We talk about the phenomenon of ESG, or Environmental, Social and Corporate Governance, on the konstrukje.cz portal they already wrote last year. We are now focusing on the issue of how ESG manifests itself and will manifest itself in the process of awarding public contracts.

According to § 6 paragraph 4 Act No. 134/2016 Coll., on public procurement (hereinafter referred to as "ZVZ") applies that the contracting authority, when proceeding in accordance with this Act, namely when creating tender conditions, evaluating bids and selecting a supplier, is obliged, provided that it will be possible due to the nature and meaning of the contract, to comply with the principles of socially responsible procurement, environmentally responsible procurement and innovation within the meaning of this law. The contracting authority is obliged to properly justify its procedure.

This requirement for responsible public procurement is part of the Public Procurement Act from 1 January 1 and applies to all contracting authorities and all types of public procurement, including small-scale procurement. In the future, this means that the environmental, social and innovative method of awarding will at least be the subject of a consideration that needs to be made when awarding any public contract and to deal with the arguments why a sustainable way is possibly not possible in a specific tender.

OVZ principles for public contracts

The principles of the OVZ are applied within all procedures of the contracting authority according to the OVZ without exception. The contracting authority is also bound to comply with them when awarding public contracts of a small scale and apparently also when fulfilling the general exceptions in § 29 (however, in these cases it will usually only be about awarding a public contract to a specific supplier without competition) and also if any of the exceptions are given for below-limit public contracts in the sense of § 30. The principle of using OVZ principles will not be contradicted if OVZ principles are not reflected in public contracts with a very low expected value (e.g. in the order of thousands or tens of thousands of CZK), however the expected value should generally not be a scale greater or less use of OVZ principles.

It follows from the diction of § 6, paragraph 4, that the contracting authority is obliged to comply with the principles of the OVZ as part of its procedure according to the ZVZ when creating procurement conditions, evaluating bids and also when selecting a supplier. 

The list of ways of applying OVZ principles is defined cumulatively. However, since the conditions for evaluating and selecting a supplier form part of the tender conditions, in fact, the contracting authority must apply the principles of OVZ already at the stage of determining the tender conditions, namely in the determination of technical and business conditions, conditions of participation (especially qualification prerequisites) or evaluation criteria. However, the contracting authority is not obliged to apply the OVZ principles in all defined ways (technical, business or qualification conditions or evaluation). As part of the preparation of a specific public contract, the contracting authority should always ad hoc assess the individual ways of applying the OVZ principles and choose such a way of applying them (if they come into consideration at all) that will be the most appropriate from the point of view of the subject of the public contract.

How to apply OVZ principles

The contracting authority is obliged to apply the principles of OVZ only within those public contracts in which it is possible and justified due to their nature and meaning. The actual application of the principles is thus absolutely not necessary in the framework of all awarded public contracts. The contracting authority must always consider the nature and meaning of the public procurement being prepared and, based on this, subsequently evaluate the specific possibilities of applying the principles of OVZ, including in relation to other public procurement principles defined in § 6. The contracting authority can thus come to the conclusion that in relation to it is not possible or meaningful to apply any or any of the OVZ principles to a given public contract. All principles must be interpreted in harmony with each other, none has priority over another, the principles stand equally side by side. the possibility to apply OVZ principles in procurement procedures is enshrined in the ZVZ from the beginning in § 37 paragraph 1 letter d). 

According to § 37 paragraph 1 letter d) ZVZ applies that the conditions of participation in the procurement procedure can be set by the contracting authority as special conditions for the performance of a public contract, especially in the area of ​​the impact of the subject of the public contract on the environment, social consequences resulting from the subject of the public contract, the economic area or innovation. It can thus be a question of requirements for ecological course the performance of a public contract (e.g. regarding the operation of machines, the production process or the disposal of waste generated during the performance of a public contract), certain requirements forand the employment of a certain number of disadvantaged persons on the labor market (e.g. long-term unemployed, caring for small children, elderly people or, conversely, recent school graduates) or establishing a minimum level for remuneration of workers suppliers, etc. These special requirements can therefore relate both to the actual course or circumstances of the performance of the public contract and to the characteristics of the requested performance, however, such requirements cannot be established which are completely outside the scope of the requested performance.

Special conditions for the performance of a public contract, especially in the area of ​​the impact of the subject of the public contract on the environment, social consequences resulting from the subject of the public contract, the economic area or innovations are newly separated in the law into a separate type of participation conditions. As he states Directive 2014/24 / EU, the aim is to properly incorporate into procurement procedures the requirements regarding environmental, social and working conditions. Directive 2014/24/EU further considers it particularly important that Member States (through transposition) and contracting authorities take appropriate measures to ensure compliance with environmental, social and labor law obligations applicable at the place where construction works are carried out or services are provided, and which result from laws, regulations, decrees and decisions at national and EU level, as well as from collective agreements, if such rules and their application are in accordance with EU law. for example, it may be about requirements for the ecological progress of the performance of a public contract (for example, regarding the operation of a machine, the production process or the disposal of waste generated during the performance of a public contract), certain requirements for the employment of a certain number of disadvantaged persons or the establishment of a minimum level for the remuneration of the contractor's employees or its subcontractor.

Application of ESG standards when awarding public contracts

It can be concluded that more and more will happen in the future more frequent application of ESG standards within the procurement procedure for public contracts. Governments will probably invest more in green solutions on the one hand, and ESG standards will be gradually conditioned on public contracts on the other.

For example, it can be:

1. energy purchase from renewable resources,
2. energetic savings as one of the criteria for selecting a supplier
3. life cycle costs in the case of purchases of computer or office equipment.

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Thus, just as at the beginning of the millennium ISO quality certification, for example, became an integral part of the prerequisites for participation in public procurement, so also smaller and medium-sized companies must start preparing for the fulfillment of new requirements if they want to succeed in the public procurement market. So far, so-called "green" public procurement is most evident in practice, i.e. in connection with ESG it is the first criterion - environmental impacts. So it can be expected that in order for the contractor to succeed in the public contract, he will have to comply with certain principles affecting the environment and it can also be assumed that in the future the criterion of impact on society and company management will be added to these criteria.

Source: construction.cz

Are you unsure about ESG when awarding public contracts? Do you want to implement ESG standards in your business? You need other legal advice regarding public contracts? Don't know how to prepare a tender? We will advise you!

JUDr. Ing. Jan Vych, attorney and partner