Since the COVID-19 pandemic, each European Union country has developed a Recovery and Resilience Plan (RRP) to build a more resilient economy and society. RRPs include reforms and investments for countries to implement by 2026 (European Commission, 2022[1]). Hungary’s national RRP was formally approved by the Council in December 2022. In it, Hungary committed to implement several reforms to improve the performance of the Hungarian public administration. Six of these reform measures are related to improving the public procurement system, which represents 16% of GDP in Hungary in 2021, well above the OECD average of 12.9% (OECD, 2023[2]) These measures are listed in the “Governance and Public Administration” component of the plan (see Figure 1.1).
Enhancing the Public Procurement Performance Measurement Framework in Hungary
1. The procurement measurement framework: a strong commitment of the Hungarian government
Figure 1.1. Commitments of Hungary related to public procurement under the RRP
Source: (European Commission, 2022[1])
Hungary is also subject to the so-called “conditionality procedure”, which is a mechanism that allows the European Union (EU) to cut off an EU Member State from receiving EU money if it breaches principles of the rule of law. The Hungarian government committed to take several corrective measures and reforms including the development of a public procurement performance measurement framework “to continuously monitor and assess the efficiency and cost effectiveness of public procurements in Hungary” (European Commission, 2022[3]). The development and implementation of the measurement framework was subject to a Government Decision 1425/2022 (5.IX.), which was published on the 5 September 2022 (Hungarian government, 2022[4]). The committed reform measures under the conditionality procedure for the EU funds were similar to the ones that Hungary committed to implement as part of the RRP implementation. (European Commission, 2022[1]). All the measures are interlinked and are expected to facilitate access to public procurement procedures and competition in public procurement.
Among these measures, the Hungarian government committed to set up a comprehensive performance measurement framework to regularly assess the performance of the public procurement system and the reasons for and effects of limited competition in the sectors most affected by the low level of competition (European Commission, 2022[1]). The measure on the performance measurement framework mentions that the framework shall enable in particular:
the annual analysis of the level of unsuccessful public procurement processes and their reasons; the share of contracts that are entirely cancelled during contract execution;
the share of occurrence of delays in contract completion; the share of occurrence of cost overruns (including their proportion and volume);
the share of awarded procurement contracts in which the whole life-cycle or life-cycle costing is explicitly taken into consideration;
the share of successful participation of micro- and small enterprises in public procurements;
the value and share of public procurement procedures with single bids financed from national resources and from Union support separately and/or both.
Performance measurement frameworks are needed to assess progress and achievements periodically and consistently and identify potential gaps against objectives and targets (OECD, 2023[5]). This is particularly relevant for public procurement as it is a key tool to provide public services to citizens and businesses and contributes to strengthening trust in governments. From an economic perspective, it contributes to an efficient and effective management of public resources taking into account the concept of “value for money” that goes beyond economic aspects (OECD, 2023[5]).
The Hungarian government has developed a performance measurement framework based on a set of indicators that have been selected in late 2022 and inspired by the OECD comprehensive public procurement performance measurement framework (Hungarian Government, 2022[6]). The framework has been published in the Hungarian eProcurement platform, EKR, on 30 November 2022 and its results for 2019-2022 were published on 28 February 2023 by the Government (Hungarian Government, 2023[7]). The results of the performance measurement exercise must be published annually in the form of a monitoring report.
This report aims to assess the public procurement performance measurement framework in Hungary (published in November 2022) and provides key recommendations for its improvement. The second chapter explores key aspects to consider for the development of a public procurement measurement framework. The third chapter provides an assessment of the Hungarian performance measurement framework developed by the Hungarian government. Lastly, the fourth chapter focuses on the communication of the results of the framework. Annex B provides the list of recommendations and a suggested timeline for their implementation.
A constant dialogue was established with the Hungarian government throughout the development of the report to enable them to work in parallel in updating the performance measurement framework within the strict deadlines and to take on board the OECD recommendations. The updated framework was published on 22 December 2023.