Amendment to the Public Procurement Act

The amendment to the Public Procurement Act brings a fundamental change for contracting authorities - it increases the financial limits for small-scale public procurement contracts, thus facilitating the process of their award. In addition, it introduces new obligations in relation to foreign subsidies and expands the possibilities of excluding bidders. What exactly is changing, what practical implications will it have and how to prepare for the new obligations? We summarise all the essentials in this article.

Authors of the article: ARROWS (Mgr. Alexandra Johnová and Mgr. Antonín Hajdušek, LL.M., office@arws.cz, +420 245 007 740)

On 27 February 2025, the Senate approved an amendment to Act No. 134/2016 Coll., on Public Procurement (hereinafter referred to as "ZZVZ"), together with an amendment to Act No. 215/2004 Coll., on the regulation of certain relations in the field of public support, and only the signature of the amendment by the President of the Republic remains in the approval process. After the signature of the Act by the President of the Republic, the amendment will be promulgated in the Collection of Laws and will enter into force on the fifteenth day following the date of its promulgation. Therefore, it can be assumed that the amendments to the ZZVZ and the Act on the regulation of certain relations in the field of public support mentioned below will be effective in a relatively short period of time and especially contracting authorities will have to comply with them.

The main reason for these changes is the need to implement the new European Regulation on foreign subsidies (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 were not subject to regulation until now, unlike public aid provided by EU Member States. Foreign subsidised companies could therefore have an advantage in acquisitions or public procurement.

The amendment to the PPA therefore introduces new obligations and rules for both contracting authorities and suppliers to ensure the proper application of the Regulation in practice. At the same time, certain financial limits in procurement procedures are increased in order to reduce the administrative burden on contracting authorities. In the following overview we discuss the main changes, their significance and practical implications for contracting authorities.

Main changes in the Public Procurement Act

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

Procurement period

Where a procurement procedure is subject to an investigation by the European Commission in respect of notified foreign subsidies, the procurement period in Section 40(2) of the PPA is extended by the time during which the preliminary review or in-depth investigation of notified foreign financial contributions by the European Commission is ongoing.

This may temporarily suspend the procurement process pending the Commission's opinion.

Possibility for a supplier to withdraw from an investigation

Newly, according to Section 40(3) of the PPA, tenderers may withdraw from the tender process during the tender period, in a situation where the European Commission has opened an investigation into their notified foreign subsidies. The contracting authority shall send information on the opening or termination of the in-depth investigation to the tenderers without undue delay after being informed by the European Commission.

Until now, tenders have been binding throughout the tendering period. However, the amendment allows for the withdrawal of a tender in the event of a lengthy investigation, so that tenderers are not bound by their tender for an unreasonably long period of time.

Obligation to complete the missing declaration of foreign support

The contracting authority is now obliged under Article 46(4) of the PPA to request additional notification or affidavit of foreign financial contributions from the supplier if the tender or request for participation does not contain such documents.

In practice, this means that for the contracts in question, tenderers must declare when submitting a tender whether they have received foreign subsidies in excess of a specified limit (see below) or provide an affidavit stating that no notification is required. Should the tenderer forget to do so, the contracting authority will now invite the tenderer to complete it within 10 working days.

Extension of the grounds for exclusion of a tenderer

The PPA is amended to provide that the contracting authority may exclude a tenderer on the grounds set out in the Regulation. In other words, if directly applicable European regulations - in particular the Regulation on foreign subsidies - stipulate that a tenderer must be excluded or its tender rejected (for example, because of detrimental foreign aid), the contracting authority has a legal basis for doing so.

Increase of limits for small-scale public procurement

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

• for supplies and services from the current CZK 2 million to CZK 3 million excluding VAT,
• for construction works from CZK 6 million to CZK 9 million excluding VAT.

Thus, contracting authorities can implement more smaller contracts outside the regime of the law (only according to their own internal rules), which should reduce administrative complexity. The reason for the increase in these limits is mainly due to the increase in price levels in recent years and efforts to simplify the award of small contracts.

Increasing the threshold for mandatory publication of the contract on the contracting authority's profile

In addition, the threshold for mandatory publication of a contract on the contracting authority's profile has been increased - now contracts will be published from CZK 1,000,000 excluding VAT instead of the previous CZK 500,000 excluding VAT.

This will again relieve contracting authorities of the obligation to publish contracts with a very small price (but beware of other regulations, such as the Law on the Register of Contracts, which may have its own requirements).

Background to the amendment to the Public Support Act

The amendment to the ZZVZ is closely related to the parallel amendment to Act No. 215/2004 Coll. on Public Support, which implements the foreign subsidies agenda into the Czech legal framework. The Public Support Act traditionally regulates the procedures for the provision and control of state aid (subsidies) in accordance with EU regulations.

Until now, however, it has dealt only with aid granted by the Czech Republic or other EU Member States. The amendment to the Act extends its scope to subsidies from third countries - the title also includes the term "and foreign subsidies". In practice, this means that the Office for the Protection of Competition (OPC) will now act as a contact and cooperating authority in investigations of foreign subsidies by the European Commission.

The OOHS also gains the power to request information from companies on foreign aid received and to forward it to the European Commission, or to carry out investigations at the request of the Commission on the territory of the Czech Republic. Member States act only in 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 amendment of the ZZVZ. While the Public Support Act addresses the institutional and procedural framework (who and how will cooperate with the Commission at national level in controlling foreign subsidies), the PPA ensures that the rules of the Regulation will permeate the daily practice of procurement procedures. Together, the two amendments create the conditions for the new EU mechanisms to protect the internal market from distortions to work in the Czech public procurement environment. From the point of view of the contracting authority, it is essential that new obligations and possibilities (see above) have been added in the conduct of the procurement procedure - compliance with them may be subject to supervision by the Office of the Procurement Supervisor, just like other rules of the Public Procurement Act.

On the other hand, for the actual provision of subsidies by Czech entities (public support), the rules are not changed. The change relates exclusively to the introduction of rules for foreign subsidies in addition to the existing regulation of public aid.

Impact on contracting authorities

From the perspective of contracting authorities, the amendment brings new obligations for large contracts and simplification for small ones. Contracting authorities should first assess whether they will be affected by the rules on foreign subsidies. These apply to extremely large tenders - the Regulation stipulates 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 tenderer (including connected persons and main subcontractors) has received aggregate subsidies of at least EUR 4 million from third countries in the last 3 years. This high value is not reached by most ordinary public contracts.

However, if you are planning, for example, a large concession or an infrastructure tender financed to the tune of billions of crowns, you need to take these rules into account. In practice, this means including in the tender documentation a requirement to submit a foreign subsidy notification (or an affidavit that no notification is required) from all bidders. The contracting authority will be obliged to forward these notifications to the European Commission without delay and not to award the contract while the Commission is investigating the possible impact of the subsidies.

The standard time limits for review are 20 working days for a preliminary examination and 110 working days (with the possibility of extension) for an in-depth investigation at Commission level. It should therefore be expected that the time between the submission of tenders and the signature of the contract may be extended by several months if notification is required under the Regulation.

Communication with the Commission must also be monitored - in case an in-depth investigation is launched, the contracting authority will notify the participants in the procedure and they may decide to withdraw their bids (as allowed by the amendment to the PPA). If the European Commission subsequently finds that a particular foreign subsidy distorts competition, it may prohibit the award of the contract to the tenderer in question.

In such a case, the contracting authority would have no choice but to exclude the bidder concerned and, if necessary, proceed to the selection of the next in line or to a new procedure. It is therefore recommended that strategic contracts should identify in advance whether they could be affected by the Regulation and inform the organisation's management and potential suppliers in good time.

Conversely, smaller contracts may be awarded more freely. Increasing the thresholds for small-scale procurement to €3 million. CZK 5 million (or CZK 9 million for construction) means that many purchases that previously had to go through a formal procedure under the ZZVZ can now be carried out in a simpler way. This will save contracting authorities time and costs associated with administration - according to the explanatory memorandum, the motivation was mainly to save administrative burden and costs.

However, contracting authorities should update their internal guidelines and procedures, which often set out the details of small-scale procurement. It is advisable to reconfigure internal thresholds and approval processes to reflect the new legislation (e.g. adjust the definition of what your organisation considers a small contract and how it is solicited). At the same time, although the law does not formally require open competition for contracts up to €3 million, it should also be clarified that there is no need for an open competition. We recommend that you maintain transparency and non-discrimination even for these smaller contracts - for example, by approaching more than one supplier and publishing the result - to ensure the cost-effective use of public funds and to avoid any possible doubts.

Another practical change is to increase the limit for the mandatory publication of concluded contracts on the contracting authority's profile to EUR 1 million. CZK without VAT.

This means that contracts with a value below this threshold will no longer have to be published on the contracting authority profile. This will reduce the administrative burden especially for smaller municipalities and organisations that conclude a large number of small contracts. However, there is still an obligation to keep records of public contracts and to comply with the 3E principles (economy, efficiency, effectiveness) even for sub-limit and small contracts. Do not forget also the Law 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 PPL.

Summary and recommendations

The amendment to the PPA and the related changes in the area of public support bring a combination of European and national measures that will affect the public procurement process. At the European level, this includes ensuring control of foreign subsidies in the largest tenders, and at the national level, simplifying the rules for smaller contracts. For contracting authorities, this leads to several key recommendations:

• Familiarise yourself with the new obligations: if your organisation potentially tenders very large contracts (in the order of billions of crowns), pay close attention to the rules of Regulation (EU) 2022/2560. Make sure you include the required declarations from suppliers in the documentation for these tenders and anticipate possible extensions to the European Commission's notification deadlines.
• Adjust internal processes and guidelines: by increasing the thresholds for small-scale contracts, you can take advantage of simpler procedures for a wider range of purchases. Therefore, update your internal rules to reflect the new limits - e.g. adjust financial thresholds for simplified tenders, approval competences, etc.

Don't wait for the new obligations to catch you by surprise - prepare early and avoid unnecessary complications. Whether you're dealing with the impact of foreign subsidies or need to adjust internal guidelines, consulting with experts will help you set up your processes correctly and confidently. Proper preparation not only minimises risks, but also contributes to fairer market conditions and more efficient contract management. Contact us to ensure you have clear and workable solutions in place before the new regulations come into force.