The European Union (EU) published the new directives on public procurement law and concessions in 2014.[1] The most important provisions of these new directives shall be implemented by the member states until 18[th] April 2016. This obligation shall be performed of course by the Hungarian legislator as well, in accordance with this general task, the implementation process has begun. According to the legislator's decision, the current Act CVIII of 2011 on Public Procurements - and the other relevant decrees as well - will be replaced by a totally new legal regulation. This paper scrutinizes the basic questions, the possible results and the legal institutions that the new legislation will create.
The Hungarian government published the conception of the new Act on Public Procurement Act (PPA) in October 2014, and its plan on 15[th] April 2015 on its website. The contracting authorities, the economic operators, the experts and the other actors of the public procurements could submit their opinions until 15[th] May (the original deadline was 30[th] April but it was extended). The proposal of the new Act was created on the base of the plan and opinions, which was debated by the Parliament and after that was published.
In the next chapters will be scrutinized the most essential questions (problems and legal institutions) which are related to the new directives.
First of all a very important question shall be mentioned: what shall be the basic direction of the reforms related the Hungarian public procurement system? What kind of fundamental problems can be appraised?
To answer this question, the opinion of The European Commission (EC) shall be cited. According to the EC the Hungarian legal regulation is proper basically, the legal institutions and the quantity of them is adequate, but the application of these legal norms is insufficient. It was necessary to reform many of the legal institutions because the fundamental problems are related to the realization of the regulations.[2] But is shall be emphasized that the reforms (the new regulations) won't have any effect without the proper legal practice and control.
Without the realization of the principle of the real and fair competition, the regulations of the Act on Public Procurement (PPA) can work only as a set (as a decor). This principle can be infringed by the contracting authorities and by the tenderers as well. In the first case for example a contracting authority may prescribe such requirements in the contract notice and in the tender documentation which can be fulfilled only by a specific economic operator or which can keep away from the procedure specified economic operators.
Further the contracting authority can 'manage' such contract award procedures which are launched without a published contract notice with the indication of the invited economic operators. For instance that resulted the aim of the decreasing the thresholds of such types of contract award procedures which can be applied in the case of a lower estimated value. Under the scope of the previous PPA the contracting authority could launch such a procedure in the case of public goods or public services if the estimated value didn't exceed the 25 million forints (without VAT), and in the case of public work if the estimated value didn't exceed the 150 million forints (without VAT). These thresholds would be decreased to 18 million and 100 million forints (according to the plan of the new PPA). The problem of these procedures shall be scrutinized later more detailed.
On the other hand the tenderers can hurt the principle of the fair competition as well. For instance if two or more tenderers form a cartel (they divide the market into lots and they violate the rules of the competition law with that action), a single contracting authority hasn't got so many legal method to handle the harmful effects of such unlawful actions. Of course there are special institutions regulated in the PPA, but the proving of these forbidden aligned activities is a very difficult task (in many cases such activities can't be recognized). In this case the contracting authority and the public funds are victims of such unlawful actions.
Besides the proper regulation of public procurements the realization of the following factors is required:[3]
1. A proper level of the public procurement culture. This requirement means that the contracting authorities should regard on the contract award procedures like an advantageous form of choosing the other contracting party. Until the procedure is expensive, circumstantial, lengthy and regularly shall
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be take into consider the risk of an eventual higher amount fine which can be imposed by the Public Procurement Arbitration Board, the contracting authorities will try to avoid the obligation of contract award procedures (for example they try to handle their procurement as an exemption or they try to divide it into parts).
2. Stable legal environment. The regularly reforms and modifications are an old problem in the Hungarian public procurement law. Three totally different PPA were applied within 5 years! The legal environment can't be planned, among such circumstances the legal practice will be uncertain, the chance of errors will be highly increased. But making mistakes in public procurements can be very expensive: if the Arbitration Board (or the entity granting support for the public procurement, or the entity co-operating pursuant to law in the use of the support) states in its decision that an infringement has occurred, it may impose a fine on any organization (person) which has infringed the law or a new procedure shall be launched etc.
3. Stable economical environment. The financial and economical crisis decreased the amount of business opportunities on the private market that's why the importance of public sphere increased. In such circumstances the role (the importance) of public procurement contracts was increased significantly. Because of that there are companies which try to win the procedure at any price: their offer unrealistic tender elements (consideration) and they try to apply reduction on other fields (for instance on the quality or on the consideration which should be payed to the subcontractors).[4]
4. The importance of trust. The public procurements are the parts of the national economies, and that's why the problems of public procurements can't be separated from the general problems of a national economy. If the general factors don't work properly, this fact influences the activity of the contracting authorities and the economic operators as well. For instance, if the general trust is missing in an economy, if the contractual obligations can't be realized by courts and other authorities (because such legal procedures are slow and inefficient), the importance of the personal connections will be increased.[5] Such circumstances can motivate the contracting authorities to try to avoid the provisions of PPA, and try to conclude the contract with such economic operators who are reliable for them.
5. Detailed rules on problematic fields. The general aim of the legislator was to decrease the amount of the legal provisions and it wanted to ensure wider frames of the legal consideration with less detailed concepts and generally referred principles. In such cases the results of the different considerations can be risky, the parties can't define their obligations squarely (precisely). That's why can be preferred that initiative for instance which would content a more detailed regulation on conflicts of interest or on business secrets.
The first Hungarian PPA - the Act XL of 1995 on Public Procurement - followed a unitary conception of the regulation: the legislator regulated all of the essential field in one act, and only the technical provisions were included by lower level decrees. This conception was followed by the second PPA -the Act CXXIX of 2003 on Public Procurement - as well. The third PPA - which is replaced by the Act of 2015 - changed this structure, because it applied a totally new approach: the act includes the main and general rules, and many details are regulated by different decrees. That means the length of the legal regulations didn't decreased, only the structure was changed. The new PPA follows this structure: it won't modify this basic conception; the system (the hierarchy) of the different legal resources won't be changed.
This structure can threat the transparency of the regulation, because it's more difficult to follow the current modifications by the contracting authorities, experts and economic operators. Further a difficult hierarchy between the Acts and the other decrees can result interpretation problems (a detail can opposite a general rules of the Act, and these oppositions aren't obvious regularly).
The general debate of the proposal of the new Act was on 9[th] June 2015. Some arguments in course of this debate dealed with the question of sovereignty. The field of public procurements is regulated by the European Union, and that's why the sovereignty of the member states are limited on this field as well. The proposing minister emphasized the limited nature of the sovereignty, and expressed that the member states gave up it on that field. He mentioned twice the importance of this question. The opposition mentioned it as well, but they did it from the aspect of the EU-funds: the received money shall be used on the base of transparent, public and controllable competition.
Why shall be mentioned the question of the sovereignty during the debate? Because the EU regulates the public procurements and if it changes the public procurement rules, the changes shall be followed the member states. That means that on many fields the member states don't have choice: they have to regulate and apply such legal institutions, which are disagreed by them or which application can be problematic (see a couple of examples in the next two chapters).
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In this chapter some of the new elements in Hungarian public procurement law will be scrutinized on the base of the new directives.
1. The self cleaning. One of the most difficult field in public procurement law is the regulation on the grounds for exclusion. These rules prescribe different facts, and such economic operators who fall under the scope of these facts, can't be tenderer, subcontractor or capacity-organ (these economic operators can't submit a valid tender or participation). It will be a new element according to the directives of EU that these economic operators get the possibility to prove their ability against the raised grounds. Not the contracting authority shall make a decision in that question but the Public Procurement Authority. It has to scrutinize and consider the submitted evidences, and has to make a decision in that question.
It is a positive prescription that not the contracting authority shall scrutinize the self cleaning. Namely that obligation would result a couple of essential questions: what kind of evidences will be proper? What kind of risks can arise? The basic risks were the following namely:
- The decision of the contracting authority could be disputed by the rival tenders before the Public Procurement Arbitration Board if the contracting authority would accept the submitted evidences.
- If the contracting authority would refuse the submitted evidences, and the problematic tenderer will be excluded, this tenderer could dispute this decision by the Arbitration Board.
- The consideration could be based on subjective points of view, if the objective criteria will miss from the legal regulation.
That would mean that the contracting authorities would have to take risk and they were responsible for an inadequate (unlawful) decision (if the decision were unlawful a fine could be imposed as well).
2. The obligation of the application of the most advantageous tender as an evaluation criteria. It is a general principle in EU that the cheaper is not always the better. That's why it is preferred to choose such products and technical solutions, which have a better quality, energy-consumption or which are environmentally friendly. Of course not only different products can be preferred but other characteristics of the tenderers, for example in connection with services the qualification of the experts can be evaluated: maybe their prices will be higher, but the contracting authority can receive a better service.
This aim can be supported but it raises a very important question: is it a luxury in the less wealthy member-states to prescribe such obligation? This general aim requires a proper level of public funds. In the lack of the proper funds the contracting authorities try to buy for the lowest consideration and in that case they won't apply properly the new rules. Maybe they try to create such evaluation system in a contract award procedure in which the consideration (the lowest price) will play the most important role and the contracting authority - if this possibility won't be limited -can determine the rated multiplier for these constituent factors on a symbolic level.
If the budgetary organs - as typical contracting authorities - don't have enough funds to realize this aim, the application and the effect of these new rules is questionable. The budgetary organs have to plan their budget for one calendar year and they can be in many cases satisfied if the planned money will be enough to fulfill the public tasks on a proper (on a basic or acceptable) level. Can they pay attention among such circumstances to difficult calculations and to other quality factors or they try to conclude contracts for the lowest price? Will they have enough money to pay for the better quality? These questions can be answered on the later emerging practice.
3. The application of electronic means will be obligatory. The proposing minister expressed that the obligate application of electronic means will be solve the problem of publicity, transparency and the controllability, because every document and data will be fixed permanently, the possibility of the exchange of documents will be excluded. He said the following: 'In my opinion this kind of Czechoslovakian tinkering will be excluded. [...] I didn't want to insult anybody in his sensitivity.'[6] This mandatory will be introduced later, because it requires a special technical system and according to the EU-directives the member states have to fulfill the introduction of it later as the general deadline of the implementation.
4. The free tender documentation. According to the new regulation (see the article 53 of the 2004/18/EC directive) the contracting authority has to ensure the tender documentation free for the economic operators, therefore consideration can't be requested for it. What could this new prohibition mean in the Hungarian practice?
It is obvious that the realization of the contract award procedures is costly. The contracting authorities have to pay for experts, advisors and for the creation of the tender documentations. And there is an other significant element in the Hungarian system: the obligation of announcement-control, which is a unique Hungarian legal institution.[7] That means that the Public Procurement Authority has to check the contents of the publishing announcements, and the contracting authorities
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have to pay a fee for it. The fee of this mandatory service is quite high, which results unnecessary costs for the contracting authorities (and if a procedure is unsuccessful, that costs shall be paid again).
That's why the contracting authorities try to receive money from the tenderers by the selling of the tender documentations; they try to compensate their costs somehow. It would be very important to 'reconsider the current system: the legislator should revoke the obligation of the announcement-control; in that case namely the burden of public procurements should be decreased.
After the EU published the new directives on public procurements the Hungarian legislator decided to create a totally new regulation. According to the new directives numerous new elements shall be implemented in the Hungarian public procurement law. Among these new elements there are positive initiatives (for example the mandatory application of electronic means) but there can be mentioned such elements the application of which can be questionable in the Hungarian circumstances (for instance the obligatory application of the most advantageous tender as an evaluation criteria).
It is a very important question that how the legal practice will develop: the new regulation includes the risks of the uncertainty, a large part of the practice related to the current regulation will lost. It will be questionable which decisions of the Public Procurement Arbitration Board and the courts will be applicable in the later legal disputes. The Hungarian legislator rather creates a totally new regulation instead of the significant modification of the current act and decrees. But without the proper economic, financial and social terms the realization of the aims and principles can be uncertain. ■
NOTES
[1] Directive 2014/24/EU of the European Parliament and the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC; Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC; Directive 2014/55/EU of the European Parliament and of the Council of 16 April 2014 on electronic invoicing in public procurement; Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts.
[2] See the concept of the new act (http://www.kormany.hU/download/a/e8/20000/%C3%9Aj%20Kbt%20koncepci%C3%B3.pdf, 2015/08/22), p. 3.
[3] See the 'six step Method' as an other categorisation of terms of a proper public procurement system: Walker, Cynthia: Setting up a Public Procurement System: The Six Step Method, in Arrowsmith, Sue, Trybus, Martin (szerk.), Public Procurement. The Continuing Revolution, Kluwer Law International, 2003, p, 3. Cited by Soloveitikas, Deividas: Public Procurement in Lithuania: The Ongoing Development. In European Public Private Partnership Law Review, Vol. 2009, Issue 2 (2009), p. 108.
[4] Layman, Brother: Az offshore halála (Szekszárdi Nyomda Kft., Budapest, 2011), p. 314-315.
[5] See Közjó és Kapitalizmus Intézet: Jelentés a Magyar Kapitalizmus Állapotáról - 2008, p. 30.
[6] Minutes of the general debate in the Parliament, 9[th] June 2015, p. 3. (www.parlament.hu, 2015/08/03)
[7] Tátrai Tünde: Verseny a közbeszerzési piacon. Közgazdasági Szemle 2009. szeptember 841-842. o.
Lábjegyzetek:
[1] The Author is assistant lecturer, Department of Financial Law, Faculty of Law, University of Pécs.
Visszaugrás
