The contracting authority has cancelled the procurement procedure in which you submitted a tender –

When the Contracting Authority Must Cancel the Proceedings and When It Only May

The law distinguishes between mandatory and voluntary cancellation, and for suppliers, this difference is crucial. The contracting authority shall cancel the procurement proceedings if, after the deadline for submitting bids, there is no participant (Section 127 of the Czech Public Procurement Act). This is the only case of mandatory cancellation. In all other situations, it may cancel, and only for reasons specified by law.

These include cases where the number of participants falls below the set minimum, when the participation of the selected supplier ceases after their exclusion, when the reasons for continuing disappear due to a material change of circumstances that the contracting authority could neither foresee nor cause, or when the contracting authority does not receive the subsidy from which the contract was to be funded.

A separate reason is also the situation where there is only a single participant in the proceedings.

A material change of circumstances must be distinguished from reasons worthy of special consideration. The former justifies cancellation only if it occurred after the initiation of the proceedings and the contracting authority, with due diligence, could neither foresee nor cause it. Contracting authorities therefore often avoid this reason and choose the more general reason worthy of special consideration, where the law also allows for circumstances caused by the contracting authority itself. For defense, it is useful to find out why the contracting authority chose the specific reason it stated.

The single participant reason often catches companies by surprise. If you are the only one who submitted a bid in the proceedings, the contracting authority can cancel it without having to prove anything else. A single bid therefore does not guarantee a contract, even if it is advantageous and meets all conditions.

Most disputes arise around reasons worthy of special consideration, as this is an indefinite concept under which contracting authorities try to subsume situations where they simply lost interest in the contract or are not satisfied with the outcome of the tender. Other optional reasons, i.e., an unreceived subsidy or a drop in the number of participants, are proven by facts outside the contracting authority's discretion, and a dispute over their existence is usually conducted differently than one over proportionality.

Reasons Worthy of Special Consideration: What Stands Up According to the Court

The contracting authority may cancel the procurement proceedings if, during its course, reasons worthy of special consideration have occurred, including economic reasons, for which the contracting authority cannot be required to continue in the proceedings, regardless of whether these reasons were caused by the contracting authority or not. The wording sounds broad, but the courts interpret it narrowly.

The Supreme Administrative Court defined where this boundary lies. It concluded that if the contracting authority has no other option to remedy its own unlawful conduct in the procurement proceedings, it is generally entitled to cancel the proceedings for this reason, and that a guide for assessing when a breach of the law reaches sufficient intensity is the possibility of the Office for the Protection of Competition (ÚOHS) imposing a corrective measure (judgment of the Supreme Administrative Court, file no. 10 As 23/2021 of January 26, 2023, available on the website of the Supreme Administrative Court).

The same judgment also implies limits that are more significant for suppliers. The reasons leading to cancellation cannot be caused intentionally, i.e., solely for the purpose of cancelling the proceedings. They cannot include arbitrary or willful reasons on the part of the contracting authority, but only those that would be equally relevant to anyone in a similar position. And cancellation due to the contracting authority's own error is an extreme solution that comes into play only when no milder remedy is sufficient.

The court explicitly recalled that cancellation must be interpreted restrictively to prevent arbitrariness and "trial" public procurement. For suppliers, this implies a simple test that can be used when reading the cancellation notification: does the stated reason make sense to another contracting authority in the same situation, or only to this one because they do not like the result?

The court also stated the circumstances that must be examined during the assessment. These include the intensity of the breach of law and the consequences that would occur if the contracting authority did not cancel the proceedings, such as the risk of not receiving the subsidy payment or the threat of a sanction for an administrative offense. The case itself concerned a contracting authority that failed to meet the statutory deadline for a site visit and, due to a technical failure of the electronic tool, was unable to remedy it by extending the deadline for bids.

The court's conclusion has one more consequence that suppliers overlook. Older decisions issued under the previous act, according to which the reason for cancellation had to stand outside the contracting authority, are not automatically applicable according to the court. Basing a defense on this argument is therefore risky; it is stronger to point out the lack of proportionality and the fact that the error could have been corrected differently.

Whether a specific reason stated in the cancellation notification stands up is assessed according to the stage of the proceedings in which it occurred, what documentation the contracting authority has, and whether a milder path of remedy existed — which is why the Czech legal team at ARROWS law firm always assesses the cancellation notification against the file, not just based on its text.

What to Do on the Day the Cancellation Notification Arrives

The contracting authority is obliged to send a written notification of cancellation to all participants within three working days of the decision to cancel the procurement proceedings (Section 128 of the Czech Public Procurement Act). From the delivery of this notification, your deadline for defense begins, so the date of delivery is the first thing you write down.

The second step is to determine exactly which statutory reason the contracting authority bases the cancellation on. The notification often contains a general description without reference to a specific letter of the law, or states multiple reasons at once. Each reason has different prerequisites, and the defense against each looks different. In the case of an unreceived subsidy, the dispute is over whether the subsidy was indeed not granted; in the case of a reason worthy of special consideration, it is over proportionality and the existence of a milder path. Where it is not clear what the contracting authority is building on, this is an argument in itself.

The third step is securing the documents. Review the procurement documentation, all communication with the contracting authority, explanations of the procurement documentation, evaluation results, and any requests to clarify the bid. The timeline often reveals that the reason presented as new existed from the beginning, or conversely, that it arose only after finding out who won the tender. Both are valuable for defense: the former indicates that the contracting authority could have corrected the error earlier and more mildly, the latter that the cancellation may pursue a different purpose than stated.

The fourth step is the decision of whether to defend yourself. It is worth it where you have a realistic chance of winning the contract and where the value of the contract is higher than the costs of the proceedings. When a formal defect in itself does not lead to cancellation is discussed in the text on whether a damaged envelope is a reason to cancel the proceedings. How quickly and to what extent to defend yourself depends on the stage in which the cancellation occurred and whether the contracting authority is already preparing new proceedings for the same subject matter — which is why the lawyers at the Prague-based ARROWS law firm make this choice with the client in the first week of the deadline, not at its end.

Objections: The Deadline and Content on Which Everything Else Stands

Objections may be filed by a supplier who risks or has suffered harm due to the contracting authority's procedure, and against the contracting authority's actions in the procurement proceedings, they are filed by a participant in the proceedings (Section 241 of the Czech Public Procurement Act). They are submitted in writing. Anyone who did not submit a bid generally cannot contest the cancellation, as objections against actions of the contracting authority other than the procurement conditions can only be filed by a participant in the proceedings.

The deadline is short and strict. Objections against actions notified in documents that the contracting authority is obliged to send to the complainant must be delivered to the contracting authority within fifteen days of their delivery (Section 242 of the Czech Public Procurement Act). Delivery to the contracting authority is decisive, not sending from your side; therefore, plan with a buffer and send objections electronically with a delivery receipt.

The content of the objections must be complete from the beginning. State which reason for cancellation you are contesting, why you believe it is not met, what documents prove this, and what you are seeking. Where the contracting authority relies on a reason worthy of special consideration, the objections must also include the proportionality argument: that the error could have been corrected in a milder way, or that it is not serious enough to lead to cancellation even before the Office for the Protection of Competition (ÚOHS).

Also consider how much you want to reveal in the objections. The objections are read by the contracting authority, which can explain and defend its originally stated reason in more detail in its decision on them. However, it cannot be relied upon that an insufficiently defined or missing reason for cancellation can be corrected later by stating new factual reasons — the decision on objections is, by law, supposed to settle what you objected to, not additionally complete the original cancellation. Therefore, arguments cannot be saved for later, because what is missing in the objections will generally not be taken into account by the Office. It is better to state everything and expect the contracting authority to react.

Also beware of requests to waive your right to file objections. A participant can waive this right in writing only after it has arisen, and upon delivery of such a waiver, the deadline for objections is considered to have expired. Contracting authorities sometimes request a waiver as part of informal negotiations on further steps; signing such a statement will deprive you of your defense permanently.

Petition to the Office: When It Makes Sense and What Can No Longer Be Added

If the contracting authority rejects the objections, you can file a petition for review of its actions with the Office for the Protection of Competition (ÚOHS). The petition must be delivered to the Office and in copy to the contracting authority within ten days from the day you received the decision rejecting the objections (Section 251 of the Czech Public Procurement Act). If the contracting authority does not decide on the objections in time, the petition must be delivered no later than 25 days from the sending of the objections.

The most important rule of the proceedings before the Office is the prohibition of new facts, although not entirely without exception. The essentials of the petition fundamentally cannot be additionally changed or supplemented; the only exception is the elimination of defects in the petition within the deadline set by the Office. The Office will take into account new facts stated in contrast to the objections only if you could not have asserted them already against the contracting authority, which you must prove yourself. The petition is therefore only as strong as your objections were.

A proof of payment of the security deposit and proof of delivery of the objections to the contracting authority must be attached to the petition. Without the security deposit, the Office will not deal with the petition on its merits. Also keep in mind that the petition and other submissions can only be filed with the Office via data box or as a data message with a recognized electronic signature.

The petition makes the most practical sense before the contracting authority has created an irreversible state. After the conclusion of the contract for the reviewed public contract, only a petition to impose a ban on its performance can be filed. If the contracting authority in the meantime announces new proceedings for the same subject matter, monitor its progress as well.

Concluding a contract in this new proceeding is a different procedural step than the contract for the procurement whose cancellation you are contesting, but in practice, it can significantly weaken your negotiating position and the contracting authority's motivation to remedy the situation. Also expect that the deadline for the Office's decision only begins to run from the delivery of the contracting authority's response and the procurement documentation, over which you have only limited influence. How to argue with the Office in another type of dispute is shown in the text on defense against the concept of abnormally low bid price.

Errors That Cost Suppliers the Contract

The most common error is waiting for an explanation from the contracting authority. Suppliers call, receive assurances that the contract will be announced again soon, and in the meantime, the deadline for objections expires. Informal communication does not interrupt the deadline, and after its expiration, defense is no longer possible. Assurances from the contracting authority guarantee nothing, as the new proceedings may have different conditions and a different circle of participants.

The second error is objections written as a general disagreement. Formulations such as "we consider the cancellation unlawful and disproportionate" without analyzing the specific reason and without supporting documents will not create any basis for proceedings before the Office. Since additions can no longer be made later, general objections mean a lost dispute even before it begins.

The third error is failing to submit a bid in the new proceedings that the contracting authority announces instead of the cancelled ones. Companies sometimes do this on principle because they are contesting the cancellation of the original one and do not want to legitimize the contracting authority's new procedure. By doing so, however, they deprive themselves of the status of a participant in the new proceedings and the opportunity to defend themselves against the contracting authority's procedure in them. Both can be pursued concurrently.

The fourth error is underestimating documentation. The timeline of communication with the contracting authority is the strongest evidence in these disputes, as it shows when the contracting authority knew about the alleged reason for cancellation and what it was doing at that time. Anyone who does not keep it from the beginning of the proceedings then reconstructs it under the pressure of the deadline.

How extensive the documentation and argumentation a specific dispute requires depends on the value of the contract and which reason the contracting authority bases the cancellation on — which is why the scope of defense is set by the lawyers of the Prague-based ARROWS law firm according to the ratio between the chance of success and the costs of the proceedings. The context of choosing the type of proceedings and its course is analyzed in the text on simplified below-threshold proceedings.

Final Summary

The article showed that the contracting authority may cancel the proceedings only for reasons specified by law, and that the courts interpret the reason worthy of special consideration narrowly. Cancellation due to the contracting authority's own error is an extreme solution; a crucial guide is whether this error would lead to cancellation even before the Office for the Protection of Competition (ÚOHS) and whether it could not have been corrected by a milder measure.

For company management, two dates and one question are decisive. The first date is the day of delivery of the cancellation notification, from which the fifteen-day deadline for objections runs. The second is the day of delivery of the decision on objections, from which the ten-day deadline for the petition to the Office runs. The question is whether the value of the contract and the strength of the argument justify the costs of the dispute.

Delay does not pay off here, because the law does not allow for defense after the deadlines have expired, and what is not stated in the objections cannot be added later. Suppliers who succeeded against cancellation had a timeline of communication with the contracting authority kept from the beginning and objections filed with a buffer.

The lawyers of the Prague-based ARROWS law firm will assess whether the cancellation of the procurement proceedings stands up, prepare objections and a petition to review the contracting authority's actions, and represent you in proceedings before the Office for the Protection of Competition and before administrative courts. Write to us at consultation@arws.cz or explore our public procurement service.