Below-Threshold Public Contract: When to Use the Simplified Below-Threshold Procedure and When to Use the Open Procedure
How long a public contract takes, and how much work it creates, is decided the moment the contracting authority sets the estimated value and the resulting regime. The simplified below-threshold procedure is the fastest route and covers most of Czech practice, but it has limits beyond which it cannot be used. This article explains how to get both the regime and the procedure right the first time.
Key takeaways
Decision-making framework: three regimes and the one value that determines them
Procurement starts with a single number. The estimated value of the contract will determine which of the three regimes the contract falls into, and thus how much time and administration it will require.
The lowest tier is small-scale public contracts. Under Czech legislation, these do not have to be awarded in a procurement procedure, although the contracting authority must adhere to the basic principles and, as a rule, its own internal rules. We cover them in detail in our article Small-Scale Public Contracts.
The middle tier is the below-threshold regime, and it is the most common in practice. In this regime, the contracting authority has a choice between a simplified below-threshold procedure and the types of procedures intended for the above-threshold regime. This choice is the only real decision you make in the below-threshold regime, and it has a direct impact on the length of the preparation and on whether you will be able to negotiate with suppliers.
The highest tier is the above-threshold regime, where European rules, publication in the Official Journal, and longer time limits apply. A contract enters this regime by exceeding the financial threshold set by a government regulation, which changes regularly.
A contracting authority is not just an office, a municipality, or a state-owned enterprise. A company that uses more than two hundred million Czech crowns of public funds for a contract, or uses them to cover more than half of its price, becomes a contracting authority directly by law. Other subsidy recipients are not contracting authorities, but they must select a supplier according to the rules of the subsidy provider. The difference is significant: in the first case, the entire regime of the Act applies, including objections and supervision by the Office for the Protection of Competition, while in the second, the consequences of any errors are resolved only in relation to the subsidy provider.
In practice, the most difficult part is not choosing the regime, but correctly determining the estimated value. Splitting related performance into smaller units, omitting an option right, or failing to include the entire duration of a framework agreement will move the contract down a tier and thus render the entire procedure defective.
Step-by-step procedure
The order of the steps is fixed, and each one concludes with a decision that you do not revisit later.
The first step is to determine the estimated value and document how you arrived at it. The file should include market research, calculations, or the price of a similar past performance. Without this documentation, the contracting authority will find it difficult to prove during an audit that it determined the value properly and not for expediency.
The second step is to classify the contract into a regime and verify whether an exemption or a special rule for social and other special services applies.
The third step is the choice of procedure type. The simplified below-threshold procedure is faster and administratively the easiest, but it has two significant limitations: you cannot negotiate tenders in it, and it cannot be used for larger construction contracts. The open procedure, on the other hand, provides certainty even for large construction projects, at the cost of longer time limits.
The fourth step is the preparation of the call for tenders and the tender documentation. In a simplified below-threshold procedure, the procedure is initiated by publishing a call for tenders on the contracting authority's profile, and the documentation must remain there for the entire tender submission period. Sending it directly to selected suppliers is possible as an additional step, but never as a substitute for publication.
The fifth step is setting the time limits. They are counted in working days, and it is necessary to incorporate the deadline for explaining the tender documentation and for a site visit into the schedule, as both precede the end of the tender submission period.
The sixth step is the assessment of qualification and evaluation. In a simplified below-threshold procedure, proving qualification is simple: documents can be submitted in copies and replaced by a sworn statement or a European Single Procurement Document (ESPD). The contracting authority may request originals or certified copies at any time during the procedure, and will request them from the selected supplier if stated in the call for submission of documents. The contracting authority is also not allowed to reduce the number of participants. Setting the qualification and technical conditions is the most common source of objections, see the article Hidden discrimination in public procurement.
The seventh step is the conclusion. The notice of exclusion and the notice of selection can be published on the profile if the contracting authority has reserved this right in the tender documentation, and they are thereby delivered to all participants. This reservation saves a week and is often missing from the documentation.
What is standard on the market and what is a warning sign
For well-managed contracting authorities, it is standard for the estimated value to have its own record in the file, for the procedure schedule to be created before the call is published, and for the technical specifications to be reviewed by someone who did not prepare the contract. It is also standard for the contracting authority to reserve the right to publish notices on its profile in the documentation.
On the supplier side, it is standard to submit questions about the documentation in the first few days, not the day before the deadline. This is because the explanation of the tender documentation has its own deadline, and the contracting authority does not have to answer a late question.
It is also standard for a supplier to read the tender conditions with a pen in hand, dividing them into two groups: what is merely inconvenient and what is illegal. Nothing can be done about the first, but action against the second can only be taken until the deadline for submission of tenders, and if reserved in the tender documentation, only up to 72 hours before its end. Companies that do not address this difference beforehand only return to it after losing the evaluation, when it is already too late.
There are three warning signs, and all can be detected before submitting a tender. The first is a contract whose estimated value is suspiciously just below the threshold for a higher regime, as this is often a sign of contract splitting. The second is a reference to a specific product or partner certification in the technical specifications.
The third sign is an unreasonably short deadline for tenders for a complex performance. The legal minimum is a floor, not a target, and for a contract requiring the pricing of hundreds of items, its use is in itself an argument for objections. We discuss tender prices that are returned from such a procedure as abnormally low in the article Application of and Defence Against the Abnormally Low Tender Price (ALTP) Mechanism in Procurement Procedures.
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Where is the legal boundary
The Act divides contracts into regimes according to their estimated value and defines the boundaries at two levels.
Under Section 26 of the Public Procurement Act, a below-threshold public contract is one whose estimated value does not reach the limit for the above-threshold regime and exceeds the values for small-scale contracts. According to Section 27, a small-scale contract is a contract up to CZK 3,000,000 for supplies and services and up to CZK 9,000,000 for construction works.
The upper limit is set by government regulation. According to Section 3 of Government Regulation No. 172/2016 Coll., the limit for an above-threshold public contract for services is CZK 3,491,000 for central government contracting authorities, i.e., for the Czech Republic, the Czech National Bank, and state-funded organisations, and CZK 5,386,000 for other public contracting authorities, including municipalities, regions, and their funded organisations. The same amounts apply to supplies, and for construction works, the limit is CZK 134,764,000. These amounts change regularly according to EU thresholds, so they should be verified as of the date the procedure is initiated, not based on last year's table.
The choice of procedure type is regulated by Section 52 of the Act. The contracting authority may use a simplified below-threshold procedure, with the exception of a public contract for construction works whose estimated value exceeds CZK 50,000,000, or the types of procurement procedures for the above-threshold regime.
The mechanics of the simplified below-threshold procedure are in Section 53 of the Act. The procedure is initiated by publishing a call for tenders on the contracting authority's profile, by which the contracting authority invites an unlimited number of suppliers; if it also sends it directly, it must send it to at least five suppliers. The contracting authority may not negotiate the submitted tenders and may not reduce the number of participants. The cancellation of the procedure is published on the profile within five working days of the decision.
Time limits are set by Section 54 of the Act. In a simplified below-threshold procedure, the deadline for submission of tenders is at least 11 working days; in an open procedure, it is at least 15 working days for supplies and services and 20 working days for construction works. The time limit in an open procedure can be shortened by up to 5 working days if the contracting authority has published a prior information notice in time. The contracting authority shall publish the explanation of the tender documentation at least 4 working days before the end of the time limit and shall allow a site visit no later than 5 working days before its end.
Potential problems | How ARROWS can help (consultation@arws.cz) |
|---|---|
Incorrectly determined estimated value: the contract is awarded in a lower regime than it should have been | We will verify the calculation method and document it in the file. In an ongoing audit, we will prepare a defence of the procedure |
The chosen procedure type cannot be used: a simplified procedure was used for a construction project above the legal limit | We will assess the choice of procedure before the call is published. For a procedure already initiated, we will propose the least damaging course of action |
Incorrectly set time limits: the minimum in working days was not met, or the deadlines for the site visit and explanation conflict | We will draw up a schedule for the procedure, including subsequent deadlines. We monitor deadlines throughout the procedure |
Discriminatory tender conditions: suppliers are filing objections and the procedure is being prolonged | We review the technical and qualification conditions before publication. We handle objections for both contracting authorities and suppliers |
Defect in the procedure for a subsidised contract: risk of a levy for breach of budgetary discipline | We will review the procedure from the subsidy provider's perspective. We provide representation during the audit and in subsequent recovery proceedings |
Final summary
The below-threshold regime is the most common in practice, and most errors in it occur before the call for tenders is even published. Determine and document the estimated value, choose the regime based on it, and only then the type of procedure. Choose the simplified below-threshold procedure where you do not need to negotiate and it is not a large construction project; choose the open procedure where you are close to the fifty-million-crown threshold.
The legal boundaries are strict and cannot be rectified retroactively. The simplified below-threshold procedure cannot be used for construction works over fifty million crowns, negotiating tenders is not possible at all, and time limits can only be shortened where the law permits. The ARROWS law firm manages procurement procedures and supplier defences as part of its Public Procurement service and is insured for professional liability up to a limit of CZK 350,000,000. Write to us at consultation@arws.cz.