Each country has its own rules in the field of public procurement and its own practices. We have collected the most important and interesting facts about procurement in the four titular countries in order to compare their procurement practices, identify the main similarities and differences in the sector of public procurement. The article will not only help to better understand how the public procurement sector works in certain countries of Central and Eastern Europe, but also to identify the strengths and shortcomings of their procurement systems.
Public Procurement Thresholds
All public procurement in Poland, Hungary and the Czech Republic, as well as in other EU member states, can be divided into procurement above the EU thresholds and below the EU thresholds. All government contracts above the EU threshold are conducted pursuant to the EU law. In addition, they must be published on the EU procurement platform TED (Tenders electronic daily). Currently, EU thresholds are set at EUR 139,000 for procurement of goods and services, and EUR 5,350,000 for procurement of construction works. However, these figures may differ depending on the procurement item and the type of buyer. The main procedures for EU-level procurement are open bidding, restricted bidding, negotiations procedure, competitive dialogue, innovative partnership, and designer competition.
Public procurement below the EU threshold is governed by the national law of the Member States, which in turn must not contradict the law of the EU. The upper limit of such procurement is the EU threshold. The lower limit is defined individually by each country. For example, in Poland it is 130 thousand zlotys (equivalent to EUR 30 thousand), in the Czech Republic — 2 million korunas (equivalent to EUR 76.5 thousand) for goods and services and 6 million korunas for works (EUR 229.7 thousand). Hungary has several lower thresholds for procurement at the national level. The lowest threshold for goods and services is fixed at 15 million forints (equivalent to EUR 41,7 thousand) and 50 million forints for works (equivalent to EUR 139 thousand). Thus, we see that the lower limits of public procurement at the national level vary greatly depending on the country.
Public procurement below the threshold set by national law is considered pre-threshold procurement. Such procurement is typically carried out at the discretion of procuring entities and agencies, mostly through non-competitive procedures; they simply sign the agreement with the selected supplier. Procuring entities usually report on such services, publishing information on their quantity, the date of procurement, the procurement item and the name of the contractor. An interesting example is the Polish city of Łódź, where the city council has adopted a regulation establishing a procedure for conducting pre-threshold procurement with a total value below EUR 30,000 and publishing information about it. Information on such procurement must be published on the official website of the Łódź city council. In Czech Republic, all contracts above 2.000 EUR have to be published, otherwise they are not legally valid (however with exception for urgent cases – which applied frequently in case of COVID-19 purchases).
In Ukraine, according to the new version of the Law on Public Procurement, which entered into force in April 2020, public procurement, depending on the expected value of the procurement item, can be divided into four categories. The first category includes procurement worth more than EUR 133 thousand for goods and services and more than EUR 5,150 thousand for works. Thus, as we can see, the threshold for such procurement corresponds to the thresholds set in EU legislation. It is mandatory to publish such tenders in English. The second category of Ukrainian legislation comprises procurement with an expected value of UAH 200 thousand (equivalent to EUR 5.8 thousand) for goods and services, and UAH 1.5 million for works (equivalent to EUR 45.2 thousand).
The new law on public procurement has also introduced the so-called “simplified procurement,” with a total value of UAH 50,000 (~ EUR 1,500) to UAH 200,000 (~ EUR 5,800) for goods and services and up to UAH 1.5 million for works (~ EUR 52.8 thousand). Simplified procurement was conceived as an easier version of competitive procurement, which is faster and easier. The fourth category is non-competitive pre-threshold procurement with an expected value of up to UAH 50,000. Such procurement, as well as its counterparts in Poland, the Czech Republic, and Hungary, is not regulated by the Law “On Public Procurement.” When a Ukrainian procuring entity conducts such a tender, it can either enter into a direct agreement and publish it in the Prozorro system or conduct a pre-threshold tender. Interestingly, compared to the other Visegrád Four countries, the lower threshold for procurement at the national level here is much lower.
Public Procurement in Poland, the Czech Republic, and Hungary
As a member of the EU, Poland has procurement legislation based on EU public procurement directives, which are enshrined in a single law on public procurement. On September 11, 2019, a new version of this law was adopted, which entered into force on January 1, 2021. Among other things, the new law provides for the creation since 2021 of a single national electronic platform e-Zamówienia, which is meant to establish a dialogue between procuring entities and suppliers. The platform is currently running in test mode, and full launch has been postponed to the end of March 2021.
Interestingly, in Poland, a procuring entity can accept proposals through its own procurement portal, commercial platforms or special (but still very modest) electronic services of the Polish Public Procurement Agency. For example, Polish Railways, Łódź University and Polish Economic Institute all have their own procurement portals. Such portals are often serviced by specialized external outsourcing companies, but the general rule, every Polish procuring entity must have a “Public Procurement” section on its website. Special electronic services of the Polish Public Procurement Agency include a pre-threshold auctions service, an auctions service, and the Mini Portal. The Mini Portal is a free system providing a connection between the procuring entities and the participants of public procurement. After the final launch of the single electronic platform, the Mini-Portal will cease to exist.
Polish law also requires the publication of procurement notices on the Central Portal of the Public Procurement Bulletin (Portal Centralny Biuletynu Zamówień Publicznych, BZP, in Polish). Since January 2021 e-Zamówienia is finally launched, but is still not fully operational . It only presents the information on planning, and notices, but doesn’t allow for conduct a procurement.
In the case of the Czech Republic, procuring entities must publish tender announcements on the National Electronic Tool portal (NEN). To participate and make a bid, any economic operator, local or foreign, must be registered directly on the NEN portal or on one of the five private electronic platforms. In the latter cases, it is quite convenient to use the integrated electronic platform FEN, which combines these 5 platforms.
The purpose of FEN is to make it as easy as possible for suppliers to access tender procedures so that they can find a tender and apply for it from one place and from one user account. The difference between the public NEN platform and the private FEN is the quality and level of services for bidders, where FEN provides advanced search and support services that help to prepare a tender offer faster and easier, but for a fee. NEN, on the other hand, is free both for procuring entities and for suppliers.
In Hungary, procurements above the national and EU thresholds must be published in the Official Procurement Journal, while related documents are published in a procurement database of the Public Procurement Authority. Not only the Public Procurement Journals publishes procurement related information. Since 2018, contracting authorities must conduct public procurements via the online platform Electronic Procurement Portal “EKR”, operated by the Prime Ministers’ Office. The platform contains information on awards, procurement plans, and all current open procurement.
Public Procurement in Ukraine
Since 2016, public procurement in Ukraine has been taking place exclusively through the Prozorro e-procurement system. Procuring entities publish information about a tender on authorized platforms, which are linked to the Prozorro database. Procurement participants must also register on one of the commercial online platforms, which are about 19 as of January 2020.
In October 2020, a new version of the Law on Public Procurement came into force, which obliged customers to conduct all purchases from UAH 50,000 (EUR 1,500) through the Prozorro system, and introduced the so-called “simplified procurement.” Another achievement was the creation of an electronic catalogue Prozorro Market, which is designed to help customers quickly and easily buy consumer goods with an expected value that does not exceed the established threshold of UAH 200,000.
Central Procurement Agencies
Unlike many EU member states, Poland and the Czech Republic have a highly decentralized procurement system with a significant number of procuring entities. A distinctive feature of the public procurement sector of these countries is the lack of a centralized procurement organization. Unlike Poland and the Czech Republic, Hungary does have a central procurement organization subordinate to the Parliament that oversees all procurement procedures under the Public Procurement Act, and national procuring entities are generally obliged to request the control of their notices prior to publication, Besides, the Authority monitors the application of the law and comments on draft legislations, controls the amendment and execution of public procurement contracts. The Public Procurement Arbitration Board within the Authority conducts proceedings initiated against any infringement of the legislative provisions applicable to public procurement or contract award procedures.
In Ukraine, there are two central procurement agencies, namely, Professional Procurement of Ukraine and Medical Procurement of Ukraine. The public institution Professional Procurement of Ukraine was founded back in 2016 to increase the effectiveness of procurement by means of decentralization and professionalization of the public procurement sector. The agency works under the Ministry for the Development of Economy, Trade, and Agriculture of Ukraine, and its primary activity is procurement on behalf of other procuring entities. SE “Medical Procurement of Ukraine” was established at the end of 2018 to ensure high-quality, transparent and timely supply and purchase of medical devices and medicines for budget funds. The institution is subordinate to the Ministry of Healthcare of Ukraine. Since 2015, procurement of medication in Ukraine has been done mostly by international organizations. In the future, it is expected that centralized procurement of medicines will be carried out exclusively by the State Enterprise “Medical Procurement of Ukraine.”
Another interesting thing is the experience of each of the four countries with coronavirus procurement. In Ukraine, in March 2020, the Verkhovna Rada allowed governmental procuring entities to purchase the most necessary goods and services to combat coronavirus without auctions. The Cabinet of Ministers approved a special resolution defining the list of such goods and services, as well as the procedure for their purchase. Thus, procuring entities may simply find a supplier, conclude an agreement and publish it on ProZorro. According to the resolution, if necessary, it can be done in a day. Under this procedure, starting from April 2020, about 145 thousand purchases were made, worth about UAH 30 billion (equivalent to EUR 90 million). Despite the benefits of simplified COVID-19 procurement early in the pandemic, it is currently giving rise to numerous violations and corruption risks. In view of this, the TI Ukraine team has been advocating for its abolition for almost six months.
With the onset of the pandemic, Article 6 of the Act of March 2, 2020 on special arrangements for preventing, countering and combating COVID-19, other infectious diseases and emergencies caused by them was introduced. In accordance with this provision, the provisions of the Act of 29 January 2004 did not apply to contracts for services or supplies necessary to counter COVID-19. – Public Procurement Law, if there was a high probability of rapid and uncontrolled spread of the disease or if it was required by the protection of public health. This provision entered into force on 8 March and was in force until 4 September 2020. In connection with the second wave of the pandemic, an almost identical solution was reintroduced at the end of November. This time, the obligation to provide detailed information on the purchase in this mode was clearly defined. Within seven days of the contract being awarded, information on the subject of the contract shall be published in the Public Procurement Bulletin, specifying the quantity of items or other goods and the scope of services; the price; the factual circumstances justifying the award of the contract without applying the public procurement regulations; and the name of the entity with which the contract was concluded.
In March 2020, the Hungarian Government adopted a decree that enabled exceptions from the Public Procurement Act in case these are needed to manage the crisis or allow the efficient operation of institutions that have leading roles in countering the crises. This provision was added in June 2020 to the Act on Healthcare. Exceptions are approved by the Prime Minister or the official the PM designates to fulfil this task. Procuring entities have to invite preferably three bidders but can also directly award contracts if urgency or reason is justified. Procuring entities need to check if there are existing framework agreements that could cover the planned emergency contract. Furthermore, the legislation can only be applied for procurements that are not funded by the EU. Legal compliance of the procurements is investigated ex-post by the minister responsible for the budget. The law does not prescribe transparency related provisions, therefore no information on contracts under the emergency regulation is proactively published.
In Czech Republic, in response to the COVID-19 pandemic, an amendment to the Public Procurement Act has been approved to simplify the procurement of personal protective equipment. According to the Czech procurement legislation, to procure goods and services to fight Covid-19 pandemic through accelerated procedure the negotiated procedure without prior publication and the procedure direct awards may be applied.
Out of the four countries described, three have electronic procurement systems. In Poland, a single electronic system is currently being implemented. In all four countries, legislation sets different cost limits for procurement below the EU thresholds, as well as for non-competitive pre-threshold procurement. While the lower limit of competitive procurement in Ukraine is UAH 200,000 (~ EUR 5,800) for goods and services and UAH 50,000 (or EUR 1,500) for simplified competitive procurement, in the Czech Republic, this figure is the highest among the four countries at CZK 2 million (~ EUR 76,500). Unlike Hungary and Ukraine, Poland and the Czech Republic have a highly decentralized procurement system with a significant number of procuring entities. Ukraine and Hungary, on the other hand, have central procurement organizations stipulated by the law, with Ukraine even having two, Professional Procurement of Ukraine and Medical Procurement of Ukraine. The practices of pre-threshold procurement in different countries are also interesting. According to the new Law “On Public Procurement,” there is now an option in Ukraine to buy goods and services through electronic catalogues or Prozorro Market, which makes pre-threshold procurement more efficient. After the outbreak of the Covid-19 pandemic, all four countries introduced measures to simplify public procurement of goods, works and services needed to fight the coronavirus disease.
This article was prepared by Kateryna Rusina, DOZORRO Communications Manager, within the project “Tackling corruption in public procurement in Ukraine and V4 countries with new approaches.”
The project is co-financed by the Governments of Czechia, Hungary, Poland and Slovakia through Visegrad Grants from International Visegrad Fund. The mission of the Fund is to advance ideas for sustainable regional cooperation in Central Europe.