How do you sidestep the law and help a friend’s company get a commission? It seems that in the Czech Republic it’s very easy.
All you need to do is divide up the commission so that each of its components falls within the prescribed limit. Then it’s possible to avoid the law about public tenders.
You don’t need to publicise anywhere who got the commission and based on what criteria. At the same time, there is no threat that someone would audit the proceedings or question the results.
In the Czech Republic billions of crowns of state money flows through this uncontrolled legal grey area. According to the Regional Development Ministry’s RIA report, in 2007, 59% of all commissions, worth a total of CZK 392 billion were awarded this way.
What’s more, the companies that frequently sidestep the law this way are state institutions.
Free choices
Public commissions, as stipulated by law must have clearly spelled-out rules: Information about the tender must be publicised and so must information about what company was selected, based on what criteria and for what price.
This way, it’s possible to look up later who got what commission and when. The antimonopoly office can inspect the tender. And dissatisfied companies can appeal with the office.
But in the Czech Republic there exists an exception: small commissions. If the price of the commission is lower than CZK 2 million for services or lower than CZK 6 million for buildings, the company that awards the commission does not need to publicise information about what firm was selected and why.
“Those awarding the commission can select whomever they want, choosing freely,” said Jan Pavel from the Economy School in Prague. “Those not awarded the commission cannot even appeal anywhere against the decision.”
It’s not possible to retroactively look up the result and the price of such a commission, and it’s not included in statistics. This lack of data means it’s not possible to uncover any shady dealings – for instance if the commission was given to an affiliated company or if some company repeatedly receive state commissions.
A popular system
The original intent of this exemption was to simplify and decrease the costs of awarding state commissions. If it’s only a small commission, it doesn’t pay off to invest into a tender, lawmakers argued.
But the RIA report, which the ministry commissioned in preparation for an amendment to the law on public commissions, shows that this uncontrolled system is becoming increasingly popular in the Czech Republic.
While in 2006, some 62% commissions were awarded within a legal framework, last year it was just 41%. The remaining 59% sidestepped the law and were awarded under unregulated conditions.
Because there are no statistics about small commissions, we can only try to deduce how much money was involved. The total volume of public commissions last year was CZK 610 billion. Of that CZK 218 billion was awarded in a legally transparent way. One can estimate that the remaining CZK 392 happened without any legal control.
Commissions awarded by municipalities often fall into this category because the commissions are small and the municipalities often don’t have very much money. About 2% of this category are also army commissions which are also exempted from the law.
But experts say the majority of the commissions in this unregulated category are bigger commissions that have been split up into smaller ones in order to bypass legal control.
Statistics show that ministries are frequent offenders. This year alone, the antimonopoly office issued seven fines to the ministries of defence, transport and agriculture for splitting bigger commissions into smaller ones.
Lower limits
Experts say the government should do something about this lack of transparency. One way to do that would be to decrease the limits for small commissions that needn’t be awarded in public tenders. Some also say every commission should be registered.
But the law amendment on public commissions being prepared right now by the Regional Development Ministry doesn’t count on introducing any of these changes. According to the ministry, smaller commissions are already sufficiently regulated.
Translated with permission by the Prague Daily Monitor.
