Hungarian public tenders are governed by completely new public procurement legislation from 1 January 2012. 

An entirely redrafted Public Procurement Act was adopted in summer 2011 ("PPA") taking effect from 1 January this year.

The structure of the new PPA differs significantly from the previous provisions. The PPA is shorter and focuses on the main principles and general rules applicable in any procedure. The specific and detailed rules (incl. certification of qualification criteria and grounds of exclusion, rules for public works contracts, rules for public service suppliers, etc.) are specified in an extensive secondary legislation (e.g. government decrees).

Some of the important changes of the new public procurement legislation are as follows:  

  • There is a special emphasis on excluding companies having any direct or indirect off-shore interest in their ownership structure or operation, and therefore an extra declaration should be submitted in any tender in this regard.
  • In the event that a bidder wishes to rely on another entity's capacity to comply with the financial standing criteria (e.g. using the mother company's positive balance sheet) suretyship shall be provided by this other entity.
  • An economic operator involved in the contractual performance of a bidder exceeding 25% still cannot be qualified as a subcontractor but a consortium shall be formed. As a new rule, if indicating such company as a subcontractor by mistake in the bid, it does not automatically amount to the exclusion of the bidder, but a consortium can be set up following the public entity's request. (According to this new correction rule serious fines can be avoided.)
  • The structure of the fees to be paid in the case of review procedures before the Public Procurement Dispute Board has changed significantly.  The fees will now be calculated pro rata, and will be based upon the number of the requests in the appeal and the value of the respective public tender. The maximum value of the fee was increased to HUF 25,000,000 (approx. EUR 80,000) from HUF 800,000 (approx. EUR 2,500).
  • The court challenge against the decision of the Public Procurement Dispute Board passed in the review procedure is restricted to the court of 1st instance. 

The public procurement market has long awaited this new PPA as the previous legislation was unreasonably complex and bureaucratic, with rigorous formal requirements and even difficult for professionals to apply.  The primary aim of the act is to make the procedures more transparent and simplify the formal requirements, e.g. no bidder can be excluded from any procedure purely on the basis of non-compliance with formal requirements.

Another significant change is that public entities will be entitled to create and apply their own procedural rules that are in line with the principles laid down in the new act, in the case of national procurements (i.e. tenders below the EU threshold).

According to certain critics, such a wide-ranging simplification will actually serve the opposite purpose, will create an uncertain legal environment and may lead for corruption.

Legal uncertainty in interpreting the new laws could be eventually mitigated through the new "precedent maker" role of the Public Procurement Dispute Board. Certain decisions of fundamental importance, made by this body, will be deemed to be precedents and can be referred to as such in future review procedures.   

Please note that the above changes shall apply to public tenders launched from 2012. Any public procurement started before 1st January 2012 shall be governed by the old laws, including the legal remedy phase. 

Legislation:  Act CVIII of 2011 on Public Procurements and numerous related Government and Ministry Decrees

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 16/01/2012.