Subsection 4.1 Supervisory boards of companies serving public interest
Justification and sources
If there was a transparent way of selection of persons to supervisory boards of enterprises serving public interest, it would be possible to enhance public surveillance over management of funds corresponding to a "small state budget" (annual revenue of enterprises serving public interest in 2011 reached CZK 680 billion which corresponds to about 2/3 of the Czech state budget). At the same time, it would be possible to increase public knowledge about the situation inside these public enterprises, for example, to whom and how they attribute public contracts.
Sources:
- European Commission: Recommendation for a Council Recommendation on the 2015 National Reform Programme of the Czech Republic and delivering a Council opinion on the 2015 Convergence Programme of the Czech Republic, COM(2015) 254 final
- European Commission: Staff Working Document, Report on the Czech Republic, (COM(2015) 85 final)
- OECD Guidelines on Corporate Governance of State-owned Enterprises, OECD, 2005
- OECD: OECD Guidelines on Boards of Directors of State-Owned Enterprises, 2013
- Czech Government Anti-corruption Conception for years 2015 – 2017
- 2012 Annual report of the Czech Intelligence Service
- 2010 Annual report of the Czech Intelligence Service
- Transparency International Czech Republic, Conflict of interest – Czech Republic [online]
- Fadrný, M., Bouda, P., Czech Republic, the country of gravy trains, Frank Bold, 2014
- Political control and corruption potential of state-owned enterprises, Center for Applied Economy, 11 September 2013
- REST. Expert nominations to supervisory boards [online], Reconstruction of state, 2013
- Business corporations controlled by the state and municipalities: Do they need stricter rules, Environmental Law Services and Center for Applied Economy, 5 November 2011
- Vondráček, O., Havrda, M., Corruption as a Parasite – Manual How to Combat It, chap. Gravy train without emotions, 2013
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90 |
#90 Composition of supervisory boards
Members of supervisory boards of companies serving public interest* should be selected from persons representing public interest, on the one hand, and professional experts, on the other hand. They all should have clean criminal record, not be in a situation of conflict of interest and have minimum qualification requirements for exercising their function in the area where the company is active.
* A company serving public interest means an undertaking or a company (firm) owned by the state, regions or municipalities.
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#91 Political members of supervisory boards in the public office
Persons representing public interest should be politicians elected to a public office or officers appointed to perform public duties. Non-elected politicians who are party members only should not be eligible for supervisory boards of companies serving public interest.
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#92 Political members of supervisory boards from different state bodies
To avoid conflict of interest the elected politician or nominated officers should as a member of supervisory board come from a different part of the state departments.*
* For example, if the owner of a company serving public interest is the state and its rights are enforced by the competent ministry, and in turn, by the ministry officer, the member of supervisory board shall not come from the same ministry or possibly not from the government; in such a case, politically nominated member of supervisory board could be member of a legislative body and be a member of different political party than the minister which is a superior to the officer enforcing ownership rights of the state.
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#93 One person in maximum two supervisory boards
One person, be it a person representing public interest or professional, shoud be a parallel member of two supervisory boards at most.
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#94 Remuneration of supervisory board members
A person representing public interest in the supervisory board of a company serving public interest whose membership results from public office should only receive remuneration covering costs related to his/her membership in the supervisory board. Person that is in the supervisory board on due to his/her professional skills should receive remuneration according to the nature of his/her managerial post and in relation to the nature of amount of time (part-time, full-time) spent on performing his/her duties in the supervisory board.
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#95 Obligation of politically nominated supervisory board members to inform the public
Persons representing public interest in supervisory boards should have a special obligation to inform the general public about matters relating to areas where the company serving public interest is subject to Act on free access to information.
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#96 Tools for supervisory board members to obtain information
If a member of advisory board does not receive for certain period of time requested information from the management, he/she should be obliged to request to call the general meeting that would solve the problem with the board of directors (management) of the company serving public interest.
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#97 Cooperation of politically nominated supervisory board members in the performance of control checks by the Supervisory Audit Authority
Elected politicians holding a post in the supervisory board of a company serving public interest should thanks to their access to information about functioning of this company cooperate in controlling activities of the Supreme Audit Authority in respect of the company in question.
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#98 Selection fo supervisory board members
The state should try to delimit at least in general way the criteria for choosing apolitical professionals to supervisory boards of companies serving public interest. Persons fulfilling these criteria should be chosen in an open selection procedure afterwards.
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Subsection 4.2 Evaluation of investments from the public interest perspective
Justification and sources
If rules on strategic planning of public investments were established, including a standardised evaluation of their costs and benefits and a transparent preparation involving the public, it would be possible to prevent unnecessary, or even corruption driven investments, the only purpose of which is to spend the granted funds irrespective of whether such investments would bring any benefits to citizens.
Sources:
- European Commission: Recommendation for a Council Recommendation on the 2015 National Reform Programme of the Czech Republic and delivering a Council opinion on the 2015 Convergence Programme of the Czech Republic, COM(2015) 254 final
- Recommendation CM/Rec(2007)7 (Committee of Ministers): Recommendation to member stateson good administration, 20 June 2007
- Czech Government Anti-corruption Strategy for 2013 -2014
- Czech Government Anti-corruption Action Plan for 2015
- Institute for International Relations, Ministry of foreign affairs of the Czech Republic: Project cycle manual for foreign development cooperation of the Czech Republic, 2006
- Ministry of Regional Development of the Czech Republic: Cost & Benefit Analysis, Methodical Guide, May 2004
- Ministry of Regional Development of the Czech Republic: Feasibility study, Methodical Guide, May 2004
- Transparency International: Curbing Corruption in Public Procurement, A Practical Guide, 2014
- Lunn, P., Regulatory Policy and Behavioural Economics, OECD Publishing, 2014
- Kameník, M., Plhoň, T., Šanc, F.,More than a Public Procurement Act: economy, transparency and accountability in public purchases, Oživení, 2012
- Černý, P., Klanicová, K.: A Clientelist or Legal State? Environmental Law Service, Prague, 2010
- Transparency International Czech Republic: Small public contracts in the Czech Republic, December 2009
- Vondráček, O., Havrda, M., Corruption as a Parasite – Manual How to Combat It, chap. Meaningful Investments, 2013
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#99 Cost and benefit analysis
Before anyone decides to carry out a project paid from public funds it is necessary to determine the costs of such project in advance and the benefits which it will bring to citizens for the overall period of its expected existence.
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#100 Analysis of the overall costs
With respect to the public investment it is necessary take into account not only to the costs of investment but all its costs, that is also costs resulting from the subsequent operation and use of the public works. To evaluate the overall sustainability of the investment it is possible to use the tools commonly used in business practice.
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#101 Obligation of politicians to demonstrate declared benefits of a costlier public investment
From certain financial limit a preliminary obligation should be imposed upon politicians realising public investments consisting in proving that the funds collected from citizens in the form of taxes will be used effectively and efficiently. Investments from the public funds should only be used on projects that have clear benefits or growth potential, such as missing infrastructure.
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#102 Identification of citizens' need
To define the purpose of the public investment it is necessary to identify citizen’s needs, that is to determine and describe the problems which citizens face. Identification of needs shall be conducted, in particular at the local level, by making surveys among citizens concerned.
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#103 Identification of options
To enhance the cost-effectiveness of the solution which is to be financed by the public investments, several alternatives of the solutions should be submitted for consideration.*
* For example, is the best possible solution to build a new four-lane highway to downtown or is it better to repair the existing road and build a cycle path next to it?
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#104 Evaluation of different options
Subsequently, it is necessary to evaluate options especially from the view of their financial burden and benefits for the citizens and entrepreneurs, compare the alternatives and to choose the one that is most suited for the given place and time.
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#105 Standardised impact assessment
In parallel, a standardized impact assessment of investment project funded with public money should be introduced. The standards should be the same regardless of the origin of funds – whether they come from the municipal budget or from state subsidies. Metrics of costs and benefits for citizens and entrepreneurs should be unified in a way that one can tell which project is sensible and which not.
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#106 Disclosure of background documents for the planned public investments
All materials for evaluation of projects should be published on the internet so that the citizens could express their opinion on the investment project before the investment is carried out.
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Subsection 4.3 Tools against “tailoring” of public procurement contracts
Justification and sources
If measures effectively preventing tailoring of public contracts to pre-selected tenderers were established, competitions for public contracts would get opened to a higher number of companies which would lead to an increased competition for public contracts. As more competition means stronger pressure on price and quality it would lead to reduction of public expenditures without a negative influence on the quality of public works.
Sources:
- European Commission: Recommendation for a Council Recommendation on the 2015 National Reform Programme of the Czech Republic and delivering a Council opinion on the 2015 Convergence Programme of the Czech Republic, COM(2015) 254 final
- European Commission: Staff Working Document, Report on the Czech Republic, (COM(2015) 85 final)
- Czech Government Anti-corruption Action Plan for 2015
- Institute for International Relations, Ministry of foreign affairs of the Czech Republic: Project cycle manual for foreign development cooperation of the Czech Republic, 2006
- Transparency International: Curbing Corruption in Public Procurement, A Practical Guide, 2014
- Frank Bold: Governance, transparency and public participation in transport infrastructure Projects, 2014
- Lunn, P., Regulatory Policy and Behavioural Economics, OECD Publishing, 2014
- Kameník, M., Plhoň, T., Šanc, F.,More than a Public Procurement Act: economy, transparency and accountability in public purchases, Oživení, 2012
- Transparency International: Corruption risks in the Visegrad Countries – Visegrad Integrity System Study, 2012
- Kameník, M.et al., Openness of tender procedures in the Czech Republic, Oživení, 2011
- What do data say about behaviour of grantors? CERGE-EI, ppt , 31 August 2011
- Kohout, P. andcoll., Collection of texts of a working group for the fight against corruption, National Economic Government Council, June 2011
- Černý, P., Klanicová, K.,A Clientelist or Legal State? Environmental Law Service, Prague, 2010
- Transparency International Czech Republic: Small public contracts in the Czech Republic, December 2009
- Vondráček, O., Havrda, M., Corruption as a Parasite – Manual How to Combat It, chap. Public Procurement Unfinished, 2013
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#107 Open tendering procedures as wide as possible
Public contracts should be tendered as much as possible in the open tendering procedure. IT contracts should be tendered in the competitive dialogue regime.
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#108 Itemized budget for standardized public contracts
Itemized budget should be a part of tender documentation for standardized contracts, in particular for construction contracts. The expected quality of each given item shall be defined by the state, for example, which quality should the surface material of the highway possess. Providing that an itemized budget is well defined, the price should be the main criteria for the assessment of submitted offers. Public contracts should not be artificially divided into smaller ones.
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#109 Limitation of a technical qualification criteria to a single one
Technical qualification criteria should be based on a principle that a the generally sufficient requirement is the realisation of a similar contract in the past.
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#110 Payment of a part of the price after the completion of the contract
At least 30% of the total price should be paid after completion and takeover of the contract (or clearly specified stage) in order to create pressure on quality.
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#111 Prohibition of additional costs
The limit under which it would not be obligatory to start a new tendering procedure due to unforeseen additional works whould not exceed 10 %. If a supplier due to his/her fault exceeds the budget, he/she should pay the additional costs from his/her pocket.
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#112 Lists of subcontractors and a prohibition to play for more than one team
An obligation to publish the list of subcontractors should be introduced as well as the prohibition to “play for more than one team”. All crucial subcontractors that supply more than 10 % of total financial amount of the contract should be stated in the bid specifying which part of the contract are they are supposed to carry out. The tenderer should not anyhow participate in the realization of the contract if any other than his/her bid is chosen.
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#113 Standardised contract-type for public investments
State should use only its own standardized contract type to prevent the situation when the contract terms and conditions are prepared by the winning candidates. Specifics of individual contract should be stated in appendices of such contracts.
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#114 Externalized evaluation of offers
The evaluation of the best bid should be as externalized as possible.
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Subsection 4.4 Disclosing ultimate beneficial owners of companies in public procurement
Justification and sources
If there was an obligation of recipients of public funds to disclose their corporate ownership structure up to the ultimate beneficial owners who are natural persons or public entities, such a state or a municipality, it would not be possible that persons deciding about attribution of public contracts would grant these contracts to companies which those persons "anonymously" own. Thus, public competition for public contracts would increase which would lead to price reduction (lowering of public expenditure) while maintaining the quality of public works
Sources:
- European Commission: EU Anticorruption Report, Annex Czech Republic, Annex 3, COM(2014) 38 final
- European Commission: Staff Working Document: Assessment of the 2013 national reform programme and convergence programme for the Czech Republic. Brussels, 29.5.2013; SWD(2013) 353 final
- World Economic Forum, Organised Crime Enablers, 2013
- World Bank: The Puppet Masters : How the Corrupt Use Legal Structures to Hide Stolen Assets and What to do About It , 2011
- OECD: Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes, 2011
- OECD: Bribery in Public Procurement: Methods, Actors and Counter Measures, OECD Publishing, 2007
- OECD, Bueb, J.-P., Ehlermann-Cache, N., Inventory of Mechanisms to Disguise Corruption in the Bidding Process in Fighting Corruption and Promoting Integrity in Public Procurement, OECD Publishing
- Czech Government Anti-corruption Action Plan for 2015
- Transparency International: Curbing Corruption in Public Procurement, A Practical Guide, 2014
- Frank Bold: Governance, transparency and public participation in transport infrastructure Projects, 2014
- Vondráček, O., Electronic securities – Transparency of Corporate Ownership Structures, Auditorium, 2013
- Revealing corporate structures of public contractors, Center for Applied Economy, October 2013
- Public Money and Corruption Risks – A Comparative Analysis, Frank Bold, 2013
- Profitability of firms with paper bearer shares in public procurement, Center for Applied Economy, 15 May and 30 August 2011
- Novotný, J., Lichard, T., Palguta, J., Corruption: Not only a fiscal problem and its solutions) in Kohout, P. andcoll., Collection of texts of a working group for the fight against corruption, National Economic Government Council, June 2011
- Anticorruption Endowment / Public Against Corruption, Initiative End to Corruption – Proposal for abolition of anonymous paper shares, 2011, [online]
- Transparency International: Corruption risks in the Visegrad Countries – Visegrad Integrity System Study, 2012
- Vondráček, O., Havrda, M., Corruption as a Parasite – Manual How to Combat It, chap. How to Get Firms Naked, 2013
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#115 Transparent ownership structure of companies receiving public funds
Ultimate beneficial owners of companies that won the public procurement tender, including their subcontractors, should be fully disclosed. *
* Companies receiving subsidies, companies carrying out public contracts, including sub-contractors, companies which buy or sell something to the state or which rent to or lease something from the state and finally companies which contract with state owned enterprises or companies in situations where those companies provide public service.
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#116 Exemptions from the ownership structure disclosure rule
Exemption should be granted only to companies whose shares are traded on the stock market (stocks are trade too fast for anyone to be able to monitor the owners and it is not technically possible neither) as well as for banks and insurance companies (their ownership structure is controlled by Czech National Bank and all shareholder change is subject to its approval).
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#117 Declaration of ownership structures
Company receiving public funds should provide the state with a declaration on its ownership structure in which it demonstrates in a clear graphical way its ownership structure up to the ultimate beneficial owner(s).
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#118 Proof of the ownership structures
The ownership structure up to the ultimate beneficial owners is proven by electronic excerpts from relevant registers or securities accounts.
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#119 Proving of ownership structures of foreign companies with paper shares
Foreign companies with certificated bearer shares that want to receive public funds from the Czech taxpayer, whether directly or indirectly, should be obliged to deposit their stock certificates in custody order to credibly prove their ownership structure.
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#120 Check of the submitted ownership structures
In case of doubt about the accuracy of the ownership structure the Financial Analytical Unit of the Ministry of Finance should check the declaration and evidence substantiating the disclosed corporate ownership structure. It should not be possible to own a Czech company that participates on Czech public funds from a country that does not cooperate with the Czech authorities in this context.
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#121 Time period for which the ownership structures must be disclosed
The ownership structure should be revealed for the whole period of utilization of public money and, alternatively, a year or two after because of the company’s dividends are usually paid out with a certain delay.
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#122 Update of ownership structures
If the corporate ownership structure of a company changes during the period of utilization of public money, the company should submit its updated ownership structure at the latest at the end of quarter in which the change occurred; if the structure does not in the meantime change the company submits its ownership structure at the end of utilization of public money.
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#123 Concealing of ultimate beneficial owner(s) not within lawyers' secret
Advocates should be prohibited from concealing the identity of companies’ true ultimate beneficial owners.
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#124 Constraining the dominance of persons receiving public funds
No natural person should be allowed to receive through companies that he/she owns more than a certain percentage of public money.
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Subsection 4.5 Fair assessment of public procurement bids
Justification and sources
If criteria for a fair assessment of public procurement bids including creation of expert lists for specific areas involving foreign experts coupled with anonymous computer-based selection of those experts for evaluation of concrete bids were used, it would not be possible to manipulate the bid assessment. This would lead to the selection of better winning bids which, in turn, would ensure to citizens a better quality of public services at lower prices (lower public expenses).
Sources:
- OECD: Principles for Integrity in Public Procurement, OECD, 2009
- World Economic Forum: Global Competitiveness Report 2015, Country profile: Czech Republic, indicator 1.07 – Favouritism in decisions of public officials (106th place out of 144 countries)
- Institute for International Relations, Ministry of foreign affairs of the Czech Republic: Project cycle manual for foreign development cooperation of the Czech Republic, 2006
- Transparency International: Curbing Corruption in Public Procurement, A Practical Guide, 2014
- Lunn, P., Regulatory Policy and Behavioural Economics, OECD Publishing, 2014
- Kameník, M., Plhoň, T., Šanc, F.,More than a Public Procurement Act: economy, transparency and accountability in public purchases, Oživení, 2012
- Kohout, P. andcoll., Collection of texts of a working group for the fight against corruption, National Economic Government Council, June 2011
- Černý, P., Klanicová, K.,A Clientelist or Legal State? Environmental Legal Service, Prague, 2010
- Pavel, J., Efficiency of functioning of public procurement control systems in the Czech Republic, Transparency International Czech Republic, October 2009
- Vondráček, O., Havrda, M., Corruption as a Parasite – Manual How to Combat It, chap. How to choose the best one, 2013
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#125 Broad lists of professional experts for selection into committees for bid evaluations
It is necessary to create broad lists of professional experts from which the evaluators for individual tenders would be randomly selected. The experts on the lists would be chosen on the basis of their education and practice. The lists should include also foreign experts.
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#126 Random computer based selection of evaluators from the expert lists
Individual experts should be chosen randomly from the above specified lists using certified software evaluation committees for individual tenders. The experts should be independent from the contracting authority.
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#127 Bid assessment
Experts chosen to evaluate individual tenders should not know each other. They shall write their evaluation independently on each other. They shall convene only if their conclusions were not unequivocal.*
* Example: Three selected experts evaluate two offers. All three agree in their evaluations that the first offer is the best; in such a case they do not meet. However, if two experts favoured the first offer, but the third the second offer, those experts would meet to compare their evaluations.
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#128 Computer analysis of evaluators
A certified software should analyze who was assigned to which tender evaluation, what did he/she evaluate and how etc. The program should ensure that the same experts were not assigned to evaluate competitions where the same companies would be competing.
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#129 Public control of the evaluation software
The results and analyses of expert assignments to individual tenders performed by the certified software should be published to ensure control by the public of software functioning.
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#130 Sanctions for evaluators for manipulation of assessments
If the certified software determined existence of irregularities in assignment of experts or their evaluations, the expert in question should be removed from the list of evaluators or face a threat of a ban of his/her professional activities.
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