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Current Status and Perspectives of Public Procurement in Hungary Focusing on Construction Projects

This presentation explores the legal regulation and practice of public procurement in Hungary, with a focus on construction projects. It discusses the antecedents of the new public procurement regulation, statistics of public procurements, and the organization and decisions of the national Public Procurement Authority.

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Current Status and Perspectives of Public Procurement in Hungary Focusing on Construction Projects

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  1. Current Status and Perspectives of Public Procurement in HungaryFocusing on Construction Projects Dr. Tamás BALÁZS Attorney-at-law,Associate Professor Dr. Károly BAGÓCSI Lawyer BALÁZS & KOVÁTSITS Legal Partnership H-1055 Budapest, Honvéd Street 40. 3rd Floor Telephone: +36-1/302-5697; +36-1/312-1103 Email: office@bakolegal.com www.bakolegal.com

  2. The Introduction of BALÁZS & KOVÁTSITS Legal Partnership ●Complex services in special fields – special services in complex fields ●10 lawyers and 3 non-lawyer colleagues ●At the disposal of the clients in English, German, Russian, Italian, Spanish, French and Hungarian languages. ●Main general fields: Business and Civil Law ●Most important special fields: Construction Law, FIDIC-contracts, Procurement Law, Data Protection Law, Environmental Law, Intellectual Property Law, legal representation in front of Arbitration Courts. www.bakolegal.com

  3. Our presentation is about ● the legal regulation and the practice of public procurement in Hungary, ●the antecedents of the new public procurement regulation, ●the concept of the new public procurement regulation, ●the statistics of public procurements in Hungary, ●the experience and consequences from the aspect of application of the new Act, ● the organization, practice and some important decisions of the national Public Procurement Authority, ●some aspects of the new construction publicprocurement procedures, ●the perspectives. www.bakolegal.com

  4. Legal regulation of public procurement in Hungary ● with regard to the lack of market economy, law of public procurement was unknown in Hungary before 1989, ● the legislation of the first act on public procurement in 1995, ● the influence of accession to the European Union on rules of law of public procurement, ● new public procurement act and government’s decree on construction procurement procedures (2015). www.bakolegal.com

  5. The concept of new public procurement regulation ●effective since 01 November 2015, ●special rules for construction public procurement procedures, ●comprising provisions of Directives of the European Union, ● including short and brief special rules in case of national public procurement, ●organization, procedures and duties of the Public Procurement Authority. www.bakolegal.com

  6. Novelties of the new regulation ● new principles, ● the institute of self-clarification, ● commencement of action of the Public Procurement Authority based on public interest, ● legislation intention: the increase of participation and transparence in public procurement procedure, - at least three tenderers in a public procurement, - the reduction of opportunity of the contracting authority for invitation for tendering of tenderers specified by him, ● the principle of declaration in connection with the grounds of disqualification and ability conditions. www.bakolegal.com

  7. System of national public procurement in Hungary ●0 ≤ x < HUF 25 Million exempt from public procurement (hereinafter pp) obligation, ●HUF25 Million ≤ x < HUF 1,723,541,680.00 (approx. EUR 5,548,000.00) national pp rules, wherein - HUF25 Million ≤ x < HUF 300 Million pp with 5 tenderers, - HUF25 Million ≤ x < HUF 700 Million pp with publication of summary information, - HUF700 Million ≤ x < HUF 1,723,541,680.00 pp with publication, ●HUF1,723,541,680.00 ≤ x common rules of pp. www.bakolegal.com

  8. The statistics of public procurements in Hungary in 2016 ● 8650 successful public procurement procedures, ●the total value of the procedures: HUF 2,007.00 billion (approx. EUR 83,591.00 million), ●the total value of the procedures is 5.7% of Hungarian GDP. Value of the procurement in the % of GDP Numbers and values of registered procedures in the last decade Values of the procedures in billion HUF Numbers of the procedures www.bakolegal.com

  9. The statistics of public procurements in Hungary in 2016 ●national vs. common public procurementsin figures Numbers of the public procurement procedures according to the order of the procedure in 2016 National: No. 7,093.00 82% Common: No. 1,557.00 18% Value of the public procurement procedures according to the order of the procedure in 2016 National: HUF 404.64 billion 20.2% Common: HUF 1,602.00 billion 79.7% www.bakolegal.com

  10. The statistics of public procurements in Hungary in 2016 ● on average 5.98 tenders in a public procurement procedure, ●average value of a public procurement is HUF 232.00 million. Ratio of the procedures with one tenderer www.bakolegal.com

  11. The statistics of public procurements in Hungary in 2016 ●volume and value according to objects of public procurement Number of thepublicprocurementproceduresaccordingtotheobjectsoftheprocurement Supplies: No. 2,818 / 32.6 % Services: No. 3,000 / 34.7 % Value of thepublicprocurementproceduresaccordingtotheobjectsoftheprocurement Services: HUF 505.80 billion 25.2 % Supplies: HUF 599.02 billion 29.8 % Construction works: No. 2,825 / 32.7 % Construction works: HUF 886,94 billion 44.2 % www.bakolegal.com

  12. The statistics of public procurements in Hungary in 2016 In the order of procedure of the EU ● types of the public procurement procedures ●small and medium-sized enterprises in public procurement open procedure restricted procedure competetive procedure with negotiation negotiated procedure without prior publication Value of the procurements won by SMSE in % Numbers of the procurements won by SMSE in % www.bakolegal.com

  13. Public procurement in Hungarian legal system ●Public Procurement Authority is a central administrative organization under the supervision of the Hungarian Parliament, ●wide rights of control of Public Procurement Authorityin the Hungarian public procurements, ●Public Procurement Authority has two important organs: - Council of Public Procurement, - Public Procurement Dispute Body, ● legal remedies regarding the public procurements: - Public Procurement Dispute Body, - administration court procedure, - civil court procedure. www.bakolegal.com

  14. Experience and consequences from the aspect of application of the new Act ● 1,046 procedures for legalremedy at Public Procurement Dispute Body (PPDB), ● appeal against decision of PPDB at courts in cases of 206, ● 98 public announcements at Public Procurement Authority, ● strict rules for amendment of the publiccontracts, ● active control of Public Procurement Authority vs. efficiency of the control. www.bakolegal.com

  15. Experience and consequences from the aspect of application of the new Act ●self-clarification based on the decision of the Public Procurement Authority - 30petitions for self-clarification in 2016:  18 petitions accepted,  10 petitions refused,  2 petitions withdrawn, - 28 petitions for self-clarification until September 2017, ●19 disqualified tenderers in 2017, ●2 breach of contracts according to the record of Public Procurement Authorityin 2017, ●decrease of theconsideration for green and social aspects in public procurement by contracting authorities. www.bakolegal.com

  16. Some aspects of the new construction public procurement procedures ●compulsory participation of an accredited public procurement advisor in the public procedures: - financed by the EU, - which subjects are supplies or services in the regime of the common regulation, - which subjects are construction works with at least HUF 500.00 million. ●strict regulation about the sub-contractors - obligation for notification of the sub-contractorsto the contracting authorities at the time of conclusion of the public contractlatest, - maximum 65% is the ratio of the performance of the sub- contractors in the public procurement, - grounds of disqualification arealso applicable. www.bakolegal.com

  17. Some aspects of the new construction public procurement procedures ●obligation of prepayment of 5% of the net contractual value but HUF 75.00 million at most - if the completion of the construction works requires 2months at least, - without compulsory providing security by the tenderer. ●if the completion lasts 6 months at least and the contractual value is HUF 50.00 million at least, there is an opportunity for the tenderer to issue partial invoices - 4 partial invoices if the contractual value is less than HUF 1.00 billion, - 6 partial invoices if the contractual value is more than HUF 1.00 billion, ●the amount of the prepayment and partial invoices can be 70% of the contractual value at most → the final invoice can be equal with or more than 30% of the contractual value. www.bakolegal.com

  18. Some aspects of the new construction public procurement procedures ●Ability requirements - prescription of financial or economical conditions is not necessary for the tenderers, - the tenderers should have liability insurance which covers the subject of the public procurement, - certification of the technical-professional ability by references that are equivalent with the construction work from technical point of view and comprise 75% of the value of the public procurement atleast frompoint of view of the value and the volume, - all tenderers are obliged to be entered in their national registers of people entitled to perform construction activity, ●Evaluation aspects - the lowest tenderer price, - the lowest costs, - the most advantageous tender, - examination of the disproportional lowest tenderer price. www.bakolegal.com

  19. Some important decisions of the Public Procurement Authority ●in case of lack of designation of the name of the expert the tenderer’s tender does not exist, ●if an item with HUF 0 is indicated in the budget, the contracting authority should always ask the reason for it, ●the prescription of the number of statistical staff is not acceptable in the invitation because it shows the tenderer’s status in the past and not in the present. www.bakolegal.com

  20. Some important decisions of the Public Procurement Authority ●the prohibition of correction of the deficiencies two times, ●the obligation of counting together, ●in case of argument of tender price, the enforcement of the provisions of labour law must have been taken more into consideration, ●the enforcement of principle of fair competition and equal opportunity, ●the duties of the accredited public procurement advisorin the public procurement procedures. www.bakolegal.com

  21. Facts and Perspectives ●difficulties with the use and theoperation of the electronic system of publicprocurement, ● not clear conditions and requirements in the public procurements financed by the EU, ● danger for blocking disbursement of the support of the EU in amount of HUF 1,200.00 billion, ●increase of power of the PPDB in lawsuit regarding public procurement → decrease of the efficiency of the judicial review. www.bakolegal.com

  22. Thank you for your kind attention. Dr. Tamás BALÁZS Attorney-at-law, Associate Professor Dr. Károly BAGÓCSI Lawyer BALÁZS & KOVÁTSITS Legal Partnership H-1055 Budapest, Honvéd Street 40. 3rd Floor Telephone: +36-1/302-5697; +36-1/312-1103 Email: office@bakolegal.com www.bakolegal.com

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