Public procurement is a key economic activity accounting for a significant share of GDP, representing 16.4% of GDP and 33.8% of government expenditure in Hungary. Public procurement has a significant impact on the quality of services provided to citizens, and on the economic and social development of countries. To secure value for money in their public procurement processes, public buyers usually rely upon open and competitive bidding processes to ensure optimal participation from suppliers.
Nonetheless, Hungary, like many other OECD Members, is experiencing low participation of economic operators in public procurement. For example, a recent report of the European Court of Auditors found that the level of competition for public procurement in the European Union’s Single Market decreased significantly from 2011-2021, and noted a lack of awareness that competition is crucial for value for money.
Access to procurement opportunities is a key principle of a sound public procurement system. The 2015 OECD Recommendation on Public Procurement highlights that ensuring broad access to the public procurement market is essential for achieving value for money and for driving innovation, quality, and efficiency, as it promotes competition and a level playing field. A healthy level of competition, in turn, provides benefits for both governments and businesses by stimulating economic productivity, innovation, integrity, and SME development. Studies that have quantified the cost savings from increased competition in procurement markets also conclude that rules and procedures that promote transparency and competition tend to reduce contractual prices substantially. A competitive environment has also shown to increase the trust of citizens and the private sector in the public procurement system, and to reduce the risks of unwanted market practices.
Despite the clear benefits of competition, creating a healthy competitive environment in public procurement has proven difficult. Improving access and competition in public procurement requires a multifaceted approach, encompassing a wide array of stakeholders and addressing multiple root causes.
This report analyses the root causes of low supplier participation in public procurement opportunities and single bidding problems in Hungary and suggests measures to boost the level of competition in the public procurement market. The report is part of a broader collaboration between the OECD and the Hungarian government on public procurement reforms that Hungary has committed to undertake under the conditionality procedure for the EU funds and in its Recovery and Resilience Plan.
The collaboration with Hungary is part of the OECD work on strategic public procurement, which helps governments respond to today's societal, environmental and economic challenges, especially when it comes to creating sustainable growth and jobs. The report was developed through desk research on procurement practices in Hungary, analysis of data from Hungary’s e-Procurement system (EKR), and interviews with Hungarian stakeholders.
The report was approved by the Public Governance Committee on 9 October 2024 and prepared for publication by the Secretariat.