Discusses the legal requirements for selling to the host government, including whether the government has agreed to abide by the WTO Government Procurement Agreement or is a party to a government procurement chapter in a U.S. FTA. Specifies areas where there are opportunities.

Lack of transparency in the procurement process remains a significant obstacle for U.S. companies. The Global Competitiveness Index ranked the Czech Republic 99th out of 137 nations for “diversion of public funds.” While the Czech government has publicly stated its commitment to fair, transparent tenders, rumors of corruption remain commonplace and the Czech media regularly follow high-profile tenders gone awry. U.S. firms active in the market have identified several tenders where they believe the process was corrupt and in many cases government tender decisions were overturned due to allegations that the process was not conducted fairly. Additionally, government decision-making is notoriously slow and due to a lack of transparency, tenders are frequently delayed or cancelled with little political will to reissue the tender again later.

As a member of the EU, the Czech Republic is subject to the rules of the WTO Agreement on Government Procurement. The Czech government’s current procurement law requires public tenders for government and government financed procurements exceeding $83,333 (2 million CZK) for supplies/services or $250,000 (6 million CZK) for construction. Tenders are publicized in the local daily press, particularly the Hospodarske Noviny (Economic News) and Mlada Fronta Dnes newspapers, as well as in the Obchodni Vestnik (Trade Gazette) published by the Czech government. All public tenders are to be listed at Vestnik Verejnych Zakazek, in Czech only), and all international public tenders are simultaneously published in English at the EU’s Tender Electronic Daily. Major manufacturers of a particular product are usually notified directly.

In most cases, U.S. companies bidding on Czech government tenders must have their products approved for the EU market (see Trade Standards section). U.S. companies that find local Czech partners for joint bids can compete on tenders for environmental, engineering, financial, and management consulting services. Bid bonds from one  to five  percent may be required for large-scale contracts. An emphasis on total value (rather than low cost) has lessened the disadvantage that U.S. companies once faced against lower-cost domestic and European firms.
Both the Czech national government and major municipal governments make increasing use of bonds to pay for infrastructure improvements but this approach is still far less common than in the United States.
 
EU Regulations
The public procurement market in the EU is regulated by three Directives. In 2014, the EU adopted new legislation in this area bringing the total up to four Directives. For additional information on EU regulations pertaining to public procurement, please refer to Doing Business in the European Union: 2018 Country Commercial Guide for U.S. Companies report at www.export.gov/ccg/.

Defense Procurement
The Ministry of Defence (MoD) can issue a “direct call” tender when it is considered to be in the government’s interest to use only one source for a purchase or procurement; however, this practice is seldom used. Through this system, the MoD is allowed to submit a Letter of Request (LOR) for a Letter of Offer and Acceptance (LOA) which is a government-to-government agreement identifying the defense articles and services the U.S. Government proposes to sell. This enables the Czech MoD to forego the tender process while maintaining transparency. The “direct call” is characterized as being similar to U.S. Government sole-source contracting, but it lacks defined selection criteria, raising concerns about procedural transparency. Lately, the Czech MoD has started to conduct a market research phase for defense acquisitions, during which it gathers data on capabilities, pricing and availability of various competitors’ products prior to making an internal decision on which products warrant a request for proposal or LOR for LOA.

Even though the Czechs have budgeted for and seek to continue to modernize their military to be more NATO-interoperable and less reliant on Russian equipment, and upgrade infrastructure to meet environmental and other EU requirements, MoD decisiveness in executing major acquisitions is insufficient to achieve full modernizations aims. The Czechs have pledged to increase defense spending from the current level of about 1.0 percent to 1.4 percent of GDP by 2020 and two percent by 2024. U.S. Government, EU, and other international funds are available to help finance purchases. There is a provision that allows U.S. firms to contract directly with the Ministry of Defence without the need for a Czech intermediary. The purpose of the provision was to improve transparency and bring cost savings to the system. However, the ministry has found ways around this ruling, such as including requirements for all documentation to be in the Czech language, thereby making the use of a local intermediary not a requirement but highly recommended. The ministry still opts to use intermediary companies for two reasons: it is easier to handle receipt of goods and customs clearance, and for cases that require national funding, the ministry cannot obligate funds until the items are delivered in full. Intermediary companies allow the ministry to pay in installments and settle upon final delivery.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.