New Public Procurement Rules in Hungary

On 21 July 2011, the Parliament approved the new Act on Public Procurement that will completely replace the current regulation. The new Act will enter into force on 1 January 2012. The Act CVIII of 2011 on Public Procurement is significantly shorter, its content being about the half in comparison to the previous law. As a result, the Act does not include the detailed provisions anymore and focuses only on the framework regulation of public procurement. Among the goals of the new Act is the improvement of the effectiveness of the war on corruption, providing simpler and more flexible procedures and supporting the participation of small and medium size enterprises in public procurement projects.

The most important regulations and modifications introduced by the new Act on Public Procurement can be summarized as follows.

1. The new Act breaks with the regulation system of the old Act, as the latter proved to be too complicated in practice. The new Act solely regulates the cornerstones of public procurement procedures, while the detailed provisions will be regulated in separate implementing decrees.
2. Tenderers who owe their subcontractors more than 10% of the contracted amount on the basis of a contract concluded after 15 September 2010 in the frame of public procurement or whose payments are overdue for more than 15 days shall be excluded from participating in the procurement procedure. Another ground of exclusion is having provided false data in the course of a previous public procurement procedure.
3. The Public Procurement Council will be changed to Public Procurement Authority.
4. The tender notices shall be delivered via electronic mail to the Public Procurement Authority by the contracting entities. The contracting entities are obliged to keep public procurement documentation for a 5 year period after the performance of the contract.
5. Public service providers may not by-pass their public procurement obligation through their subsidiaries. The public service provider as contracting entity may not contract directly an entity in which it holds majority ownership which will in turn conclude a contract with a third party in order to fulfil its contractual obligations with the public service provider.
6. Judging the appeal submissions will remain within the purview of the Public Procurement Decision Committee. Against the decisions of the Decision Committee a legal remedy may be submitted to the court.

With respect to the extent of the new Act on Public Procurement, specific issues not regulated in the Act will be addressed in further implementing orders. The evaluation of the effectiveness and transparency of the public procurement system established by the new Act on Public Procurement and its implementing decrees will be possible only after having obtained the first practical experiences.