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Gov't to issue largest single tender in history

Ministry slates billions for ecological cleanup

By František Bouc
Staff Writer, The Prague Post
July 16th, 2008 issue

The government is readying its biggest tender in history and inviting plenty of criticism along the way.
An order worth up to 114.5 billion Kč ($7.6 billion) will be at stake when the Finance Ministry selects a company to redevelop areas that have been ecologically damaged.
Although preparations of the tender started only recently, the decision immediately attracted controversy, thanks to the enormous sum under discussion.
The government promises to clean up remnants of environmental damage caused by mines, chemical plants and other industrial zones under the communist regime.
When these companies passed into private hands in the early 1990s, the government pledged to contribute funds for projects such as the cleanup of contaminated soil and groundwater.
Collectively, the government has made a commitment worth 169.5 billion Kč. A portion of that, 55 billion Kč, has already been awarded through nearly 400 independent tenders.
An additional 1,100 tenders have yet to be distributed, and more than 200 private companies still await the payout. Frustrated at the prolonged process, those same companies now threaten legal action against the Czech Republic, seeking hefty financial compensation.
To avoid this, the Finance Ministry is speeding up the disbursement. Finance Minister Miroslav Kalousek has now proposed lumping together the remaining commitments into one package to be awarded to a single company, rather than spreading it over separate tenders, and said the move would be more efficient and financially sound.
“With one tender, the government will save time and money, since the final price will be set. Paying to just one [company] will be more advantageous for the government,” he said.
According to the Finance Ministry, it will be like a favorable loan. The sum won’t need to be paid in full right away. With no accrued interest, yearly payments would be no more than 5.7 billion Kč over a 20-year period.
Prime Minister Mirek Topolánek said a single tender would reduce government costs. Separate tenders paid out from state coffers could total 160 billion Kč, he said.
Kalousek said the price will be the key factor for the upcoming tender. However, what amount constitutes a fair value has sparked debate, even among ministries.
While the Finance Ministry estimates the single tender to be 114.5 billion Kč, the Environment Ministry said it could be much less.
“Based on our calculations, costs related to cleaning up the damage to the environment could reach up to 40–50 billion Kč,” said Environment Ministry spokesman Jakub Kašpar.
Finance Ministry spokeswoman Zuzana Chocholová said a special expert committee nominated by the government will evaluate the bids.
In addition to the single-tender proposal, the Finance Ministry is also considering hiring more clerks to speed up the current process of awarding independent tenders, or letting private companies perform the cleanups on their own and compensating their expenses afterward.
The single tender has also been supported by independent consultancy firm A.T. Kearney, which was hired to advise the Finance Ministry in the process.
One vocal critic of the plan, Transparency International, warned that the single-tender idea would be less effective.
“The cost could increase 30 billion Kč if the government does not split the order into separate independent deals,” said Transparency International’s Director David Ondráčka. “That’s why we’d like to appeal to the government to reconsider the decision.”
Kalousek admitted there is a risk of corruption with such a large deal, but added that the tender would be open to big European firms and would therefore be transparent.
Given the size of the tender, Czech companies would most likely have to form consortia to compete with larger European firms. So far, specialized company Mario Pedersen of the Veolia group has shown preliminary interest, daily Hospodářské Noviny reported.
The Finance Ministry will work out a draft of the tender’s terms in cooperation with A.T.Kearney, and submit it to the Cabinet by Aug. 9. The ministry estimates the winner of the tender to be announced within 10–18 months.

František Bouc can be reached at fbouc@praguepost.com


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