Record fine for contracting authority confirmed

6 Nov 2007

The Chairman of the Office for the Protection of Competition Martin Pecina confirmed a five million CZK fine imposed in September 2007 on state enterprise in liquidation Moravské naftové doly (Moravian Oil Wells, hereinafter "MND").

The company awarded public procurement for the cleaning up of environmental damage – removal of gas-oil drilling rigs and probes in a negotiation proceeding without publication, i.e. without open tendering. The total value of the contract was in excess of 4 billion crowns.

The mistake given was made by the former liquidator of the state company, who was removed from office in mid-July 2007. The newly appointed liquidator in his statement as part of the administration proceedings admitted that in this case the legal requirements for the use of negotiation without publication had not been met. Commenting on the contract issuer’s approach in the case in question the Office said that the purpose of the Act is to secure a framework for the efficient expenditure of the contract issuers’ financial resources, which can only be achieved in a transparently conducted contract issuing procedure, i.e. by an approach securing the maximum level of competition, which is the basis for gaining the most favourable conditions for the contracting authority. In announcing an open, close or negotiated proceeding with publication the contract issuer announces to an unlimited number of suppliers his intention of awarding a public contract in this contract issuing procedure. In view of the fact that the contract issuer used for awarding a public procurement a negotiated proceeding without publication, in which the intention of the issuer to award a public procurement is not subject to the requirement for publication, he caused the tender proceedings to be used by only the three suppliers who had been addressed (of which 1 refused to take part in the proceedings).

Highest fines imposed by the Office in the area of public procurement

Contracting authority	Year	No. of proceeding	Fine (in crowns)	In force
Moravské naftové doly, s.p.	2007	S195/07	5 000 000	YES
City of Zlín	2007	S 395/06	3 000 000	YES
City of Praha	2002	S 155/02	715 000	YES
City of Hradec Králové	2005	S 249/05	700 000	YES
Dopravní společnost Zlín-Otrokovice (Public transport company Zlín-Otrokovice)	2005	S 048/05	500 000	YES
Ministry of labour and social affairs	2006	S 213/06	500 000	YES
City of Karlovy Vary	2007	S 169/07	500 000	NO

External Relations Department of the Office