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Two-Thirds of Purchases Are Not Regulated by the New Public Procurement Act

Two-Thirds of Purchases Are Not Regulated by the New Public Procurement Act

Today begins the general discussion of the new Public Procurement Act, which consists of 175 articles. In comparison, the law it replaces consisted of more than 400 articles. Transparency International Hungary (TI) sent a letter to the Members of Parliament, in which the organization highlighted the possible corruption risks that might arise after the enactment of the new Public Procurement Act. According to TI, the biggest problem is that in the case of purchases that do not exceed the community threshold the procuring authorities are free to change their own procedural orders which are not regulated appropriately. The fact that the first instance forum for legal redress, the Public Procurement Commission was placed under the authority of a government agency is also considered risky.

TI applauded the corruption-reducing effect of a number of provisions, but also wanted to call attention to the shortcomings of the bill and the corruption risks related to it.

No consultation was held

Public procurement regulates the procurement of 1500 billion Ft annually. The procedure involves certain corruption risks and conflicts of interests, but the government failed to arrange an extensive consultation process. The Ministry of National Development only formally complied with the provisions on legislation and social consultation.

The Commission will become a government agency

Currently the Public Procurement Commission is under the supervision of the Hungarian Parliament. This is subject to change as the government wants to reorganize it as an authority under its own supervision. According to TI Hungary, if a government agency is set up which also exercises the employer rights of the public procurement commissioners, the executive will be able to influence the first instance forum for legal redress.

Unknown laws

One of the major shortcomings of the bill is that it does not address the problems of several significant areas due to its reference to a “legal framework”. TI also claims that this legislation concept is a major concern as it removes a number of important problems that need to be solved from the Public Procurement Act. This means that several fundamental questions, such as the provisions concerning the imposition of penalties and procedural rules concerning public service providers, will not be regulated by law.

Unique procedural orders

The new Procurement Act might create excessive flexibility, since it allows developing unique procedural orders in the national procedural order. The procuring authorities conducted two-thirds of the procedures (73.8% in 2010) under the EU threshold, which was 26,5% of the total purchases and which cost approximately 400-500 billion Ft. This shows that overly flexible regulation without appropriate monitor jeopardizes the transparent and efficient use of public money.

Monitoring and publicity

The international anti-corruption organization also argues that the bill does not deal appropriately with the issue of monitoring. TI pointed out that certain measures, which were taken as part of an economic policy, affect the financial competition adversely, which is a serious problem.

The organization applauded that the bill gives an itemized account of the disclosure obligations, which was not present in the draft bill. However, according to TI, the publication of contract amendments and of procurement regulations should also be obligatory. TI also claimed that violations concerning the publication should be appropriately sanctioned.

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