This chapter first describes the frameworks currently used for measuring competition in the public procurement system by Hungary, namely the Single-bid Reporting Tool and the Public Procurement Performance Measurement Framework. The chapter then provides an analysis of the state of competition in the Hungarian public procurement market (general overview, state of competition in various sectors, regions, etc.) based on the methodological framework presented in this chapter.
Improving Competitive Practices in Hungary’s Public Procurement
Reducing Single-bids and Enhancing Supplier Participation
OECD Public Governance Reviews
Abstract
2.1.1. Single-bid reporting tool
As part of the remedial measures notified by Hungary under Regulation (EU, Euratom) 2020/2092 for the protection of the Union budget, Hungary was tasked by the European Commission to develop a single-bid reporting tool to monitor and report on public procurements awarded with single-bids. As such, paragraph 8 of the Government Decree 63/2022 (28. II.) on measures to reduce the number of single-bid public procurements mandated the Minister in charge of public procurement policy to i) continuously monitor the data on the proportion of single-bid public procurements, and ii) to prepare and publish on the e-procurement platform (EKR) an annual report providing an analysis of single bidding, no later than February 15 of each year. The report to be published is based on information from the Single-bid reporting tool. (Government of Hungary, 2023[1])
The report developed on information based on the Single-bid reporting tool includes numbers and shares of procurement procedures resulting in single bids financed from national resources or from European Union funds or from both and analyses the evolution of single bids based on different considerations, such as place of performance and subject-matter (goods, services or public works) (see Box 2.1).
The Single-bid reporting tool is used to calculate the following indicators to analyse the trends of single bidding:
Number and share of single-bid procurement processes compared to the total number of procurement processes.
Value and share of single-bid procurement processes compared to the total value of procurement processes.
Number, share and value of single-bid procurement processes by subject-matter (goods, services and public works).
Number, share and value of single-bid procurement processes by CPV code divisions.
Number, share, and value of single-bid procurement processes by place of performance (i.e. by county).
Each of these indicators is further broken down into:
Above vs. below EU thresholds
Funded by EU funds vs. funded by national funds.
The calculation of the share of single bids used in the Single-bid reporting tool follows the EU Single Market Scoreboard methodology and therefore exclude the following procedures from the scope of the analysis:
unsuccessful procurement procedures or parts of procedures,
public procurement procedures for the conclusion of framework agreements,
purchases made under the framework agreement,
negotiated procedures without prior publication of a contract notice, and
concession procurement procedures without prior publication of a contract notice (Prime Minister’s Office of Hungary, 2023[2]).
While the analysis based on the Single-bid reporting tool represents a solid starting point to identify the areas where single bid procurements are the most prevalent, such an analysis alone is not sufficient to understand the state of play of competition in general and to highlight the systemic issues that could cause these single-bid processes in Hungary.
2.1.2. Public Procurement Performance Measurement Framework
With the aim of regularly assessing the performance of the public procurement system and analysing the reasons behind the limited competition in the sectors most affected by the low level of competition, in the Recovery and Resilience Plan and within the conditionality procedure for EU funds, the Hungarian Government committed to set up a comprehensive measurement framework. The public procurement performance measurement framework that was adopted by the Hungarian government in late 2022 by Government Decision 1425/2022. (IX. 5.) goes beyond the areas foreseen in Hungary’s commitments towards the European Union and in the Government Decision. The measurement framework includes 77 indicators and 57 sub-indicators and covers key issues of the procurement system, including compliance issues (i.e. legal compliance and the remedies system), efficiency issues (i.e. competition, capacity, and centralisation), and the use of public procurement as a strategic lever to achieve wider policy objectives, such as the green transition or social inclusion. (OECD, 2024[3])
The first results of the measurement framework (for 2019-2022) were published in February 2023. The main report is accompanied by several annexes, with Annex I focusing on single bidding based on information from the Single-bid reporting tool.
The measurement framework was updated in 2023 to reflect the lessons learned from the first reporting period, the recommendations from the OECD and the proposals from the Working Group established by the Government. The revised framework was published on 22 December 2023 (Elektronikus Közbeszerzési Rendszer, 2023[4]).
The exact areas covered by the Hungarian public procurement performance measurement framework are grouped into the sub-categories of Compliance, Efficiency and Strategic Public Procurement as Table 2.1 shows.
While originally competition issues and especially the high number of single bids triggered the development of the Hungarian public procurement performance measurement framework, the framework covers not only single-bids but includes a more comprehensive set of indicators. Indeed, to assess the level of competition in public procurement, it is pivotal to consider specific competition indicators beyond single-bid procurement and to read them in the light of other indicators which may either have a direct or indirect impact on the level of competition (e.g. the number of negotiated procedures without prior publication, bidding practices such as time allowed for bidding, or decision-making speed by contracting authorities).
In the Hungarian framework, under the category of efficiency, a sub-category of indicators is focusing specifically on competition, namely on the operation of the market, access to public procurement opportunities and the intensity of competition. Furthermore, there are indicators grouped under other categories and sub-categories that might be also relevant for understanding the level of competition. As such, the Hungarian public procurement performance measurement framework contains several indicators which could help understand the level of competition, in addition to the indicator on single-bidding.
While already the original (2022) version of the framework had the potential to provide a comprehensive picture on the level of competition in public procurement, a recent OECD report highlighted opportunities for further enhancement of certain elements measuring competition in the framework. For example, the OECD report suggested deepening the analysis of the indicator “average number of bids” (an indicator that is particularly relevant for measuring competition) and suggested adding additional dimensions to be analysed under this indicator, such as the “average number of bids” when: i) using Best Price-Quality Ratio (BPQR), ii) using the lowest price criterion, iii) including environmental aspects, and iv) including social aspects. These dimensions aim at understanding if including quality criteria or aspects in relation to policy objectives have an impact on competition. The OECD report also suggested introducing an indicator regarding the share of bids submitted by domestic vs foreign suppliers, to better understand how open is the Hungarian market to bidders coming from other countries, as well as indicators to assess the market concentration with the aim of assessing the extent of domination of some economic operators in a particular market. (OECD, 2024[3]) Many of these recommendations were taken on board when the Government, in close co-operation with OECD and the respective working group, developed further the measurement framework in 2023. The revised framework now includes the measurement of the average number of bids depending on the evaluation method (BPQR or lowest price) as well as the share of bids submitted by domestic vs foreign suppliers.
Table 2.2. presents those elements of the 2023 revised framework that are relevant for analysing the level of competition in the public procurement system.
1. The procedure under Article 115 of the PPL is applicable to public works contracts with an estimated value of less than HUF 300 million (approximately EUR 781 540). Through this procedure, contracting authorities should directly send a written invitation to tender to at least five economic operators instead of publishing a contract notice to announce the procedure, and only the economic operators invited to tender may submit a bid. Since February 2021, following an amendment of the PPL, this type of procedure cannot be used when using EU funds (even partly).
Source: (OECD, 2024[3]).
Although the Single-bid Reporting Tool and the public procurement performance measurement framework already provided a wealth of information about the level of competition and single bid procedures in the Hungarian public procurement market, further analysis deemed to be necessary to get a comprehensive picture on the root causes for the low level of competition. This Report intends to provide this deeper analysis following on a methodology that i) measures different aspects of competition in public procurement based on publicly available administrative data; and ii) enumerates the key factors which are likely to impact competition directly or indirectly.
Single bidding has become one of the key indicators for examining competition in public procurement, partially due to its easily interpretable nature. Moreover, it is of crucial relevance to efficient public procurement markets as it is one of the hallmarks of non-competitive public tendering (European Commission and Fazekas, 2022[5]). Single bidding can lead to higher prices and/or lower product quality (Fazekas and Kocsis, 2017[6]; Titl, 2021[7]).
However, beyond single bidding, there are further indicators that aim to capture the level of competition or lack of competition. Indicators, such as number of bidders, market entry, share of non-local bidders or market concentration are just few examples, that in one way or another capture relevant, different and complementary aspects of competition. For instance, even when a market has a high share of single bidding, it can simultaneously have a sub-market that operates at a more competitive level. Therefore, looking at the number of bidders, instead of looking only at single bidding, can more comprehensively capture certain aspects of these markets.
This Report provides an analysis of the competition in the Hungarian public procurement market as well as its determinants. Competition is characterised using descriptive statistics of indicators such as single bidding, number of bidders, market entry rate, market concentration and share of non-local bidders (see Table 2.3). Beyond the competition indicators, the analytical framework includes further indicators that describe the economic fundamentals for competition, the characteristics of organisational capacity, tender and contract design and last but not least transparency. These factors will be analysed in depth in Chapters 3 and 4.
Table 2.3 presents the variables used in the analytical framework, however, to ensure the readability of this chapter, Annexes A, B and C include the more detailed description of the methodology, such as the precise definitions and descriptive statistics of all variables used in the analysis and the details of data collection, processing, and data quality).
Note: The indicator on framework agreements is excluded from the analysis. The dataset also excludes tenders that are framework agreements, as there is insufficient information published on the number of bidders.
1. The market concentration indicator uses the Herfindahl-Hirschman Index (HHI), and it is used to determine the competitiveness of the market. In essence, the indicator measures the share of contract values for one year compared to the total annual market value. It looks at the total number of companies on a specific market and the share of each company from the total market value in a particular year. Higher values indicate higher concentration of some companies, lower market concentration, expressed through the HHI, indicates more competitive markets. The index has been standardized on a scale of 0 to 1. 0 indicates highly competitive markets. For instance, in a monopoly a single firm controls the entire market, or if there is a moderate concentration, there are several large firms that control large share of the market.
Source: Authors’ own work
Determinants of competition, more precisely single bidding, encompass a range of environmental factors which are not readily modifiable through policy intervention, as well as a wide range of factors which can be influenced through policy action on the short to mid-term range. Considering such a wide variety of determinants for single bidding allows the Report to identify the most powerful levers comprehensively and precisely for improving competition in public procurement in Hungary. In the subsequent sections, some variables are further transformed, for example from continuous variable into categorical variable (e.g. instead of using the actual number of days for advertisement, categories for short, average and long advertisement of tenders were created). Categorical variables can capture non-linear, step changes in the relationships among variables, hence can be useful in the subsequent analysis to increase modelling accuracy.
The empirical analysis draws on data coming from publicly available official government sources, such as the Official Gazette (Közbeszerzési Értesítő)1 as well as the e-Procurement system (Elektronikus Közbeszerzési Rendszer or EKR)2 and the Public Procurement Database (Közbeszerzési Adatbázis or KA)3. Combining multiple official sources enables building a comprehensive database for the analysis. The only major data gap identified concerns contracts awarded within framework agreements and centralised procurement tenders which are not available publicly in a readily machine processible format.
The analysis draws on data for 105 788 public procurement contracts representing approximately EUR 54 billion (HUF 19.97 trillion) for the period 2017-2022 (see Table 2.4). After removing negotiated procedures without prior publication and framework agreements, the analysis dataset contains 89 663 public procurement contracts (HUF 18.62 trillion). Public procurement officials record the data into a variety of standard procurement forms. The data collection methodology compiles such information from different structures and standardises them into a harmonised structure. The collected data is further processed to remove likely erroneous records and values (e.g. currencies which no longer exist).
Source: Procurement data from EKR and KA.
The data processing pipeline considers modifications and cancellations occurring during the tendering process to identify the final correct record of each tender and contract. Unfortunately, due to source data errors, many records must be excluded from the analysis as they lack information on key variables, such as number of bidders. In addition to automated checks of data quality, manual checks on a sample of the dataset were also performed to assure that the dataset as closely as possible replicates the source publications (i.e. comparing sample records in the dataset with the corresponding official publications). More details on data processing and data quality can be found in Annex A.
To identify the determinants of single bidding in Hungary, fixed effects binary logistic regression models were estimated for the full dataset on the contract level (following the data quality and sample selection procedures described above). As such, each policy-relevant impact identified should be interpreted considering differences by year, sector and region. This means that the estimated effects of changes in procurement practices are not biased by differences across these major dimensions. Such comprehensive modelling means that the most complete models can accurately predict over 85% of single bidding outcomes (that is 0s and 1s combined) across the whole public procurement market of Hungary. Full details of the regression models estimated can be found in Annex C.
This Section presents the state of play of competition in public procurement in Hungary along a number of related dimensions, based on the methodology presented in Section 2.2 More precisely, the Section conceptually describes and provides an overview of the trends of competition in public procurement, with special focus on trends of single bidding, which is the main dependent variable of the analytical framework, as well as further indicators that aim to capture competition or lack thereof, such as the number of bidders, share of non-local bidders, market concentration, and market entry throughout the period of analysis, between 2017 and 2022.
The descriptive analysis in this Section includes not only country-wide results but also a deep dive into 3 sectors with high spending value and high single bidding rate:
IT services;
Medical equipment and pharmaceuticals; and
Construction materials sectors.
2.3.1. Competition trends over time
Considering the potentially wide range of activities needed to be undertaken by central governments and local authorities to ensure continuity of public service delivery, governments’ spending on public procurement in OECD countries amounts to 4.5-20.9% of GDP (OECD, 2023[8]), with Hungary located on the upper side with 16.4% of GDP. In light of such substantial figures, the primary aim of the public procurement process is to ensure the promotion of the best value for money or selecting a bidder with the lowest price for the highest quality, and subsequently promote open and fair competition. To ensure that this blueprint is followed, public agencies have to secure and provide competitive bidding processes within the relevant markets. Therefore, public procurement process should be designed to encourage open competition by promoting higher participation of potential bidders (Spagnolo, 2012[9]).
The results and trends in this Section are based on calculations using opentender.eu data which processes and cleans both Tenders Electronic Daily and national public procurement data published by the Publications Office of the EU and the Hungarian Public Procurement Authority, respectively. By implication, the results may differ from the Single Market Scoreboard. In terms of single bidding in Hungary, an overall increasing trend can be detected between 2017 and 2021, with a peak at 31.5% in 2021. In the last year of the analysis, in 2022, a drop can be observed in the share to 27.3% (Table 2.9).
Source: Procurement data from EKR and KA.
Two trends of single bidding variation can be observed. On the one hand, services and goods oscillate year by year, with 2022 levels being comparable to those of 2017. Services reached their peak of single-bidding in 2018 with 42% of single-bidding, while the peak for goods came in 2021 with 43% of single-bidding. On the other hand, works have a downward trend of single bidding. In 2017, the share of single bidding is 18%, after which it gradually decreases on a yearly basis reaching 6% in 2022 (see Figure 2.1).
Source: Procurement data from EKR and KA.
Overall, tenders that receive only one bid are the single largest category throughout the period of the analysis, ranging from 26% to 31.5% of all tenders. The share of tenders that receive only 2 bids is also quite high ranging between 21% and 29% of all tenders for specific years. Another noticeable trend is the decrease in the share of procedures that receive 3 bids and the increase in the share of procedures that receive 4 or more bids (Table 2.6).
Source Procurement data from EKR and KA.
The average number of bids show different trends across the three procurement types: goods, services and works (see Figure 2.2). The three types are closely positioned together in 2017 and vary to a certain degree across the entire period of analysis. Unlike the share of single bidding, the average number of bidders in the works category reduces in the first three years of analysis, before picking up in 2020, and achieving its peak in 2022, where on average it received 3.75 bids. The goods category, which had the highest share of single-bidding instances, also has the lowest average number of bids in 2022 with 2.3 bidders. The situation with services has slightly improved over the years. In the first year of the analysis, it has the lowest average number of bidders. However, a continuous increase can be observed in the number of bidders between the start (2017) and end years of the analysis (2022), from 2.8 to 3.1.
Source: Procurement data from EKR and KA.
The variable for non-local suppliers is defined as a binary variable that denotes whether the buyer and supplier are from the same settlement (Lewis-Faupel, Neggers and Olken, 2016[10]). Overall, the share of local bidders is approximately one-third. In 2017, it reaches almost 35%, while the lowest share of local bidders of around 30% is in 2018 (Table 2.7). However, when splitting according to the different supply types, different trends can be observed.
Source: Procurement data from EKR and KA.
While services have the lowest share of non-local bidders, there is an initial upward trend throughout the period of analysis (see Figure 2.3). Despite such an increase, the category of services is still substantially lower compared to the other two. After a period of stagnation, there is also a minor upward trend of non-local bidders in the goods category, but with a significantly higher starting share of 72.5%. The works category is located between the other two ones, with a tendency to increase the share of non-local suppliers, from 64.5% in 2017 to 71% in 2022.
Source: Procurement data from EKR and KA.
Market concentration denotes the annual winner's market share, i.e. the share of the supplier total market value per year. When the market is less concentrated and there is a greater number of suppliers that received a share from the buyer, lower averages of single bidding can be observed. (Cingolani and Fazekas, 2017[11]) In essence, market concentration aims to capture the size of suppliers relative to the size of the market/sector. Higher market concentration indicates lower competition. Figure 2.4 shows diverging trends of six markets from the three sectors analysed below. Medicinal and pharmaceutical products (CPV-3363 and 3365) note substantial rises in the last few years. Construction materials (CPV-4411) have low market concentration, and this trend dominates the entire period of analysis. Procurement of wire products (CPV-4431), classified within the construction materials sector, on the other hand, fluctuates much more. Within IT services, two trends can be observed. After a period of low market concentration, systems and consultancy services (CPV-7222) see a sharper increase in the concentration. On the other hand, programming services (CPV-7221), after a period of gradual increase of concentration, see a downward trend in market concentration in the last year of the analysis. Overall, the light grey line within the analysis (Figure 2.4) indicates a gradual increase in concentration at national level.
Source: Procurement data from EKR and KA.
Market entry is defined as the average share of new companies that have not been awarded a contract in the preceding year, i.e. if a given supplier was not awarded a contract in the previous year in the same market, its score will be 1, otherwise, the score is 0. Lack of competition, transparency, and restrictive bidding requirements present obstacles for new companies to enter the market (Coviello and Gagliarducci, 2017[12]), (Duguay, Rauter and Samuels, 2020[13]), (European Commission and Fazekas, 2022[5]). There is an increase in the number of market entrants in the second period of the analysis, 2020-2022 on average around 15% of contracts, compared to the first period, 2017-2019, where less than 10% of the contracts were awarded to market entrants (Table 2.8).
Source: Procurement data from EKR and KA.
Figure 2.5 exhibits an upward trend of new market entrants for all three procurement categories. Between 2019 and 2020 all categories note an increase of the new suppliers that have entered the market, i.e. suppliers that have not been awarded a contract in the previous year. Works notice the sharpest increase between 2019 and 2020. However, in the period between 2021 and 2022 there is a period of stagnation across all categories.
Source: Procurement data from EKR and KA.
2.3.2. Competition differences by procurement categories (goods, services, works)
Figure 2.6 shows the share of each procurement category (goods, services, works) in terms of total number of contracts and total value of contracts. Although the bulk of the contracts are in the goods category (right figure), the total value share of goods is the lowest (left figure). Works represent 37% of the total number of contracts, however, their total value share is 62%. The share of services contracts and values is approximately equal, with 17.5% of all contracts equalling 18.3% of the total value. As such, the figures for the goods category are the opposite of those for works category, as 45% of all contracts are awarded within this category, nevertheless, it only accounts for 19% of the total value share.
Source: Procurement data from EKR and KA.
Compared to goods and services, works perform quite well, across all years. It is the least concentrated category and has the lowest incidence of single bidding (Figure 2.7, panels 1 and 3). Services have the highest number of bidders, on average, and a share of single bidding of 37.35%. Such a differentiation between the two indicators could potentially indicate a market split across procurement categories. While some markets within this category, have healthier competition, others could be more restricted. As Figure 2.7 shows, new suppliers of goods face more substantial obstacles, considering the lower share of new market entrants.
Source: Procurement data from EKR and KA.
2.3.3. Competition differences across regions
This Section looks at two particular trends across regions in Hungary. Regions are defined according to the NUTS-2 level classification of buyer locations (please note that Budapest region includes both local bodies and national government entities residing in the region). Figure 2.8 shows the share of single bidding across all 8 regions in Hungary. The numbers are quite high for all regions in Hungary, with a share of single bidding between 23% and 33%. Although the share is high across all regions with more than 25%, the share in Budapest region is the highest with 33%. This should also be considered in conjunction with the total number of contracts awarded within the Budapest region, that stand as substantially more compared to the next region. This picture can be further sophisticated by investigating how the situation looks like when the tendering procedure receives more than one bid, i.e. what is the average number of bidders across the regions.
Source: Procurement data from EKR and KA.
However, with regard to the average number of bidders, interesting trends can be observed (see Figure 2.9). Although the Budapest region had the highest incidence of single bidding, it also has the highest average number of bidders, with an average of 3.3 bidders. Similarly, regions with comparably lower share of single bidding do not automatically have higher numbers of bidders. For instance, the three Transdanubia regions have the lowest number of bidders per contract, i.e. less than 2.8 bidders.
Source: Procurement data from EKR and KA.
2.3.4. Competition differences across sectors
Table 2.9 shows the top 15 sectors regarding the total value of contracts which are mostly impacted by single-bidding. IT services, transport services, repair and maintenance services, and hotel and restaurant services have the highest single-bidding incidence with more than 50% of the market value being awarded to single-bidders. The medical equipment and pharmaceuticals category are also close to the 50% mark.
Source: Procurement data from EKR and KA.
Table 2.10 displays the top 15 sectors in terms of the total number of contracts, which are mostly impacted by single-bidding. There is some overlap with the highest valued sectors when it comes to the top of the list. IT services and repair and maintenance services are again at the top, however, compared to sectors such as medical equipment and pharmaceuticals or transport equipment, they have fewer number of contracts.
Source: Procurement data from EKR and KA.
Based on the descriptive overview of top sectors in terms of value and number of contracts, this analysis explore 3 sectors in more detail, as follows: 1) health sector: medical equipment and pharmaceuticals; 2) construction structures and materials; and 3) IT services.
Health sector: medical equipment and pharmaceuticals
Figure 2.10 shows variations within the medical equipment and pharmaceuticals sector. The share of single bidding of the procurement of medical equipment, pharmaceutical products and personal care products is 49.1%. Procurement of pharmaceuticals and personal care products are above the sector average, while procurement of medical equipment is below. As such, two large markets, medical equipment (HUF 262.9 billion), and pharmaceutical products (HUF 164 billion), have different trends. On the one hand, the share of single bidding is slightly below the average for medical equipment, while for the similarly large market of pharmaceuticals, the average incidence of single-bidding is higher.
Note: The circles represent the value of each market.
Source: Procurement data from EKR and KA.
Even though the pharmaceutical market has a substantially higher incidence of single bidding, when this trend is cross tabulated with the average number of bidders per contract, it seems that it is more competitive than previously indicated. Such results indicate a potentially dual market structure within the pharmaceuticals sector (see Figure 2.11); that is some sub-markets have very strong competition and attract a high number of bidders, while other sub-markets are far less competitive with an elevated rate of single bidding. This is likely reflecting the fact that generic drugs have a competitive supplier base, while many patented drugs have a monopolistic supplier. The other markets follow a more linear trend, i.e. when the share of single bidding increases, the average number of bidders goes down.
Note: The value of each market is indicated within each circle.
Source: Procurement data from EKR and KA.
Figure 2.12 dives deeper into such trends, with some sub-sectors (CPV4) in the pharmaceutical market having substantially a higher average number of bidders, 3 or more, while other sectors, which are also considered large markets, on average have fewer than 1.5 bidders. Some more specific markets such as products for genitourinary system and hormones have substantially fewer average bids compared to the procurement of dermatological products, or large sub-markets such as the procurement of various medicinal products (71 billion HUF). However, considering its size, it is also worth noting the restricted competition on the market for procurement of vaccines (63.4 billion HUF).
Note: The value of each market is indicated within each circle.
Source: Procurement data from EKR and KA.
Construction sector
The construction structures and materials market is one of the largest markets both in terms of contracts and value share. Figure 2.13 presents a significant variation within the market. There are large sub-markets, such as tanks, reservoirs, cable, and wire, that are above the market average for single bidding (30.5%), and other categories such as construction materials, that are below the average. Some sub-markets, for instance, for procurement of paints and varnishes outperform, have a significantly lower share of single bidding (below 5%).
Note: The circles represent the value of each market.
Source: Procurement data from EKR and KA.
More linear trends can be observed when looking at how the construction structures and materials market is structured. Figure 2.14 shows that markets with lower incidence of single bidding also have higher average number of bidders. The lowest share in terms of average number of bidders (1.3 bidders) and highest incidence of single bidding can be found in the stone for construction, limestone, gypsum and slate sub-market.
Note: The value of each market is indicated within each circle.
Source: Procurement data from EKR and KA.
IT Sector
There is greater variation in the IT services sector (see Figure 2.15). This market has the highest incidence of single bidding. On the one hand, computer network services, computer-related services, and internet services are significantly below the sector average. Other subsectors are closer to the average, with data, hardware consultancy and software programming services (233.1 billion HUF) slightly above the average. Taking into account the size of the market, those categories above the average share of single bidding in IT services, such as consulting and software development (95.2 billion HUF), further accentuate the need for greater attention.
Note: The circles represent the value of each market
Source: Procurement data from EKR and KA.
The IT services sectors follows similar trends to those of the construction structures and materials (see Figure 2.16). Markets with lower share of single bidding have higher average number of bidders. The results follow the expected logic of the market, when there is low share of single bidding, there should be higher average number of bidders. Sub-markets, such as computer network services have comparatively low share of single bidding (below 10%) and substantially high average number of bidders (more than 3.5) per contract. Larger sub-markets that are close to the average (58.8%), such as IT services and software programming, show more restricted competition, with an average number of bidders lower than 2.
Note: The value of each market is indicated within each circle
Source: Procurement data from EKR and KA.
2.3.5. Summary of the analysis
Looking across the great deal of indicators and the different temporal, regional, and sectoral trends and distributions, a rich and diverse picture of competition in the Hungarian public procurement system emerges. Despite a major economic and governance shocks, especially the COVID-19 pandemic, there is continuity in the competition profile of Hungary according to the analysed data. The low level of competition, in particular an elevated level of single bidding, persisted until 2021, which is also confirmed by similar assessments such as the Single Market Scoreboard and the European Court of Auditors’ performance audit of the state of public procurement competition across the EU (European Court of Auditors, 2023[14]). Nevertheless, the level of competition may have somewhat improved in 2022, breaking the negative trends of 2017-2021, exemplified by a drop in single bidding and increase in the average number of bidders.
A considerable improvement was observed in the rate of market entry where 2020 brought a major improvement, albeit it has been widely documented that many market entrants in 2020 across the EU have also presented pronounced risks. Nevertheless, the large variation behind the high-level averages calls for a deeper dive into the determinants of competition differences in Hungary. Identifying the drivers of performance differences will allow to draw relevant policy conclusions and point at potential improvements to public procurement policy and practices in Hungary. Chapter 3 and 4 will turn exactly to these questions.
References
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[7] Titl, V. (2021), “The One and Only: Single Bidding in Public Procurement”.