National Economics Council proposes anti-corruption measures; Prime Minister Petr Nečas wants to bring them to life

The government's National Economic Council [NERV in its Czech acronym] has proposed its first set of anti-corruption measures to make public contracts more effective and make transportation construction less expensive.

For example, the limit on small-scope contracts should be decreased to CZK 1 million, expert opposition should be made mandatory, and a minimum of five companies should be required to be identified to bid on major contracts.

Public contracts worth CZK 630 million were listed in 2009. "A savings of only 2 % would mean CZK 13 billion, which is comparable to the cuts in social mandatory expenditures for 2011," Prime Minister Nečas said.

NERV's recommendations consist of such things as the implementation of the principle of the "3 E's" in the law on public contracts: Economy; expediency and effectiveness. "The goal of these measures is to decrease room for flexibility in tenders through items of fulfilment that are defined far too narrowly, or through choosing evaluation criteria structures for economic advantage," the experts write in the recommendations of NERV's anticorruption subcommittee against (see attachment).

NERV also recommends decreasing the limits for listing public contracts from the current CZK 6 million for construction contracts and CZK 2 million for others. These limits are among the highest in Europe. NERV proposes lowering these limits to CZK 1 million, as well as creating a special type of contract with a simplified procurement process for amounts from CZK 300 thousand to CZK 1 million.
Part of the proposal also includes using data boxes for the administration of public contracts. Such a solution would rule out the possibility of erasing, predating or altering documents in the middle of the tender.

The minimum number of competitors for large contracts (above CZK 100 million, for example) would be set at five companies which could apply for the tender. "The measure reacts to certain situations where only one or two subjects enter a bid, and the customer excuses it by saying that this is how the market is. It introduces the responsibility of carrying out a detailed market analysis and preparing contracts in such a way that a sufficient number of bidders be secured, and that the benefits of the effects of competition be cashed in on," the recommendation states.

Overpriced Transportation Construction

"In comparison with developed EU countries, our construction contracts are markedly overpriced. The relative costs on predominantly state infrastructure are 45 % higher in the Czech Republic than on predominantly private apartment construction," said NERV member Pavel Kohout. In the Czech Republic, this ratio is 81.25 % higher than in Germany.

According to economists, overpriced contracts are a signal of possible corruption and lower effectivity, lower competition, because few companies take part in tenders for transportation construction.

Public contracts

Resources worth 17.5 % of GDP (CZK 635 billion in 2009) are spent in public contracts every year, of which 14 % of GDP (CZK 508 billion in 2009) came from public budgets.

"The result is that sometimes unnecessary things or services are bought. At other times they are necessary things, but at overinflated prices. Sanctions are by far unable to resolve the problem, and this would be true even if there was a willingness and an ability to affect corruption on the part of authorities. What is more important is to create such a system which could make it maximally more complicated to act corruptly. Therefore, not to solve the effects, but mainly the causes of the problems" , NERV writes in its report.

Prime Minister Nečas appreciated NERV's work and called on its members to continue activities in this area. "Until now the government has only made cuts to stabilise the budget. What NERV is coming up with are real reforms to the system which can save significant taxpayer resources," the prime minister added.