In January, the Chamber of Deputies passed a relatively groundbreaking amendment to the Public Procurement Act, which increases the threshold for mandatory procurement under the Act from CZK 2 million excluding VAT for supplies and services to CZK 3 million (or from CZK 6 million to CZK 9 million excluding VAT for construction contracts).
This increase is more than appropriate when the two-million (six-million) limit has been in law for more than 20 years - and has been since May 2004 (it was briefly at half that level between 2012 and 2013). From 2004 to 2025, prices for construction works and materials have increased by over 200%, with the most significant increase after 2020. Prices for services and supplies are too fragmented an area for such a figure, however, for example, consultancy services have also increased by over 200% over the same period (with wage increases of 37% and significant increases in operating costs during the 2022-2023 energy crisis). As a benchmark for price increases in the supply segment, one can choose e.g. conventional computing, where even a 400% cumulative price increase can be recorded - after inflation adjustment, the real increase is 150-200%.
However, the limit for public procurement procedures under the law still resisted the above facts until this January. The only modification that appeared in practice in this matter, with the objective increase in prices, was the modification of the internal guidelines of public contracting authorities for small-scale public procurement. They have often responded by raising the usual half-million threshold for open calls to at least CZK 1 million.
The described amendment to the Public Procurement Act is not yet in force; the Senate has it on its agenda for discussion at its 6th session scheduled for the end of February. It is likely to come into force in the spring of this year and will bring a 50% increase in the limit, i.e. it will not achieve the real price increases described above - but it will be received with no small amount of gratitude. Ties will be loosened by both contracting authorities and their suppliers, for whom the often already two-million-dollar limit was not tenable. It has led to the dilution of invoicing into other seemingly unrelated orders and contracts - and not always to circumvent the law with the motive of "milking" public budgets. Rather, such in fraudem legis practices were often seen as the only way to manage significant cost increases and still provide adequate quality performance.
An important role will be played by how contracting authorities approach their internal guidelines for small-scale public procurement - whether they naturally increase their limits for individual procedures as the law increases them. Let the first natural limit be up to CZK 1 million excluding VAT as the newly increased minimum value for the obligation to publish the contract on the contracting authority's profile. And then let the next band simply be extended up to the increased legal value (CZK 3 million). A major step backwards would be the introduction of a new band between 2 and 3 million with procedures stricter than those previously in place for contracts up to 2 million. In this way, the contracting authorities would have completely missed an opportunity which is precisely to remove the necessary stranglehold and to put three million instead of the current two million. This may seem like a very large sum of money - which is being put into the hands of contracting authorities under much more relaxed rules than the law provides for. However, it is important to note, in the context of the figures given in the second paragraph, that this amount does not in reality represent a higher value than it had in 2004, when it was introduced by law. Competition in small-scale procurement has functioned adequately for 20 years, and it is much higher up the scale that the problems arise.
The rules for public procurement under various subsidy programmes (e.g. the rules of the MIT, the Jan Ámos Komenský Operational Programme, the rules of the National Recovery Plan, etc.) should be updated in a timely manner, ideally during the legislative period. The aim is to avoid uncertainty during the transition period, especially for contracts in the range of CZK 2 - 3 million. Here too, there should be a natural increase in the financial limits and the obligations attached to them, so that no special new limit is created for values between 2 and 3 million. That was certainly not the legislator's intention.
It is difficult to predict how long these new three million and nine million thresholds will be in place. If they are in place for another 20 years, it could be a sign of price stability without global crises, or a renewed sleepwalking through the legislature. In practice, however, a freer approach to small-scale procurement should not mean that procurement contractors are to be immediately taken off the hook so that in a short time the three-million-dollar limit is as small as the existing one.
Autor: Michaela Žejšková
This increase is more than appropriate when the two-million (six-million) limit has been in law for more than 20 years - and has been since May 2004 (it was briefly at half that level between 2012 and 2013). From 2004 to 2025, prices for construction works and materials have increased by over 200%, with the most significant increase after 2020. Prices for services and supplies are too fragmented an area for such a figure, however, for example, consultancy services have also increased by over 200% over the same period (with wage increases of 37% and significant increases in operating costs during the 2022-2023 energy crisis). As a benchmark for price increases in the supply segment, one can choose e.g. conventional computing, where even a 400% cumulative price increase can be recorded - after inflation adjustment, the real increase is 150-200%.
However, the limit for public procurement procedures under the law still resisted the above facts until this January. The only modification that appeared in practice in this matter, with the objective increase in prices, was the modification of the internal guidelines of public contracting authorities for small-scale public procurement. They have often responded by raising the usual half-million threshold for open calls to at least CZK 1 million.
The described amendment to the Public Procurement Act is not yet in force; the Senate has it on its agenda for discussion at its 6th session scheduled for the end of February. It is likely to come into force in the spring of this year and will bring a 50% increase in the limit, i.e. it will not achieve the real price increases described above - but it will be received with no small amount of gratitude. Ties will be loosened by both contracting authorities and their suppliers, for whom the often already two-million-dollar limit was not tenable. It has led to the dilution of invoicing into other seemingly unrelated orders and contracts - and not always to circumvent the law with the motive of "milking" public budgets. Rather, such in fraudem legis practices were often seen as the only way to manage significant cost increases and still provide adequate quality performance.
An important role will be played by how contracting authorities approach their internal guidelines for small-scale public procurement - whether they naturally increase their limits for individual procedures as the law increases them. Let the first natural limit be up to CZK 1 million excluding VAT as the newly increased minimum value for the obligation to publish the contract on the contracting authority's profile. And then let the next band simply be extended up to the increased legal value (CZK 3 million). A major step backwards would be the introduction of a new band between 2 and 3 million with procedures stricter than those previously in place for contracts up to 2 million. In this way, the contracting authorities would have completely missed an opportunity which is precisely to remove the necessary stranglehold and to put three million instead of the current two million. This may seem like a very large sum of money - which is being put into the hands of contracting authorities under much more relaxed rules than the law provides for. However, it is important to note, in the context of the figures given in the second paragraph, that this amount does not in reality represent a higher value than it had in 2004, when it was introduced by law. Competition in small-scale procurement has functioned adequately for 20 years, and it is much higher up the scale that the problems arise.
The rules for public procurement under various subsidy programmes (e.g. the rules of the MIT, the Jan Ámos Komenský Operational Programme, the rules of the National Recovery Plan, etc.) should be updated in a timely manner, ideally during the legislative period. The aim is to avoid uncertainty during the transition period, especially for contracts in the range of CZK 2 - 3 million. Here too, there should be a natural increase in the financial limits and the obligations attached to them, so that no special new limit is created for values between 2 and 3 million. That was certainly not the legislator's intention.
It is difficult to predict how long these new three million and nine million thresholds will be in place. If they are in place for another 20 years, it could be a sign of price stability without global crises, or a renewed sleepwalking through the legislature. In practice, however, a freer approach to small-scale procurement should not mean that procurement contractors are to be immediately taken off the hook so that in a short time the three-million-dollar limit is as small as the existing one.
Autor: Michaela Žejšková