue delay after being informed by the European Commission.

Until now, tenders were binding for the entire tender period. However, the amendment allows for the withdrawal of a tender in the event of a lengthy investigation, so that bidders are not bound by their tender for an unreasonably long time.

Obligation to supplement a missing declaration on foreign support

Under the new Section 46(4) of the PPA, the contracting authority is now obliged to request an additional notification or declaration on foreign financial contributions from a supplier if the tender or request to participate does not contain such documents.

In practice, this means that for the contracts concerned, participants in the procurement procedure must declare when submitting their tender whether they have received foreign subsidies exceeding the specified threshold (see below), or provide a declaration that no notification is required. If a bidder forgets to do so, the contracting authority will now ask them to supplement it within 10 working days.

Expansion of grounds for excluding a participant from a procurement procedure

The PPA is amended to allow the contracting authority to exclude a participant from a procurement procedure for the reasons set out in the Regulation. In other words, if directly applicable European regulations – in particular the Foreign Subsidies Regulation – stipulate that a particular participant must be excluded or its tender rejected (for example, due to a finding of harmful foreign support), the contracting authority has a legal basis for doing so under Czech legislation.

Increase in thresholds for small-scale public contracts

In addition to the provisions related to subsidies, the amendment also changes the financial thresholds for small-scale public contracts. Specifically, the threshold for mandatory procurement under the PPA regime is increased as follows:

• for supplies and services, from the current CZK 2 million to CZK 3 million excl. VAT,

• for construction works, from CZK 6 million to CZK 9 million excl. VAT.

Contracting authorities can thus carry out more smaller contracts outside the statutory regime (only according to their own internal rules), which is intended to reduce the administrative burden. The reason for increasing these thresholds is mainly the rise in the price level in recent years and an effort to simplify the award of small contracts.

Increase in the threshold for mandatory publication of a contract on the contracting authority's profile

In addition, the threshold for the mandatory publication of a contract on the contracting authority's profile is also being raised – contracts will now only have to be published from a value of CZK 1,000,000 excl. VAT, instead of the current CZK 500,000 excl. VAT. This will again relieve contracting authorities of the obligation to publish very low-value contracts (however, beware of other regulations, such as the Act on the Register of Contracts, which may have its own requirements).

Connection with the amendment to the State Aid Act

The PPA amendment is closely linked to a parallel amendment to Act No. 215/2004 Coll. on State Aid, which implements the foreign subsidies agenda into the Czech legal framework. The State Aid Act traditionally regulates the procedures for granting and monitoring state aid (subsidies) in accordance with EU regulations.

However, until now it has only dealt with aid provided by the Czech Republic or other EU Member States. The amendment to this Act extends its scope to subsidies from third countries – the term "and foreign subsidies" is even added to its title. In practice, this means that the Office for the Protection of Competition (ÚOHS) will now act as the contact and cooperating body in the European Commission's investigation of foreign subsidies.

The ÚOHS also gains the authority to request information from companies about foreign aid received and to forward it to the European Commission, or to conduct investigations at the Commission's request on the territory of the Czech Republic. Member States only play an assisting role in the process under the Regulation – all decision-making power remains with the European Commission.

This change goes hand in hand with the PPA amendment. While the State Aid Act deals with the institutional and procedural framework (who and how will cooperate with the Commission at the national level in monitoring foreign subsidies), the PPA ensures that the rules of the Regulation permeate the daily practice of procurement procedures.

Together, both amendments create the conditions for the new EU mechanisms to protect the internal market from distortions to also function in the environment of Czech public procurement. From the contracting authority's point of view, it is important that new obligations and options have been added (see above) in conducting procurement procedures – compliance with which may be subject to supervision by the ÚOHS, just like other PPA rules.

On the other hand, the rules for the actual granting of subsidies by Czech entities (state aid) do not change. The change relates exclusively to the introduction of rules for foreign subsidies alongside the existing regulation of state aid.

Impact on contracting authorities

From the perspective of public contracting authorities, the amendment brings new obligations for large contracts and simplifications for small ones. First and foremost, contracting authorities should assess whether the rules on foreign subsidies will apply to them.

These apply to exceptionally large tenders – the Regulation states that the notification obligation arises for contracts with an estimated value of at least EUR 250 million (approx. CZK 6 billion) and, at the same time, if the bidder (including affiliated persons and main subcontractors) has received aggregate subsidies of at least EUR 4 million from third countries in the last 3 years. Most ordinary public contracts do not reach such high values.

However, if you are planning, for example, a large concession or an infrastructure tender financed in the billions of crowns, you must anticipate the application of these rules. In practice, this means including in the tender documentation a requirement for all participants to submit a notification of foreign subsidies (or a declaration that no notification is necessary). The contracting authority will be obliged to forward these notifications to the European Commission without delay and not to conclude the contract until the Commission has investigated the possible effects of the subsidies.

The standard review periods are 20 working days for a preliminary assessment and 110 working days (with the possibility of extension) for an in-depth investigation at the Commission level. It is therefore necessary to anticipate that the time from the submission of tenders to the signing of the contract may be extended by several months if notification under the Regulation is required.

It is also necessary to monitor communication with the Commission – if an in-depth investigation is initiated, the contracting authority will notify the participants, who may then decide to withdraw their tenders (as permitted by the PPA amendment). If the European Commission subsequently finds that a particular foreign subsidy distorts competition, it may prohibit the award of the contract to that bidder.

In such a case, the contracting authority would have no choice but to exclude the participant in question and possibly proceed to select the next in line or to a new procedure. We therefore recommend that for strategic contracts, you preliminarily identify whether the Regulation could apply to them and inform the organisation's management and potential suppliers of this fact in a timely manner.

Conversely, smaller contracts can be awarded more freely. The increase in the thresholds for small-scale public contracts to CZK 3 million (or CZK 9 million for construction works) means that many purchases that previously had to go through a formal procedure under the PPA can now be carried out in a simpler way. This will save contracting authorities time and administration costs – according to the explanatory memorandum, the main motivation was to save administrative burden and costs.

However, contracting authorities should update their internal guidelines and procedures, which often set out the details for awarding small-scale contracts. It is advisable to reset internal thresholds and approval processes to reflect the new legislation (e.g., adjust the definition of what your organisation considers a small-scale contract and how it is procured).

At the same time, even though the law does not formally require an open competition for contracts up to CZK 3 million, we recommend maintaining transparency and a non-discriminatory approach even for these smaller contracts – for example, by approaching multiple suppliers and publishing the result – to ensure the economical use of public funds and to avoid any doubts. Another practical change is the increase in the threshold for the mandatory publication of concluded contracts on the contracting authority's profile to CZK 1 million excl. VAT.

This means that you will no longer have to publish contracts with a value below this threshold on the contracting authority's profile. This will reduce the administrative burden, especially for smaller municipalities and organisations that conclude a large number of minor contracts. However, the obligation to keep a record of public contracts and to comply with the 3E principles (economy, efficiency, effectiveness) even for below-threshold and small-scale contracts still applies. Also, do not forget the Act on the Register of Contracts, which requires the publication of contracts above a certain value in a central register – this obligation remains unchanged regardless of the PPA.

Summary and recommendations

The PPA amendment and related changes in the area of state aid bring a combination of European and national measures that will affect the public procurement process. At the European level, this mainly involves ensuring control of foreign subsidies in the largest tenders, while at the national level, it involves simplifying the rules for smaller contracts. This results in several key recommendations for public contracting authorities:

• Familiarise yourself with the new obligations: If your organisation potentially issues very large contracts (in the order of billions of crowns), pay close attention to the rules of Regulation (EU) 2022/2560. Make sure to include the required declarations from suppliers in the documentation for these tenders and anticipate possible extensions of the deadlines for processing notifications by the European Commission.

• Adjust internal processes and guidelines: Thanks to the increase in the thresholds for small-scale contracts, you can use simpler procedures for a wider range of purchases. Therefore, update your internal regulations to correspond to the new thresholds – e.g., adjust financial limits for simplified tender procedures, approval powers, etc.

Don't wait for the new obligations to catch you by surprise – prepare in time and avoid unnecessary complications. Whether you are dealing with the impact of foreign subsidies or need to adjust internal guidelines, consulting with our Prague-based legal team will help you set up the processes correctly and with confidence. Proper preparation not only minimises risks but also contributes to fairer market conditions and more efficient contract management. Contact us and secure clear and functional solutions before the new regulation comes into force.