The adequate capacity of both the public and the private sectors is a key element to ensure a sound procurement system in order to deliver efficiency and value for money in the use of public funds. This chapter looks at measures to be undertaken specifically in Hungary to improve both contracting authorities’ and economic operators’ capacities to increase competition.
Improving Competitive Practices in Hungary’s Public Procurement
Reducing Single-bids and Enhancing Supplier Participation
OECD Public Governance Reviews
Abstract
The procurement workforce at the contracting authorities is expected to have technical knowledge to ensure compliance with the regulatory framework such as knowledge of the public procurement law and bylaws, knowledge on drafting tender documents and setting evaluation criteria, but in order to foster competition, they are also expected to enhance their knowledge of the market and observe good practices throughout the procurement cycle to ensure an optimal number of bids. Economic operators are also expected to have a sound capacity and knowledge regarding the procurement system in order for them to be able to submit bids. If the contracting authorities do not foster attractiveness of procurement opportunities, or if economic operators have low capacity to answer to procurement opportunities, the impact on competition may be tremendous. As such, the National Audit Office of the United Kingdom identified enablers of effective competition from both buyer and supplier perspective at all cycles of the procurement process (see Table 4.1).
4.1.1. Improving contracting authorities’ practices throughout the procurement cycle
Leveraging the use of market engagement tools
Engaging early with the market can increase the level of competition in procurement processes, as it allows the private sector to gain awareness on future procurement opportunities, but it also helps government officials benefit from suppliers’ knowledge of markets and trends and understand the capability and capacity of suppliers prior to formulation of a procurement plan and strategy. The level of detail of this analysis also impacts the overall efficiency and success of procurement operations and increases the potential to obtain best value for money.
Early engagement with the market can have long-term consequences on competition in public procurement. Studies have shown that high bid costs, lack of confidence in evaluation, and lack of feedback can deter participation from bidders in future opportunities. As such, contracting authorities that improve engagement with the market have been shown to get increased levels of competition in subsequent procurement processes. However, studies have also demonstrated that contracting authorities often take too cautious approaches to engagement with the market and are not always clear on what they can and cannot do, hence why capacity-building in this area is key. (National Audit Office of the UK, 2023[1])
Market engagement can also increase trust in doing business with the public sector. Furthermore, such engagement can also be used for civic participation from a broader range of societal actors than simply potential bidders seeking to work with the public sector. This can support more deliberative and democratic approaches with civil society, helping to increase transparency and build trust in public sector decision making that affects communities. (OECD, 2022[2])
As mentioned in Section 3.2.2, engagement with the market and especially the use of preliminary market consultation is already seen as a tool to increase competition in Hungary, as the Government Decree rendered preliminary market consultations mandatory in some instances. As Box 4.1 shows, beyond the formal preliminary market consultations, there are several tools and methods to engage with the market and potential bidders in the preparatory phase of the procurement procedure, such as issuing a request for information, publishing annual procurement plans, using surveys or organising market engagement events. (OECD, 2023[3])
Different methodologies can be used to engage the market.
Direct engagement mechanisms:
Publish procurement plan.
Organise public events to meet with suppliers.
Meet with key suppliers (taking into account integrity risks).
Request for quotation (RfQ)/questionnaires.
Publish Prior Information Notices (PINs).
Getting information from third parties
Commission a consultant (public and transparent selection).
Use market analysis or sector study reports published by specialised companies or trade unions.
Consult other contracting authorities with experience in similar procurement.
Source: (OECD, 2023[3]).
However, the success of early market engagement with the economic operators depends on a proactive and constructive approach by contracting authorities and suppliers for its success. Contracting authorities also need to be prepared to receive constructive criticism from potential suppliers and take useful learning from it. On the other hand, sector-specific early market engagement and dialogue could facilitate public-private discussions that enable economic operators to share their insights without breaching internal compliance and legal constraints that might otherwise prevent them from doing so. In addition, this would help contracting authorities gain a better understanding of market dynamics.
Interviews conducted with sectoral associations representing economic operators illustrate the benefit of engaging with the market as it shed light on challenges that economic operators are facing. For example, in the health informatics sector, many public institutions (hospitals, health centres) have built up strong relationships of trust with suppliers that go back decades where it is in the common interest of the parties to maintain them. Another issue mentioned by interviewees was that contracting authorities, for reasons of convenience, put together packages that cover the annual needs of a hospital ward, where different types of equipment (bed, textiles, health IT, and bedside diagnostic equipment) are put together in a package. This could be changed by shortening the supply chain and by eliminating the middlemen/links (packaging companies that solicit bids to put together the packages). In the diagnostic imaging market, even though many imaging manufacturers operate globally, the Hungarian market remains limited. In this sector, service and spare parts supply are tightly linked to sales and can only be provided by companies with specific qualifications and licenses, further restricting market competition. As a result, the entry of new manufacturers is seen as a risky venture, posing a significant barrier to introducing new technologies and increasing competition. Public procurement largely defines this market, and it is often clear at the outset of a tender which company will benefit from the technical specifications. Parameters like display size dominate technical descriptions, diverging from patient-centric considerations. The solution might lie in long-term strategic planning and thus predictability in public health procurement. Respondents suggested categorising annual purchasing needs for health institutions and securing maintenance and servicing through specialised tenders. This approach would give market players a clear perspective, encouraging investment and entry. As a result, new manufacturers and technologies would enter the market, fostering competition and reducing reliance on single-source procurement.
Prior to market engagement, contracting authorities should perform a needs analysis, and then check whether these needs can be met by the market. The definition of needs should follow a functional and performance-based approach by identifying the performance, functionalities, quality, and quantity of the solution required, but without being oriented towards specific products, services, and brands available in the market. Once these needs are defined, the contracting authority should try to understand whether the market can meet the identified needs. A sound market analysis is key to understand the characteristics, capacity and capability of the supply market and their capacity to respond to priorities and policy objectives of the procuring entity. (OECD, 2023[3])
Before engaging with the market in a consultation process, the contracting authorities are advised to carry out market research/market study to gather information on the market structure, suppliers’ capabilities, market leaders, new entrants, price trends, alternatives as well as information on how other buyers operate in this market – both public and private sector buyers. The information can be used by procurement practitioners as input to define procurement requirements, select the appropriate tender method, analyse and evaluate submitted proposals from bidders. A market study may also be used to solicit ideas and opinions on the feasibility of requirements and the capability and capacity of the market to deliver. (OECD, forthcoming[4]) The results should lead to the identification of opportunities and risks which will inform strategic options to consider. Figure 4.1 summaries the advantages of carrying out a market study in the pre-tender phase.
Source: (OECD, forthcoming[4]).
However, similarly, to running market consultations, carrying out market study requires that contracting authorities have the adequate capacity to do so. Further guidance could support entities in choosing the appropriate method for analysing the market. In this context, MPASD should consider providing further guidance (including templates) and capacity building activities to contracting authorities on these tasks. For instance, the Scottish Government provides not only guidance but different tools and templates to contracting authorities in its Procurement Journey (a web-based guidance that guides contracting authority throughout the whole public procurement cycle, from planning to contract implementation) on how to carry out market research (Scottish Government, 2021[5]). Another example is the State Government of Queensland, Australia that provides guidance to contracting authorities regarding market analysis (see Box 4.2).
The State Government of Queensland, Australia, provides procurement staff with detailed guidelines on conducting market analysis. The objective is to ensure that, once complete, the market analysis provides a strategic understanding of:
how a market works
the direction in which a market is heading
the competitiveness of a market
the capability and capacity of a market
key suppliers and the value that suppliers place on the contracting authority as a customer
how suppliers or markets can be developed to better meet contracting authority requirements
the sustainability performance and capability of the market
how to manage variances in pricing over time or between suppliers
The guidelines provide a step-by-step guide for conducting market analysis. Guidance is provided on how to conduct common market and economic analysis tools, such as PESTEL analysis and Porter’s Five Forces. It also includes recommended practices that have been implemented by contracting authorities, and a range of questions that the analysis should be able to answer.
Source: (OECD, 2019[6]).
Understanding the market through market engagement tools could help contracting authorities identify the number of market players within each relevant market.
Chapter 2 also ooked at additional indicators and found that more suppliers within each relevant market indicates decreased incidence of single bidding (see Figure 4.2). Using quantiles, the number of suppliers was split into 5 categories. Using the 1-45 suppliers category as a reference, categories starting with at least 282 suppliers have significant effect on fewer instances of receiving a single bid (second category is also associated with lower incidence of single bidding, however, its effect is not significantly different from the base group). Encouraging market entry of new potential suppliers should therefore be a strategic policy to reduce instances of single bidding. The Competition Authority could play a role in building contracting authorities’ capacity to undertake market analysis in those markets that were identified in Chapter 2.
Source: Procurement data from EKR and KA.
Nonetheless, the use of market engagement tools should abide by the principle of proportionality, and it should depend on different elements such as the complexity of the procurement and the estimated value of the contract. (OECD, 2023[3]) It should also take into account the specificities of the different markets. As such, market engagements tools can be also tailored for certain sectors with highly technical products such as medical equipment, or products where price volatility is high, such as foodstuff. These tools can be created in collaboration with the private sector, and especially business associations, so both parties can benefit from these dialogues. In some countries, the private sector itself has developed collaborative tools to help contracting authorities better plan and conduct their procurement processes (see Box 4.3).
In addition, the U.S. General Service Administration (GSA), by recognising the vital role small businesses play in advancing federal missions and strengthening local economy, organise matchmaking events annually as a dedication to support equity in procurement and to drive small business entrepreneurs for presentations and discussions on federal government research, marketing strategies, and effective engagement practices (GSA, 2023[7]). At these events, small businesses receive insights into navigating government procurement processes, including how to secure spots on GSA's Multiple Award Schedule and various IDIQ (indefinite delivery/indefinite quantity) contracts (that provides for an indefinite quantity of supplies or services during a fixed period). Small businesses also can learn about regional forecasting opportunities and engage with procurement officials from GSA's Federal Acquisition Service, Public Buildings Service, and Office of Administrative Services. Furthermore, the European Commission’s Public Buyer Community (Commission, 2024[8]) organises annual, general, sectoral and thematical matchmaking events to promote collaboration and innovation where public buyers and pioneer companies unite for a synergy of knowledge exchange. Participating in this event aims to facilitate public and private cooperation, encourage the co-creation of innovation procurement, and foster exchanges. Additionally, these events enable stakeholders to meet and exchange information on their respective needs and challenges, ultimately leading to the identification of existing technologies to address common healthcare challenges.
Slovenia: Food products catalogue developed by the Chamber of Commerce and Industry
The procurement of food products is particularly complex in Slovenia, as both the procurement legislation and the food market are constantly changing. In addition, planning a procurement process for food products is challenging due to the large differences of needs among institutions, especially regarding the quantities of food, the norms for the catering, the capacity of the procurement staff, etc.
Given all these factors, the Chamber of Commerce and Industry of Slovenia, in cooperation with an IT company, has developed a web-based Food Catalogue application for public procurement, which allows public institutions to correctly label food products and create lots for procurement, to extract CPV codes, EAN codes, nutritional values, allergens, etc. The catalogue is informative and provides constant market analysis and product data. The public sector can create generic lists of the types of food products to be procured and send out notices for selected lots.
The Food products catalogue for public procurement offers assistance to contracting authorities for the following:
labelling of food products;
the development of lots and the possibility to place orders;
the design of criteria;
printing out products information;
contacting suppliers directly via the supplier map or sending requests for the excluded lots;
extracting information on nutritional value, allergens and certificates;
ensuring that the requirements of the Public Procurement Act and the Green Public Procurement Regulation are met.
More than 5 660 products are available in 38 categories and 125 subcategories, and the offer changes according to the current market situation and the needs of public institutions.
Germany: Bitkom’s manuals on vendor-neutral tendering of various IT products
Bitkom, Germany’s digital association was founded in 1999 and currently represents more than 2 700 companies of the digital economy, which produce an annual turnover of EUR 190 million, including EUR 50 million in exports, and employ more than 2 million workers in Germany. Its members also include 1 000 SMEs and over 500 startups. Its members offer software, telecommunications and internet services, produce hardware and consumer electronics, operate in the digital media sector or are in other ways affiliated with the digital economy.
Bitkom has several working groups specialising different aspect of the digital economy. The Public Contracts Working Group is focusing on issues related the public procurement of digital solutions. As the public sector is the largest buyer of digital in Germany, it has enormous market power and therefore considerable influence on competition. The Working Group, in collaboration with relevant ministries and other stakeholders, developed several manuals and other materials that support public buyers’ in designing their tender requirements and contracts in a way that creates a fair and transparent competitive environment. For example, the Working Group worked closely with the Federal Ministry of Interior (BMI) on the development of contract terms for the purchase of IT services or with the Competence Center for Sustainable Procurement (KNB) of the BMI Procurement Office on the declaration on social sustainability for IT procurement.
Bitkom, through the Working Group, also developed several guidelines on vendor- and product-neutral tendering of different IT products and services, again in collaboration with representatives of the public sector (e.g. the BMI Procurement Office, the Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support (BAAINBw), the Federal Employment Agency, Berlin Police, ITDZ Berlin). The guidelines for product-neutral procurement are sorted by product groups (such as notebooks, PC desktops, laptops, server, monitors, archive, home office) and are updated regularly to comply with regulatory developments and technological standards. They address the aspect of product-neutral tendering as well as legal requirements for the product to be procured and information on environmentally friendly procurement. Bitkom’s manuals on vendor-neutral tendering of different product categories encourage contracting authorities to formulate their tenders in a non-proprietary manner that avoids the use of brands or the reference to specific manufacturers, while leveraging current technical standards. This is consistent with legal requirements in Germany, which mandate equal treatment of suppliers and market products by using descriptions of the procurement objects based on factual and non-discriminatory criteria. Indeed, Bitkom considers vendor-neutral tendering as an opportunity to ensure fair and open competition, prevent early technical determination, and avoid lock-in effects. As the number of competing suppliers increases when the tender is based on factual and technical criteria, better options and savings are realised, minimising obstacles to change providers as deemed adequate.
In the case of public tenders, contracting authorities are advised to draft a list of criteria that allows comparison of different offers and sufficient differentiation. Such award criteria should be needs-based, vendor-neutral, and transparent. However, Bitkom also recognises that technical complexities may lead to difficulties in describing the desired performance of computing equipment. In consequence, it recommends the use of technical standards and benchmarks.
Ensuring transparency and completeness of procurement plans
Public entities have different mandates contributing to provide public services to citizens and businesses. To deliver on their mandate, those entities require the adequate human capital and the procurement of goods, services, and works. Therefore, the fulfilment of strategic goals for these entities is closely linked with procurement planning. One of the main goals of procurement planning is improving market preparedness by providing economic operators with enhanced visibility on upcoming procurement opportunities, therefore increasing access to public tenders and ultimately promoting more competition. (OECD, 2023[3]) Non-product-specific and non-recommendatory preliminary consultations could play a pivotal role in shaping procurement planning, enabling public entities to solicit proposals aligned with their objectives. Large companies often operate within stringent internal compliance and regulatory frameworks, limiting their active engagement in formal procurement processes, including preliminary market consultations. Nevertheless, informal and non-statutory consultations preceding the official planning and procurement procedure would prove beneficial. Such consultations would facilitate a deeper understanding among all stakeholders, including authorities, public entities, company representatives, and associations, regarding each other's operational dynamics and requirements. Furthermore, professional organisations can play a crucial role in supporting less-experienced firms and aiding contracting authorities in acquiring essential knowledge.
In Hungary, according to Article 42 of the PPL, contracting authorities, with the exception of central purchasing bodies, shall draw up, at the beginning of the budgetary year, by 31 March at the latest, an annual overall public procurement plan, which shall outline all public procurements envisaged for the given year. In addition, the same article describes that contracting authorities are not necessarily bound by their procurement plans, as contracting authorities may launch procurement procedures prior to the submission of the said public procurement plan, and these activities shall be subsequently included in the public procurement plan, as appropriate, and the procurement plan does not entail any obligation to carry out the procedures for the award of contracts included therein. The public procurement plans shall be made publicly available on EKR and may be controlled by the PPA upon request.
The information that procurement plans must contain is basic, and includes:
1. the subject-matter of the planned procurement
2. the planned quantity
3. whether the procurement is above or below EU threshold
4. the type of procedure (open, restricted, etc.)
5. the planned date of launching the procedure
6. the planned date of contract execution.
Procurement plans are a key tool to provide visibility to the market on upcoming procurement opportunities, however several gaps exist in the preparation of procurement plans in Hungary, which may give uncertainty to bidders as to which activities will actually be carried out. First, the exclusion of CPBs from the obligation to prepare procurement plans should be reconsidered, as CPBs represent a large purchasing power in Hungary, and publishing procurement plans – at least for new framework agreements or DPSs – could ensure increased participation of economic operators. In most OECD Members, CPBs have the same obligations as any other contracting authority, which includes procurement planning. Second, the fact that contracting authorities are not entirely bound by their procurement plans weakens the effectiveness of planning. Since a contracting authority can launch a procurement process, and modify its procurement plan after the fact, economic operators may not be aware of the opportunity, hence impacting competition. In several OECD Members, a contracting authority may not launch a procurement process if the process was not included in the procurement plan. At the same time, flexibility needs to be given to contracting authorities as needs may change over time. It is therefore recommended that contracting authorities may launch a procurement process that was not foreseen in the original procurement plan, but only after having amended said procurement plan, and published the amended version onto EKR.
In addition to ensure transparency of procurement plans, contracting authorities should also strive to develop detailed internal procurement strategies to tackle all areas surrounding procurement process. This detailed procurement plan, which goes beyond what is publicly available, should be developed at a strategic level and include roles and responsibilities of different stakeholders, chains of approvals, action plans with key milestones, etc. (see Box 4.4)
Procurement planning is defined as a process carried out by contracting authorities to plan purchasing requirements for a defined period. While minimum information should be made available to the public, contracting authorities should also include detailed information in this internal procurement plan to ensure all areas, stakeholders, and procurement stages are taken into account.
Procurement plans usually include:
Details on the stakeholders involved in the preparation of the plan, in terms of roles, department/s and any necessary sign-offs, including any other stakeholders consulted during the process.
Description of procurement requirements – divided by the respective category; goods, services, works.
Respective section/department requiring the procured goods (if relevant) and any areas affected by the procurement needs.
Estimated budget and project implementation deadlines.
Strategy including established timelines – for expected award, delivery or implementation.
Action Plan – delineating key tasks to be completed by each identified stakeholder, with timeframes for completion. This may also incorporate the approach the project team will adopt to select the product/s or service together with the procurement type/procedure and any respective selection criteria.
Source: (OECD, 2023[3])
Considering seasonality in procurement
Recent studies have shown close association between the end of year spikes in spending and certain procedures receiving only a single bid. (McCue, Prier and Lofaro, 2021[11]). The analysis detects similar trends of increased incidence of single bidding in the months of November and December. Using January as a reference category, Figure 4.3 shows that November or December has significantly higher incidence of tenders receiving only one bid. For instance, approximately every fifth tender (18.7%) published in January is predicted to receive only one bid. Comparatively, in the months of November and December, the predicted share increases to 21.5% and 20.9%. Furthermore, these two months also have the highest share within total number of contracts, with 8.9% (almost 8 000) and 11.3% (slightly over 10 000) of all contract notices published in November and December respectively.
Inefficient planning of budget expenditures throughout the fiscal year can contribute to substantial funds remaining in the last few months of the year. Therefore, when the need arises to relocate these funds, contracting authorities can experience rushed procedures and shortened advertisement periods that lead to increased share of single bidding. A second observation that arises from Figure 4.4 relates to the month of August. Lack of competition can arise because of the holiday season for potential suppliers or contracting authorities. The seasonality factors therefore call for a better planning of procurement processes throughout the year on the side of contracting authorities. International evidence points out that seasonality of spending not only leads to higher single bidding rates, but also considerably higher prices, especially close to the end of the financial year or holiday periods when economic operators are less responsive.
Source: Procurement data from EKR and KA
Source: Procurement data from EKR and KA
Developing better procurement processes and tender documents enabling optimal competition
Tender documents are central in the tendering process as they detail both what is being procured but also based on what economic operators will be selected, and what the contractual relationship will look like once the procurement is awarded. They usually contain three key elements that can influence whether or not economic operators will participate to the procurement process, including 1) technical specifications; 2) qualification and evaluation criteria; and 3) contract conditions.
Interviews with stakeholders in Hungary have revealed deficiencies in all three categories resulting often in invalid procedures. Indeed, the rate of invalid procedures has become a serious concern, which undermines the motivation of economic operators to further participate in procurement processes. As a response, rather than opting for a relaunch of the procurement process with different specifications, criteria, or contract conditions, contracting authorities resort to issuing multiple corrigenda to the same procurement documents. It is worth noting that article 55 of the PPL states that tender documents may not be substantially altered, and contracting authorities must relaunch the procedure in case corrections lead to substantial changes, However, although correcting tender documents in a non-substantial way may superficially appear as more efficient, it is rather counterproductive as it may lead to more financial burden for contracting authorities, as the issuance of these notices is cost-consuming. (OECD, 2023[12])
As such, the first key element concerns technical specifications. In Hungary, an issue highlighted by stakeholders concerns the inclusion by contracting authorities of various specifications of different nature into a single, comprehensive contract. This practice, while intended to streamline the process, may impact competition as only a few bidders are able to provide for all the requirements of the procurement process. On the opposite, contracting authorities also resort to artificially splitting the procurement procedure into smaller processes, however the adverse effect is that a smaller value of the contract gives the opportunity to circumvent the requirement of an open process (such as the use of Article 115 of the PPL mentioned above in section 3.2.1). Contracting authorities may then be tempted to invite a small group of companies, typically 2 or 3, to participate. This approach raises concerns about transparency and fair play within the procurement process. (OECD, 2023[12])
Another issue highlighted by stakeholders is the lack of balance of contract conditions. Contracting authorities in Hungary tend to develop contracts that are unbalanced and unfair to economic operators, as the allocation of risks is much higher on the private sector’s side. Economic operators, when looking at the tender documents, may then decline to submit a bid due to these contract conditions, hence impacting competition overall. (OECD, 2023[12])
As such, the contract is usually part of tender documents and is considered the cornerstone of the process as it defines the relationship between the contracting authority and a supplier and reflects the requirements of the tender documents. A well-drafted contract is therefore critical to a successful engagement and delivery, especially since taxpayers’ money is at stake. The contract should cover various elements including prices and payments, personnel, governance, a detailed description of what will be delivered, and terms of delivery themselves. The risks must be fairly allocated and clearly described in the contract, along with safeguards for each party such as non-performance clauses, delays, force majeure, etc.
As for the engagement with the market above, contracting authorities may need support from policy-making authorities to build their capacity for developing sound public contract conditions, for different types of subject-matters or different values. One way of doing so is developing model contracts to be used by all authorities, at least for standard purchases, with clear risk management tools for usual contract risks, dispute resolution mechanisms and designated persons on either side (public and private) to manage the contracts and related disputes. New Zealand, for example, has developed model contracts (see Box 4.5). (OECD, 2016[13])
The New Zealand Ministry of Business, Innovation and Employment (MBIE) has developed a set of standard conditions of contract for routine government purchases. These conditions are called government model contracts (GMCs).
The 2nd Edition GMCs were launched by MBIE in October 2011, replacing the 1st Edition GMCs that were launched in July 2010. The development and implementation of GMCs is part of the Government Procurement Reform Programme and has been mandated by a Cabinet Directive requiring MBIE to create a standard, simple, plain English set of conditions of contract for common goods and services to be used by all Public Service Departments and State Services.
The GMCs are aimed at low-value, low-risk common goods and services. They have been designed as the default government contract. It is up to each agency using the GMCs to determine what constitutes low-value, low-risk common goods and services. This definition is subjective and will depend on the size of the agency and the scale and complexity of its procurement function.
Through the use of GMCs across the Public Service and State Services, Government aims to:
provide simple, plain English contracts that are easy to use for both agencies and suppliers
provide a fairer balance of risk between buyer and supplier
standardise the treatment of legal risk in low-value, low-risk contracts
reduce the need for negotiations and legal advice in routine purchases
promote consistent practice across government
promote process efficiencies in high-volume, low-value transactional contracting
simplify doing business with government
support improved procurement practice and align with international best practice.
Source: (OECD, 2016[13])
When it comes to the size of the contract, smaller contracts are associated with lower incidence of single bidding (see Figure 4.5). The analysis predicts that approximately 12.9% of the contracts in the lowest decile will receive only one bid, compared to the last decile, that represents the biggest contracts concerning value (21%). All deciles are statistically significant, and the effect is substantial. All categories have approximately equal share of observations.
Source: Procurement data from EKR and KA
Time allowed to potential bidders for preparing their bids, i.e. advertisement period length has an effect on the incidence of single bidding as well (see Figure 4.6). A reasonable amount of time, already at least 19 days, substantially and significantly lowers, by half, the incidence of single bidding. Almost 40% of the contracts whose advertisement length period was less than 19 days are predicted to be single bids. In contrast, already the next group, whose advertisement length period is between 19 and 28 days, divides the share of single bidding by more than half. The model predicts that 17.7% of the awarded contracts are predicted to be single bids. Similar trends follow other groups that allow even for longer advertisement periods. The first group (1-18 days) is also the second largest group with approximately 10 500 contracts within this group, which indicates that there is great potential for addressing single bidding by allowing for bidders to prepare bids.
Source: Procurement data from EKR and KA
Regarding the tender description length, the variable is operationalised by looking at the mean deviation with markets classified at market level (CPV–3) and classifying them into groups based on the deviation from the mean (see Figure 4.7). Very short descriptions, which includes the categories of minimal descriptions and short descriptions, of the tender increase the predicted share of single bidding. These tenders have no or only few short descriptive points written in the description section of the tender, therefore, providing little to no-details for the potential suppliers about the requirements or selection criteria. On the other hand, very long descriptions decrease the predicted share of single bidding. However, these tenders tend to have overly detailed and complex explanatory requirements, thus potentially warding off or discouraging potential suppliers, or such complexities contribute to restricting competition as only few potential suppliers can meet the required criteria.
Source: Procurement data from EKR and KA
Analysing the practices of centralised purchasing bodies, leveraging their purchasing power, and evaluating the use of framework agreements
Centralised purchasing and collaborative procurement tools such as framework agreements or dynamic purchasing systems, DPS can be effective tools to drive value for money and competition. The principle of efficiency from the Recommendation on Public Procurement calls Adherents to “[d]evelop and use tools to improve procurement procedures, reduce duplication and achieve greater value for money, including centralised purchasing, framework agreements, e-catalogues, dynamic purchasing, e-auctions, joint procurements and contracts with options. Application of such tools across sub-national levels of government, where appropriate and feasible, could further drive efficiency.” (OECD, 2015[14]) At the same time, the Recommendation on Fighting Bid Rigging in Public Procurement recommends that adherents should, among others, encourage their relevant authorities to assess whether framework agreements, centralised purchasing, joint bids and subcontracts might pose collusion risks. (OECD, 2023[15])
Centralised purchasing bodies (CPBs), when designing adequate tenders, can therefore offer significant procurement opportunities to economic operators and bring many benefits such as economies of scale or reduction in transaction costs. To do so, most CPBs conclude framework agreements or DPS, and procure the goods or services on behalf of contracting authorities through call-off contracts or mini-competition following the initial competition, with a limited pool of suppliers. Therefore, centralised purchasing, if used in an inefficient manner, is not devoid of risks and can have a negative impact on competition.
Centralised purchasing has a long history in Hungary and as highlighted in Section 3.1.1, CPBs, namely the Directorate General for Public Procurement and Supply (KEF), the Digital Government Agency (DKÜ), and the National Communication Office (NKH) play a key role in the procurement ecosystem of Hungary. The use of CPBs is mandatory for certain categories of contracting authorities as well as certain categories of goods and services. According to the data of the first report published under the Performance Measurement Framework, in 2022, more than 1 million contracts were concluded under framework agreements or dynamic purchasing systems (DPS) set up by CPBs. (Government of Hungary, 2023[16])
Despite such an important number of contracts, there is a lack of data on the efficiency of centralised purchasing and on effective competition. Indeed, while the procurement procedures to conclude a framework agreement or a DPS are conducted in EKR according to the general rules, the call-offs under these contracts are usually conducted under the CPBs’ own portals, which are not integrated into EKR. Measuring competition under these circumstances can be therefore quite challenging as EKR does not include key data on public procurement from established framework agreements and DPSs, such as the number of tenders submitted under call-offs. Most indicators related to centralised purchasing under the performance measurement framework are relying directly on data provided by the CPBs through surveys. This lack of integration with EKR led to a lengthy process for the PMO (now MPASD) to assess and clean the data received from CPBs when drafting the first report under the performance measurement framework. (OECD, 2024[17])
The Government of Hungary should therefore conduct an in-depth analysis of the procurement practices of CPBs and measure the impact of such practices on the levels of competition both at the stage of conclusion of framework agreements and DPSs, but also under call-off contracts or mini-competition. This analysis should include participation from SMEs, market concentration, length of framework agreements, etc. The analysis should also cover the practices of CPBs regarding procurement planning, as they are not required to publish procurement plan.
Measuring competition within CPBs procurement processes is crucial, as the duration and length of framework agreements may pose a risk, especially regarding SMEs participation. Indeed, the duration of framework agreements, in the case of centralisation can have a significant impact on competition for a fixed period, as the goods and services can only be procured from a limited pool of suppliers. Framework agreement may also not have enough suppliers for a call-off/mini-competition, or on the contrary, too many suppliers to effectively choose between. Interviews with several stakeholders in Hungary revealed that framework agreements are widely used by the central purchasing bodies, and for extended periods of time. The Integrity Authority also noted in its report that centralised procurements through framework agreements are characterised by their high value and therefore the number of bidders who can participate in the procedures is limited. (Integrity Authority of Hungary, 2023[18]) This is particularly the case for SMEs, since it is challenging for them to access framework agreements (especially large ones) due to their lack of capacity to offer small prices like larger companies or to satisfy selection criteria, and the fact that they may not be able to offer goods or services for a sustained period of time. As such, framework agreements typically significantly narrow the procurement market for a certain number of years and may cause distortive, competition-restricting effects on the market. (OECD, 2011[19])
As an alternative to framework agreements, the use of DPS by CPBs should therefore be encouraged in Hungary. Indeed, the use of DPSs can bring many benefits such as the standardisation of processes, with automatic checks of the technical and financial offers and the simplification of administrative documents. They are proven to be effective in enlarging markets and increasing competition. Several instances of newly launched DPSs have shown to have been able to attract a significant and initially overwhelming level of interest in participation, including from new suppliers who had not previously bid for public sector contracts. They provide flexibility for suppliers to join or not compete the DPS at any time, and suppliers are not locked out of the market as they would in a framework agreement. DPSs are also associated with a reduced risk and costs of tendering traditionally associated with framework agreements. DPSs are also particularly SME-friendly, for instance, in Scotland, 75% of enterprises participating in the Scottish DPS arrangements are SMEs. (OECD, 2022[20]) In Hungary, the PPL highlights that any economic operator shall have the right to join the dynamic purchasing system throughout its entire duration, provided that it satisfies the selection criteria laid down by the contracting authority, which contrasts with framework agreements where only tenderers that were awarded the framework agreement can compete in subsequent call-offs. The use of DPS could therefore provide more flexibility, especially to SMEs and increase competition. For DPS to be accepted and become standard practice however, DPS owners reported that a significant amount of market and stakeholder engagement should be undertaken prior to the creation of the DPS to make buyers and potential suppliers are aware of the benefits, practicalities and challenges of operating and participating in a DPS. The Government of Hungary could also benefit from issuing guidelines on good practices regarding size, length, and competition in framework agreements and DPSs for CPBs. As such, several countries have already taken the initiative to create guidance and templates to encourage the use of DPSs (see Box 4.6).
An important aspect of launching a DPS is ensuring support to both contracting authorities and suppliers that will be using it. As such, several organisations have invested in guidance, templates and similar support tools:
For instance, BBG, the CPB in Austria supports contracting authorities as well as economic operators with training material, handbooks, click-instructions as well as with direct personal contact / consulting.
In Scotland, each of the DPS has a buyer guide which contains practical advice and guidance on the operation of the DPS. Template Terms and Conditions of Contract are also made available to buying organisations.
Similarly, SKI, the CPB in Denmark, has developed a digital platform to support the use of DPS. In addition, it provides guidance to suppliers on how to apply for the DPS.
In Italy, CONSIP also provides ready-made documentation for contracting authorities, such as model documents and templates for technical specifications for a specific contract.
Source: (OECD, 2022[20])
The use of framework agreements for an extended period of time may also have an impact on the competitiveness of prices. For instance, economic operators may set higher prices when being awarded the framework agreements, with said prices becoming unrealistic compared to the prices on the market over time. (National Audit Office of the UK, 2023[1]) In Hungary, procurement through CPBs is mandatory for certain products and for certain contracting authorities. However, in certain circumstances, the PPL allows contracting authorities to carry out their own procurement processes under certain circumstances (for KEF) or upon the decision of the central purchasing body. There can be different reasons for contracting authorities for requesting to conduct the procurement procedures on their own, including the lack of competitiveness of the CPB offer. (OECD, 2024[17]) While the report on the performance measurement framework indicates that some CPBs already perform some monitoring of prices, it would be beneficial for the CPBs to develop systematic price monitoring tools in order to evaluate whether the prices under the framework agreements are competitive compared to those in the market, and to allow more flexibility to contracting authorities to perform their procurements separately if standalone procurement would be proven more competitive. Early systematic engagement with the market (such as market consultations, prior information notices, etc.) can also be undertaken to evaluate whether framework agreements are indeed the appropriate tool, that competition is maximised, and that integrity is ensured during the bidding process. For example, to prevent risks of collusion during market analysis, ChileCompra, the Chilean central purchasing body, before launching the process for a framework agreement for goods and services, conducts a supplier consultation process online (see Box 4.7).
Prior to issuing a tender, ChileCompra carries out an open consultation process with suppliers, which it announces online at www.mercadopublico.cl. The consultation aims to obtain information about prices, the characteristics of the required goods or services, the time that bidders need to prepare, and any other information that might contribute to a successful tendering process.
ChileCompra has, in addition, an on-line forum with questions and answers for each tender in advance of deadlines for submitting bids. The forum is particularly practical for providers who are geographically distant from the capital city, where ChileCompra’s offices are located, and need remote access to questions and answers. The forum ensures transparency and supports equitable treatment and fair competition.
Source: (OECD, 2016[21]).
Raising awareness of the impact of the purchasing power of CPBs is also key to enhance competition. For instance, Hungarian CPBs could exchange good practices with CPBs from other countries by actively participating to the Central Purchasing Bodies (CPB) Network. The CPB Network, established in 2012, comprises 21 CPBs from 20 countries across the EU member states and other countries in EEA. The objective of the network is to provide a platform to CPBs to discuss common issues encountered in public procurement and centralised purchasing and share experiences. In addition, the Network organises meetings for its members twice a year, to discuss a wide array of topics, including competition, strategic procurement, management of framework agreements, energy procurement, etc. These meetings facilitate information sharing and capacity building of the different member organisations. The Network has also created smaller working groups to facilitate collaboration among its members, and in the process of creating indicators on common activities to develop comparative studies. While KEF is already a member of the Network, it would be beneficial to fully leverage the membership to the Network by participating actively in bi-yearly sessions, but also for both DKÜ and NKH to join the network.
Optimising contract management to sustain competition
Once the procurement process is completed and the contract is awarded, the contract management phase begins, where all formal and informal activities relating to the performance of a contract and the monitoring of the contract implementation are performed. As such, contracting authorities should strive to maintain a healthy business relationship with their suppliers in order to ensure participation in future procurement opportunities. Good oversight and governance arrangements, as well as clear responsibilities for contract implementation are key to ensure both parties benefit from the contract. In addition, a constant underlying factor across good practice is building consistent knowledge and understanding of the contract, requirements, supplier and costs and retaining this knowledge throughout the procurement cycle (that includes the contract management phase, too). (Cabinet Office of the United Kingdom, 2020[22])
Whether or not the contract undergoes corrections/amendments has substantial and significant effect on the predicted share of single bidding (see Figure 4.8). 22.5% of contracts that are not amended are predicted to receive a single bid. The effect is even more pronounced when considering the size of the groups. Contracts that receive corrections are only a quarter of the entire dataset, therefore even miniscule improvements to this group can contribute to reducing the share of single bidding. The analysis predicts substantial decrease of single bidding share when there is at least one contract modification. The share decreases to 10.5%. Such practices confirm the findings in the first report under the Performance Measurement Framework, which found that 61.3% of responding bidders consider that competition is often or constantly hampered by the fact that the contract terms advertised are not compatible with market conditions or impose excessive risks on the contractor. (Government of Hungary, 2023[16]) Therefore, if a contract is too rigid or too risky, it may deter competition bidders, whereas a contract that is more prone to being amended may attract much more bidders as it provides more flexibility in case of unforeseen market conditions.
Source: Procurement data from EKR and KA
One particular aspect of contract management that is crucial for suppliers is the timeliness of payments. For instance, one indicator under the Methodology for Assessing Procurement Systems (MAPS) is whether invoices are examined, time limits for payments comply with good international practices, and payments are processed as stipulated in the contract. Delays in payments may impact the perception of economic operators regarding the practices of contracting authorities, and in turn, economic operators may be hesitant to participate in future procurement processes of the same (or even other) contracting authority, hence lowering competition. Timely payments may therefore ensure that economic operators have the incentive to remain in the public procurement market. However, timeliness of payments is sometimes out of the control of the contracting authorities due to administrative burdens, internal controls, and approval chains. To mitigate this risk, Korea, for example, has developed an e-payment module on its e-procurement system. Launched in 2001, the module offers several functionalities as follows: (OECD, 2016[23])
Contract information review
Request for upfront payment
Request for inspection (for delivery of goods, completion of public works) and response
Checking inspection result
Submission of payment request
Receipt of payment request and payment approval
Additional policy measures and tools can also be put in place, especially for SMEs, to ensure that payment is made in a timely fashion (see Box 4.8).
Korea: Allowing upfront payments for SMEs
The Public Procurement Service (PPS) is the central procurement agency of Korea. PPS has extensive mandates, ranging from procurement of goods and services, operation of the e-procurement system, operation of stockpiling business, and capacity building of the procurement workforce. Among its functions, PPS also provides special financial support to SMEs involved in public contracting. SMEs are entitled to an upfront payment of up to 70% of the value of a government contract. For some contracts for goods, including orders against unit-price contracts, lump sum contracts for goods valued up to USD 423 800, or at the request of the end user for other goods contracts, the business is entitled to instant payment upon presentation of the invoice. In these cases, payment is made from the PPS special account and then reimbursed by the end user. Though central government entities are entitled to a payment period of up to five days, instant payment allows SMEs to receive payment within as little as four working hours.
United Kingdom: Prompt Payment Policy
The Government of the United Kingdom enacted the prompt payment policy in 2015 to ensure timely payment to government suppliers. Through this policy, the Government aims to pay 90% of undisputed and valid invoices from small and medium-sized enterprises (SMEs) within 5 days. In addition, 100% of all undisputed and valid invoices should be paid within 30 days. This policy is required to be incorporated in all public sector contracts, and that the payment term is passed down their supply chain.
Another requirement from this policy is for government departments to report their payment performance annually on GOV.UK in line with these two targets.
In 2023, the Government announced new measures to tackle payment of invoices to SMEs. The new measures include providing greater advice to small businesses on negotiating payment terms that better suit them, and promoting the benefits of digital payment technologies.
4.1.2. Reinforcing contracting authorities’ capacities to better understand the market and risks to competition
Studies show that improving the capacities of public buyers is a critical marker in terms of lowering single-bid procedures. The administrative capacity is important, as lack of experience and weaknesses in administrative capacity usually result in mistakes and inefficiencies in procurement processes. Administrative capacity can be measured through several factors, including use of best price-quality ratio as an awarding criterion, buyer’s average decision period length per bid, buyer’s average relative price, and buyer type. For example, increasing the average decision-making speed for contract award can send a positive signal to the market increasing bidder participation and lowering single bidding, as highlighted in Section 3.2.1 above.
Various interviews with stakeholders have revealed that in Hungary, as mentioned above, the PPL allows for a lengthy decision-making speed, which in turn can weaken the trust of bidders in the process. In addition, stakeholders have pointed out that evaluation criteria may sometimes be too restrictive, which in turn can limit competition. In addition, the report on the performance measurement framework indicates that in the context of selecting the most economically advantageous tender, while the PPL only allows the sole use of the lowest price criterion in justified cases, and even excludes it for certain procurement objects, contracting authorities still used the lowest price as a sole criterion in 34% of procedures in 2022. (Government of Hungary, 2023[16]) Although evaluation criteria are planned to be published in the future as part of the market consultations, a training on those criteria would be helpful to Hungarian public buyers in order to better understand how to maximise bidders’ participation and ensure value for money. Stakeholders have also highlighted that contracting authorities do not have enough knowledge regarding the market, potential cartels, and variations within the market. (OECD, 2023[12])
The procurement workforce is the cornerstone of efficient and transparent procurement processes. The OECD Recommendation on Public Procurement calls adherents to ensure that procurement officials meet high professional standards for knowledge, practical implementation and integrity by providing a dedicated and regularly updated set of tools, for example, sufficient staff in terms of numbers and skills, recognition of public procurement as a specific profession, certification and regular trainings, integrity standards for public procurement officials and the existence of a unit or team analysing public procurement information and monitoring the performance of the public procurement system. (OECD, 2015[14]) Public procurement is increasingly recognised as a strategic function, a function that is becoming more and more complex and requires increased skills from procurement officials. As such, in addition to reinforcing the administrative capacity of public buyers, reinforcing their knowledge of topics such as market analysis, drafting sound evaluation criteria, project management, speeding up the evaluation process through training, showcasing good practices and experience sharing through collaborative approaches is key. (OECD, 2023[25])
As such, supporting a learning culture in the civil service will ensure that skills are reinforced and regularly updated. It allows public officers to keep up with the fast-changing nature of work. This implies making investments in learning opportunities for civil servants including the public procurement workforce. Hungary could implement different initiatives to reinforce the capability of the public procurement workforce through capability-building systems such as the provision of training courses and methodological assistance. (OECD, 2023[25])
Leveraging theoretical and practical trainings
Reinforcing the capability of the public procurement workforce requires an adequate training system. Several OECD countries, including Hungary, have introduced mandatory training for procurement officers. These trainings should not only focus on compliance with the public procurement law. As such, many countries including France, Germany, and Portugal are providing training opportunities for more advanced topics. These countries recognise that traditionally public procurement training has focused on legal and procedural aspects rather than emerging and advanced topics such as the Most Economically Advantageous Tender (MEAT) criteria and strategic (sustainable) procurement (including the knowledge on the SDG agenda), in particular public procurement for innovation. (OECD, 2023[25])
Beyond theoretical trainings, public procurement is also a practical task which requires not only technical expertise and knowledge but also practical experience. The knowledge and skills acquired through training courses could be further reinforced with practical training systems such as on-the-job training and job swapping. Studies show that having a supervisor or co-worker with strong public service values was associated with higher levels of public service motivation. Hungary could therefore leverage different forms of practical training depending on the target and the purpose of the training especially for smaller contracting authorities (see Table 4.2) (OECD, 2023[25]).
Note: * Newcomers refer to not only the newcomers that entered the organisation but also anyone who assume new tasks. In addition, these practical training mechanisms should be available to all the staff throughout their careers. ** It can be also called as temporary mobility/secondments
Source: (OECD, 2023[25]).
These initiatives on practical training sessions could be taken at organisational and/or inter-organisational level. Some larger or experienced contracting authorities in Hungary, such as DKÜ, could therefore offer mentoring to procurement officers in smaller contracting authorities such as municipalities, schools, etc. For example, New Zealand and Finland have implemented such mentoring programmes (see Box 4.9).
New Zealand
New Zealand Government Procurement officially launched a mentoring programme in 2015 after a pilot period in 2014. This programme aims at raising individual procurement capability across government, and providing a mechanism for procurement practitioners to enhance their work-related skills, procurement knowledge and professional networks.
Both mentors (public & private sectors) and learners (public sector) must be volunteers. The application form for the learner includes current experience, preference on the background of the mentor (specific agency, etc.), and goals of skill development. The mentor is required to describe his/her current experience, preference on the background of the learner, and strong competency area in which to assist the learner. New Zealand Government Procurement reviews applications to match learners with the best mentor who possesses the knowledge and skills matching the learner’s needs. The mentor needs to attend a mentoring workshop before being assigned a learner. The mentor and the learner sign the mentoring agreement which specifies how often they meet, how they contact each other, and focus topics for the initial meeting. The mentoring relationship lasts 12 months with the possibility of extension. They are contacted at the 3 month and 12-month point to gain feedback on how the relationship is going.
Finland
Finland launched its first Mentoring Programme for Public Procurement Professionals in October 2022 to promote skills and competence in public procurement. This idea was proposed by the thematic working group to develop procurement competence in Finland. It will be implemented for six months (October 2022 – April 2023). Each mentor will have two or three mentees at maximum. To match mentors and mentees, various elements were considered such as their background, professional experiences and objectives. A kick-off meeting was held in Helsinki in November 2022. It is recommended that the (face-to-face or virtual) individual meetings be held every month from December 2022 to April 2023. In addition, the mentoring process includes an interim online meeting of the entire group in January 2023. The final meeting was held in Helsinki in April 2023. This first mentoring programme in Finland organisations attracted participants from both public and private sectors.
Source: (OECD, 2023[25])
In addition to trainings on procurement processes themselves, procurement officials should be trained on the negative effects of collusion and corruption, as they are the frontline defenders of the integrity of public procurement processes. In order to avoid corruption, procurement officials should be made aware of the consequences for officials who themselves engage in corrupt practices. Equipping procurement with the skills and tools to identify, avoid and seek redress for collusion and corruption in public procurement is an indispensable element in the fight to protect the process from anticompetitive conduct. Professional training of public officials at all levels of government is important to strengthen procurement agencies’ awareness of competition issues in public procurement. From the perspective of corruption prevention, education also serves as a warning of the likely consequences for officials who might otherwise be tempted to themselves engage in corrupt practices. (OECD, 2011[26])
In Germany for instance, the Federal Procurement Agency has taken several measures to promote integrity among its personnel (see Box 4.10).
The Procurement Agency has taken several measures to promote integrity among its personnel, including support and advice by a corruption prevention officer (“Contact Person for the Prevention of Corruption”), the organisation of workshops and training on corruption and the rotation of its employees.
Since 2001, it is mandatory for new staff members to participate in a corruption prevention workshop. They learn about the risks of getting involved in bribery and the briber’s possible strategies. Another part of the training deals with how to behave when these situations occur; for example, by encouraging them to report it (“blow the whistle”). Workshops highlight the central role of employees whose ethical behaviour is an essential part of corruption prevention. About ten workshops took place with 190 persons who gave positive feedback concerning the content and the usefulness of this training. The involvement of the Agency’s “Contact Person for the Prevention of Corruption” and the Head of the Department for Central Services in the workshops demonstrated to participants that corruption prevention is one of the priorities for the agency. In 2005 the target group of the workshops was enlarged to include not only induction training but also on-going training for the entire personnel. Since then, 6-7 workshops are being held per year at regular intervals, training approximately 70 new and existing employees per year.
Source: (OECD, 2016[13])
Capacity building initiatives can be promoted by other institutions in the procurement system. For example, in Australia, the Competition Authority plays an important role regarding capacity-building and advocacy for procurement officials (see Box 4.11). (OECD, 2011[26])
Australia’s national competition authority, the Australian Competition and Consumer Commission (ACCC), has developed an extensive education and advocacy programme for officials, at all levels of government, who are involved in public procurement.
Efforts to promote awareness of competition issues among procurement officials have included:
Development of education material for procurement officials, which was provided to public sector procurement agencies, as well as private companies involved in procurement. The educational material was interactive and allowed procurement officials to access a variety of different levels of information, including information on how to identify cartel activity; the process for reporting suspected cartel or bid-rigging behaviour; the statutory provisions; and what a person should do if a cartel operation is suspected. The material also included a checklist for procurement officials to determine whether or not there is any suspected cartel activity;
Presentations by ACCC staff, at all levels, to procurement officials from Commonwealth, state, and local governments; and
Advocacy efforts directed toward high level government officials, aimed at seeking support for the ACCC’s education and compliance programme at the top levels within central and regional governments, and also in order to request all governments to examine their procurement frameworks and introduce measures requiring officials to take into account competition laws when designing their procurement policies and guidelines.
Source: (OECD, 2011[26])
Ensuring the practicality of methodological assistance
Methodological assistance constitutes a key pillar to strengthen the capacity-building systems of the public procurement workforce. It is a useful tool to support public procurement officials to undertake their daily tasks effectively, and complements training courses. Many countries have developed tools such as manuals and guidelines, standardised templates, and help desks. Recently, more direct support and advice is also provided to help contracting authorities to carry out actual complex procurement procedures. (OECD, 2023[25])
Interviews with stakeholders in Hungary revealed that lots of guidelines exist on a wide range of topics. These guidelines were prepared both by the PMO (now MPASD) and the PPA, however these guidelines are sometimes considered too lengthy, focusing mainly on regulatory issues and not very practical. (OECD, 2023[12]) For guidelines to be helpful to procurement officers, they should provide practical “how-to” information on specific procedures and topics with concrete example, such as how to set contract award criteria, how to evaluate offers, etc. As such, taking stock on the number and types of guidelines, as well as collecting feedback from procurement officers on the usefulness of these guidelines could help Hungary develop better support for contracting authorities by directly addressing their capacity-building needs. (OECD, 2023[25])
In addition to guidelines, Hungary could benefit from creating practical standardised templates for contracting authorities to use in their procurement processes. Standardised templates are ready-to-use forms that contracting authorities can use to facilitate their work, and usually include, but are not limited to, tender notices, tender documents, contract documents and tender evaluation formats. They help contracting authorities save time and avoid errors. They also contribute to assuring the quality of procurement procedures and decrease the administrative burdens of economic operators who prepare bid proposals. For example, Ireland developed not only standardised templates but also user-friendly guidelines on how to use them (see Box 4.12). (OECD, 2023[25])
Ireland developed standardised templates of tender and contract documents for goods, services and public works. These are also accompanied with user guides. There are ten forms of standardised contract documents for public works, each of which is appropriate for different circumstances, such as Public Works Contract for Building Works designed by the Employer and Public Works Contract for Civil Engineering Works designed by the Contractor.
These documents provide further opportunities to help professionalise, streamline and standardise the procurement function of contracting authorities in Ireland. They are also useful for economic operators by allowing them to understand better the public procurement system of Ireland.
Ireland also developed Public Procurement Guidelines for Goods and Services and Public Procurement Guidelines for Construction to help procurement officers implement their daily tasks in accordance with the National Public Procurement Policy Framework. These guidelines provide a friendly explanation about the regulatory framework of public procurement by using visual charts.
Source: (OECD, 2023[25])
Other tools to provide methodological assistance to contracting authorities include help desks, which are contact point centres to assist contracting authorities and/or economic operators in clarifying their inquiries related to their daily tasks of public procurement. It is an efficient tool to provide quick and tailor-made information. The PPA in Hungary already provides support on interpretation of procurement-related legislation through a help-desk. The help-desk is available to all interested parties. However, Hungary could take stock of more recent initiatives of more direct support and advice on implementing the actual complex procurement procedure, in addition to manuals, templates, and help desks. For example, the Region of Puglia in Italy provides direct support to pre-commercial procurement procedure throughout the entire process, under an EU-financed pilot project with the support of the OECD. Czechia, to support the implementation of recently adopted Strategy for Public Procurement Development, aims at putting in place a competence centre to provide methodological support to contracting authorities for their procurement processes (see Box 4.13).
Collaboration and institutional learning on innovation procurement in the Region of Puglia in Italy
Over 2015-2019, the Region of Puglia conducted two Pre-Commercial Procurement (PCP) procedures in the field of water management in its capacity as contracting authority. The two PCP cover the “Reduction of sludge in urban wastewater” and the “Detection of water leaks in water distribution networks”. The end user of PCPs is Acquedotto Pugliese S.p.A., i.e. the regional network operator.
While some experience with PCP was already available in the Region, it is not a routine operation. Acquedotto Pugliese, the end-user, was also new to this kind of procedure. As such, the Region requested the technical assistance to the in-house company InnovaPuglia, which has a double mandate as the innovation agency and the regional CPB.
InnovaPuglia provided its support to the PCP procedures throughout the entire process, from the preparation and market consultation stages to the phases of feasibility study, technical design, and prototype development. In particular during the early phases of the PCP, i.e. the market consultation phase, it provided critical input on the analysis of technological readiness of different technology options. It continued advising the Region and Acquedotto Pugliese until the conclusion of the procedure, including through supporting the analysis of the results achieved.
The experience of collaboration among the three institutions active in the PCP, i.e. the Region of Puglia, InnovaPuglia and Acquedotto Pugliese, allowed for institutional learning from the more experienced peers, with the long-term goal to have innovation procurement firmly established in the toolbox of several public entities.
Creation of a competence centre to provide direct methodological assistance to contracting authorities in Czechia
The Government of Czechia recently adopted the National Strategy for Public Procurement for the period 2024–2028. The strategy tackles many strategic objectives such as innovation procurement, professionalisation, and digitalisation. Among the different measures of the strategy, one concerns the establishment of a competence centre for knowledge management and transfer within the Ministry of Regional Development (MRD). The centre is the main responsible authority for the implementation of the strategy. The competence centre will also be tasked with the preparation of user-friendly guidelines, methodologies, and templates, and to provide training and methodological support.
The direct support to contracting authorities will be provided by a group of experts within the centre, who will support contracting authorities with the preparation of their individual (real-life) tenders. The rationale behind this direct support is the perception that contracting authorities, and especially local ones, need closer support as they often struggle with different interpretations of the legislation and lack of capacity to take into account new sustainability requirements.
The centre will also host a platform to allow the share of experiences and networking among contracting authorities. The platform will ensure regular meetings of contracting authorities' representatives, with at least two face-to-face meetings per year and regular online sessions.
Source: (OECD, 2023[25])
Recognising the procurement profession as a standalone function
Professionalising the public procurement workforce has increasingly been key to enhance public procurement systems. Hungary recognised public procurement as a profession as early as in 2004. The currently applicable certification system for public procurement professionals was set up by the 2015 Public Procurement Law that introduced the category of “certified public procurement consultant” (in Hungarian: Felelős Akkreditált Közbeszerzési Szaktanácsadó, FAKSZ) as of 1 November 2015 (replacing the previous profession of “official public procurement consultants” introduced in 2004). As of April 2019, contracting authorities are obliged to involve a certified public procurement consultant in the following public procurement procedures:
in the case of procuring goods and services, in the public procurement procedure with a value reaching the EU threshold;
in the case of works, in the public procurement procedure with a value of up to seven hundred million forints;
in the public procurement procedure financed in whole or in part from European Union funds, except in the implementation of procurement based on the framework agreement, which does not reach the value specified in the previous two points;
for the implementation of the purchase based on a framework agreement, with the value specified in the first and second points.
The most recent amendment to the PPL which entered into effect on 8 November 2023, brought further changes to the denomination of these consultants, which are now called “state public procurement consultants” (in Hungarian: Állami Közbeszerzési Szaktanácsadó, ÁKSZ). Following this change, the PPA, the designated entity responsible for managing the consultant list, notified consultants listed under FAKSZ that they have been transferred to the ÁKSZ list. They were given 30 days to declare their intention to continue their status as ÁKSZ. At the same time, the FAKSZ were required to present proof of employment with a contracting authority that qualifies as state authorities, and central government authorities. This requirement posed a challenge for consultants employed by local contracting authorities, as local authorities were not included in the notion of ÁKSZ, and did not need to have an ÁKSZ expert in their procedures. However, from 1 October 2024, local authorities will also be included in this provision. The FAKSZ consultants that are not able to provide such a proof of employment are treated as new requests to be included in the list of ÁKSZ. Another important amendment is that the abovementioned cases where the use of ÁKSZ is mandatory are only applicable to contracting authorities that qualify as state authorities and/or central government authorities. Therefore, it is not clear whether and if yes, when, this provision will include the local authorities.
Authorities should adopt a more coherent strategic approach to professionalise public procurement, beginning with clear goal-setting followed by the development of appropriate regulatory frameworks. This strategy should streamline access to the ÁKSZ register of state public procurement consultants and have a comprehensive vision for the development of public procurement expertise in the national public procurement market. To prepare a professionalisation strategy, an assessment of the level of professionalisation of the public procurement workforce should first be undertaken to identify key issues and challenges. It is also critical to identify key stakeholders and consider their engagement during the process of developing and implementing a strategy, as they might have different views and conflicting interests. Once the assessment is carried out and the stakeholder engagement mechanism is established, a leading entity or a multi-stakeholder taskforce can start drafting a professionalisation strategy. Finally, it is essential to implement monitoring and evaluation (M&E) during the implementation of the strategy and at the end of the implementation. (OECD, 2023[25]) In Slovenia for example, professionalisation was identified as a key issue in the procurement system and an action plan was developed to enhance the professionalisation of the procurement workforce (see Box 4.14),
In 2018, the Directorate for Public Procurement within the Ministry of Public Administration of the Republic of Slovenia prepared an Action Plan to improve the system and professionalisation in public procurement. Slovenia recognised the low level of professionalisation of public procurement as a big challenge.
This Action Plan specifies the following five priority areas:
Raising the competency level and encouraging civil servants to improve the quality of public procurement;
Assisting contracting authorities and economic operators to ensure greater legal certainty, quality and cost-effectiveness of public procurement;
Promoting strategic public procurement;
Promoting joint public procurement;
Developing smart tools to support procurement processes such as e-procurement
As part of the first priority area to define the knowledge, skills and competences that public procurement officials should have, the Directorate for Public Procurement developed a competency model for the public procurement workforce in Slovenia by adjusting the competency matrix of ProcurCompEU to the context of Slovenia. This framework includes the three-level competency matrix for the six job profiles: (i) procurement support officer, (ii) stand-alone public buyer for smaller value contracts, (iii) stand-alone public buyer for higher value contracts, (iv) category specialist, (v) contract manager, and (vi) department manager. In July 2022, the Directorate for Public Procurement published a manual for the assessment of competences in the field of public procurement, which provides the detailed information on the developed competency model. Currently, Slovenia has been working to establish a Public Procurement Academy to provide training modules for the four job profiles (standalone public buyer for smaller value contracts, standalone public buyer for higher value contracts, category specialist, and contract manager). As of July 2022, a Public Procurement Academy will start to provide training from January 2023. This current initiative of establishing a Public Procurement Academy will set up the basis to establish a certification framework in the future.
The Action Plan also targets the establishment of awards for excellence to recognise innovation and good practices in the field of public procurement such as green and socially responsible public procurement and the fight against corruption. It also aims at supporting the development of initial training at the graduate and postgraduate level and other initial vocational training. It intends to provide guidelines, standardised forms and tools (e.g. tender documents, criteria for green public procurement), frequently asked questions and answers, collection of good practices, help desk, the online platforms and professional networks.
Source: (OECD, 2023[25])
As such, adopting a strategy for professionalisation will ensure uniformity and effectiveness in public procurement across all levels of government. Furthermore, engaging stakeholders, including public procurement professionals and local government representatives, is crucial to gather feedback and ensure that the certification system meets the needs of all involved. Moreover, continuous evaluation and adaptation of the system are necessary to address emerging challenges and maintain relevance in a dynamic public procurement landscape. Overall, implementing these recommendations could enhance access to certified public procurement consultants, ensure clarity in requirements, and foster professionalisation and efficiency in public procurement processes.
4.2.1. Encouraging capacity-building of economic operators
An increased capacity of contracting authorities should be accompanied by an increased capacity of economic operators. Indeed, the way the private sector acts on different markets and their will to submit a bid will vary depending on their knowledge of the procurement regulatory and institutional frameworks. As such, organising training for the private sector is generally seen as a good practice. The Government’s action plan to increase competition in public procurement from 2023-2026 already contains a measure for training of SMEs. The training system is foreseen to be free of charge and will include self-paced e-learning and online training, with occasional face-to-face training. However, it is recommended that such training be accessible for all economic operators, in addition to SMEs, and that the training exercise is held regularly in order to help new entrants to the market.
In addition, the trainings should take into account the regional factor. Indeed, studies show that single bidding varies considerably by region in Hungary and the share of single bidder contracts is around 20% in Central-Hungary (including Budapest), while the highest single bidding share is still around 25% outside of it. The procurement capacity is usually higher in capital regions since capital regions’ higher procurement spending tends to be accompanied by more mature supplier markets. (European Commission and Fazekas, 2022[27])
This regional factor was considered in Italy, where about 200 Supplier Training Desks (STDs) were set up throughout the country in order to assist SMEs with the use of electronic tools in procurement (see Box 4.15).
Italy has strengthened its co-operation with suppliers by setting up Supplier Training Desks (STDs) (“Sportelli in Rete” in Italian) within the offices of suppliers’ associations. STDs provide training and assistance to local enterprises and in particular micro, small and medium enterprises (MSMEs) on the use of electronic procurement tools. The project consists of a network of dedicated training desks over the country where the central purchasing agency, Consip experts train workforce from the associations that will subsequently train local MSMEs on the use of electronic procurement tools. In Italy, MSMEs (Micro Enterprises) tend to participate to lower value public procurement tenders. Their participation to tenders from EUR 100 000 to 300 000 corresponds to 65%, whereas to tenders from EUR 1 to 5 million their participation decreases up to 51% and to 30% for tenders with a value higher than EUR 5 million.
The project addresses point 5 of the European Small Business Act (SBA): “Adapt public policy tools to SME needs: facilitate SMEs’ participation in public procurement and better use State Aid possibilities for SMEs”, it has also been quoted as a good practice, at a European level, in the “European Code of Best practices facilitating access by SME’s to public procurement contracts” and has been winner of the European eGovernment Awards in the category “empowering business”. This project has been well received and attended by MSMEs. Since the beginning of the project, more than 2 250 MSMEs were supported by the Supplier Training Desks and obtained the qualification to the public e-marketplace implemented by Consip for low value purchases through e-catalogues (MePA).
Around 1 000 of these enterprises were qualified in 2013, which corresponds to 44% of the total. 11 National Enterprises Associations are involved in the project. Their role is fundamental since they are recognised, by the enterprises, as the local reference institution. As a result, in 2013, more than 21 000 SMEs represented 98% of online enterprises (online at least once between 1st of January and 31st of December) and 14 000 SMEs represented 98% of active enterprises (active means having been awarded at least once between 1st of January and 31st of December).
Furthermore, in 2013, 97% of the number of transactions (337 682) was handled by SMEs and 93% of the value (EUR 907 million) was gained by SMEs.
Today, more than 200 training desks are active and scattered around the country, providing continuous free training and assistance. The MePA has allowed thousands of SMEs to make business during the last five years making it a very suitable procurement tool for SMEs who are the highest percentage of enterprises using it. Consip’s active role in setting up an efficient e-procurement platform and commitment in establishing a very collaborative partnership with the Enterprises Associations has changed the perception of Consip: it is no longer seen as a threat, but as a business opportunity in a transparent and competitive environment.
Source: (OECD, 2014[28])
In addition to an adequate training system for economic operators, methodological assistance constitutes a key pillar to strengthen their capacity. Methodological assistance includes manuals/guidelines and helpdesks. Guidelines and manuals provide practical information on specific procedures and topics. In Hungary, the PPL gives an exhaustive list of topics where the PPA has an obligation to prepare guidelines. The PPA issued several guidelines on various issues, such as certificates, declarations, registers, and data to be submitted in connection with grounds for exclusion, specific questions on framework agreements, some specific questions related to sub-contractors, etc.
In addition to the PPA, the PMO (now MPASD) has also published a number of guidance documents on different aspects of public procurement, such as the proper use of environmental and social awarding criteria in public procurement procedures relating to projects funded by EU. The above-mentioned operational tools are published on the PPA’s website in Hungarian. Overall, a wide range of information and guidance is available to potential suppliers free of charge, however, they focus mainly on current issues in public procurement law and lack practical case examples demonstrating how strategic procurements were practically implemented in Hungary and what benefits they achieved.
In addition to manual/guidelines, a help desk is a contact point centre to assist contracting authorities and/or economic operators in clarifying their inquiries related to their daily tasks of public procurement. It functions as an efficient tool to provide quick and tailor-made information. In Hungary, the service provider for EKR operates a helpdesk function and publishes e-learning materials and users’ guides on different aspects of the system. However, a general helpdesk could be established at the PPA or MPASD in order to answers queries from economic operators and contracting authorities on procurement matters. A good practice could also include to collect statistics on the number and category of questions received from the different stakeholders. These statistics could for instance inform the decision on developing relevant guidelines. (OECD, 2023[3])
4.2.2. Encouraging pro-competitive joint bidding and sub-contracting
Fostering collaboration among economic operators themselves can help increase their capacities to respond to procurement opportunities. Indeed, as certain bidders do not have the financial or technical capacity to bid for procurement processes, giving the opportunity to bidders to find consortium members, or to offer to be a sub-contractor can mitigate this lack of capacity. Such an approach was undertaken for example in Sweden (see Box 4.16).
The Swedish Competition Authority (SCA) is responsible for the enforcement and surveillance of both competition and public procurement rules. In addition to this task, the SCA is also in charge of providing guidance and support to the public in procurement matters.
The combination of enforcement, policy, and support tasks within the fields of competition and public procurement produces valuable synergy effects and gives the SCA a unique position and advantage in the work for intensifying competition in public procurement.
The SCA has developed a web-based interactive guide for cooperation in procurements. The purpose is to offer guidance to companies on when and in what form they can cooperate and submit joint bids in procurements. Through its surveillance activities, the SCA has noticed that companies find it difficult to draw the line between competitive and anticompetitive/illegal cooperation. In this context, the SCA saw an opportunity to couple the enforcement work with more preventive outreaching measures and assist companies in this matter at an earlier stage.
The guide, which can be used by both procurers and companies, is built up around frequently asked questions. The questions range from more specific questions “Can we cooperate in this particular tender” to more general questions “What forms of cooperation are permitted” or “When am I allowed to use a competitor as subcontractor”. The user is also informed of what the consequences of illegal cooperation might be. Throughout the guide “pop-ups” appear where the user can get more detailed information about specific questions or examples based on real cases. Eventually, the user gets an indicative answer on whether the situation in question is likely to be permitted or not. The guide underlines, however, that in case of any uncertainty the user should seek legal advice.
Source: (OECD, 2014[28])
However, joint bidding may also pose a threat to competition if used with malicious intent. Among the practices at odds with a competitive market listed by the OECD Recommendation on Fighting Bid Rigging in Public Procurement, are cases when “two or more businesses submit a joint bid even though at least one of them could have bid on its own” and states that “joint bids can be a way to split profits among bid riggers”. As such, to detect a pro-competitive joint bidding arrangement among bidders, contracting authorities can use several criteria (see Table 4.3).
In addition, the Danish Competition and Consumer Authority (DCCA) guidelines also developed criteria to detect competitive or anti-competitive joint bidding. Competitive joint bidding is when companies are not direct competitors for the contract and can carry out together the tendered contract for the contracting authority significantly better and/or cheaper than they could individually, provided that the companies do not exchange more information than necessary to fulfil it. On the contrary, anti-competitive joint bidding is when companies can each bid for the contract individually and are therefore direct competitors, when collaboration is not beneficial for the contracting authority, and when there are more parties in the consortium than necessary to carry out the contract. The DCCA can provide informal guidance to companies upon request regarding joint bidding. (OECD, 2021[29]) Similarly, the Hungarian Competition Authority could also devise such criteria for competitive or anticompetitive joint bidding and provide guidance to both contracting authorities and companies in this regard.
In addition to joint bidding, another option to foster competition would be fostering pro-competitive subcontracting. Indeed, for large or complex contracts, some companies, and especially SMEs may not be in a position to even tender jointly with other economic operators because of its small size, specialisation or limited resources. Subcontracting may therefore provide good opportunities for SMEs to perform some of the services or works included in a project. In this way, subcontracting can facilitate the access of SMEs to the public procurement market. (OECD, 2018[30])
However, like in the case of joint-bidding, sub-contracting may also negatively impact competition in public procurement if used incorrectly, and economic operators should compete against each other if they have the capacity to fulfil the contract as a sole contractor. As such, the OECD Recommendation lists subcontracting as one of the practices that might indicate bid rigging, particularly in cases where a “winning bidder repeatedly subcontracts work to unsuccessful bidders” or “does not accept the contract and is later found to be a subcontractor”. (OECD, 2021[29])
4.2.3. Developing measures to increase the access of SMEs to procurement opportunities
Small and medium enterprises represent a significant share of the total number of enterprises in Hungary. In 2020, the negative economic impact of the COVID-19 pandemic also affected the Hungarian SME sector, although there was no considerable downturn in the proportion of public procurements awarded to SMEs compared to the pre-COVID-19 years. Out of 100 successful public procurement procedures, 84 was awarded to SMEs (85/100 in 2021) and out of HUF 100 spent in public procurements 56 was won by SMEs (60/100 HUF in 2021). The total value of public procurements awarded to SMEs exceeded HUF 2500 billion in 2021, which is a record high amount. In its 2020 Country Report, the European Commission also acknowledged that Hungary’s efforts to facilitate SME access to the procurement market are yielding results. As per the Indicator 7 in the European Single Market Scoreboard, in 2021 and based on notices published on TED, Hungary has performed above the EU average (45%) in the proportion of awarded contracts to SMEs (with 78%). (European Commission, 2022[31])
Nonetheless, increasing SMEs’ access to procurement opportunities is a cornerstone of the Government’s strategy to curb single-bidding. As mentioned above, the Government’s action plan to increase competition in public procurement from 2023-2026 includes a measure for training of SMEs, but also a support scheme for SMEs. This latter measure consists of an aid scheme providing direct flat-rate compensation for the costs incurred by micro, small and medium-sized enterprises (in particular micro and small enterprises) in order to support their participation in public procurement procedures. The financial support provided under the scheme is expected to cover the costs of hiring an accredited public procurement consultant responsible for public procurement, and some of the costs incurred by the SME in participating in the public procurement procedure. The criteria for selection of SMEs include micro, small and medium-sized enterprises which have submitted a valid bid in a public procurement procedure, and which have not participated in any other public procurement procedure in the 12 months preceding the submission of the bid in the public procurement procedure. (Government of Hungary, 2023[32]) The grant scheme was launched by the deadline provided by the action plan, in March 2023. It is recommended that the next action plan takes stock of the effectiveness of this measure in terms of increasing competition of SMEs in public procurement in order to evaluate whether the same measure can be repeated in future action plans.
Adopting measures to support SMEs is quite important in a procurement ecosystem. For an SME, participation in public procurement represents a consumption of resources that is proportionally higher than for larger businesses. In addition, the report Corruption Prevention to Foster Small and Medium Sized Enterprises Development from UNIDO & UNODC, 2007, states that SMEs are more susceptible to bureaucratic corruption than larger companies. This is due to: their structure (e.g. there is often a greater degree of informality and fewer accountability mechanisms); short-term vision and perspective (as opposed to larger companies, small and medium size enterprises may be less concerned about reputation and other long-term negative impacts of corruption); limited financial or technical resources; and their inability to wield influence over officials and institutions, as they lack bargaining power to oppose requests for illegal payments from public officials. (OECD, 2014[28])
Countries across the world have made use of a variety of measures to encourage SMEs’ participation in public procurement. Measures in favour of SMEs include specific legislative provision or policy (e.g. set-aside) to encourage participation from SMEs in procurement; specific unit dedicated to SMEs is placed at the central government level; training and workshops for SMEs; documentation or guidance focused on SMEs available online; SMEs benefitting from preferential financial treatment, e.g. waiving fees, etc. (OECD, 2013[33])
In Denmark, for example, the Competition and Consumer Authority has published a step-by-step guide including information on rules, procedures and key issues related to how to establish SMEs consortia. In New Zealand, although there is not a specific policy of preference for SMEs, support is given by way of measures to reduce compliance costs for suppliers (e.g. through procedural simplification, development of online guides and templates, and training and workshops for both suppliers and procurement practitioners). In the United Kingdom, there is a programme of work with departments to drive up spending with SMEs where they can provide best value to the taxpayer. In Korea, PPS, Korea’s Central Government Procurement Agency, provides special financial support to SMEs involved in public contracting, and SMEs are entitled to an upfront payment of up to 70% of the value of a government contract. In Canada, the Office of Small and Medium Enterprises works with the Government to address SME’s constraints in Procurement (see Box 4.17). (OECD, 2013[33])
The Office of Small and Medium Enterprises (OSME) in Public Works and Government Services Canada assists the Government in bridging the gap between supply and demand by bringing to light the concerns and challenges of SMEs in the federal procurement process. OSME works with SMEs to address their key challenges and constraints by undertaking the following:
understanding and reducing the barriers that prevent SMEs from participating in federal procurement
advising government buyers and policy makers on SME concerns
recommending improvements to procurement tools and processes to encourage SME participation in federal procurement. PSPC provides additional information available to SMEs on their webpage under “Help for SMEs”
a portal that provides access to federal procurement information and open data including bid opportunities (tenders), standing offers and supply arrangements, and contract history
free seminars, webinars and one-on-one sessions to assist suppliers in understanding federal procurement
telephone information line for suppliers who have questions about the procurement process and related tools. The Office of Small and Medium Enterprises also manages the Build in Canada Innovation Programme, which assists Canadian businesses in testing their innovative goods and services before they are commercialised.
Source: (OECD, 2018[30])
Removing administrative burdens is also a good way to encourage SME participation. For example, in Spain, the creation of a self-declaration regarding legal, social, and fiscal status of the firm for smaller contracts has removed administrative barriers and has been beneficial for both contracting authorities and economic operators, and especially SMEs (see Box 4.18).
Spain was a pioneer in reducing administrative burdens in public procurement procedure by introducing a self-declaration in 2013 (i.e. before the EU Directives of 2014 made it compulsory), through the Act 14/2013, of support and internationalisation of entrepreneurs which modified the Royal Legislative Decree 3/2011, of Contracts of the Public Sectors. This legal reform introduced measures intended to support and facilitate participation of SMEs in public procurement.
In addition to several changes in the legal regime of classification in order to increase the thresholds requiring pre-classification, Act 14/2013 added a new paragraph to article 146 of Royal Legislative Decree 3/2011, of Contracts of the Public Sectors in which allows contracting entities to receive from potential suppliers a self-declaration instead of several documents certifying legal, social and fiscal situation of the SME willing to participate in public procurement procedures. This self-declaration will always be enough in contracts of works under EUR 1 000 000 and in provision and services contracts under EUR 90 000.
The tenderer to which it has been decided to award the contract should, however, be required to provide the relevant evidence and contracting authorities should not conclude contracts with tenderers unable to do so. Contracting authorities should also be entitled to request all or part of the supporting documents at any moment where they consider this to be necessary in view of the proper conduct of the procedure.
Subsequently, Spain deepened the simplification of administrative burdens in public procurement by passing Act 9/2017 and Royal Decree 3/2020, which comply with the 2014 Directives on Public Procurement from the European Union, by making compulsory the use of the European Single Procurement Document (ESPD) in public procurement procedures (except from the simplified procurement procedure) for all public contracts (irrespective of their estimated value). In this regard, the Spanish legal framework has taken into account the fact that: “many economic operators, and not least SMEs, find that a major obstacle to their participation in public procurement consists in administrative burdens deriving from the need to produce a substantial number of certificates or other documents related to exclusion and selection criteria. Limiting such requirements, for example through use of a European Single Procurement Document (ESPD) consisting of an updated self-declaration, could result in considerable simplification for the benefit of both contracting authorities and economic operators.”
4.2.4. Leveraging collaborative approaches to increase competition and dividing procedures into lots
In addition to measures directly targeted at building the capacity of economic operators, and by extension SMEs, collaborative approaches may also help improve the level of competition. Collaborative approaches may take many shapes and forms, including collaboration within the public sector, collaboration between the public and private sectors, and collaboration within the private sector. Collaborative approaches include well-known procurement processes such as centralised purchasing and joint procurement, but also cooperation in pre-bidding or post-bidding stages, capacity-building, knowledge sharing, etc. (see Figure 4.9).
Source: (SPICE Project, 2017[35])
If well used, collaborative approaches in public procurement can boost the attractiveness of the public procurement market to bidders. For instance, centralisation has widely acknowledged benefits such as better prices through economies of scale, lower transaction costs and improved capacity and expertise. However, larger-scale procurement projects may adversely affect bidders – and especially SMEs – participation on the surface. As such, contracting authorities should ensure that SMEs have their fair chance of participating amidst the aggregation of procurement volumes. For instance, encouraging partitioning of CPBs’ contracts into lots is one of the most widely used approaches to facilitate SME participation in CPBs’ procurement opportunities. (OECD, 2018[30])
The role that public procurement can play in supporting SMEs is sometimes the main motivation behind establishing the centralised purchasing body. In Ireland, for instance, as part of the Public Service Reform Plan, the Government established the Office of Government Procurement (OGP) to drive a consolidated and integrated approach to public procurement. The OGP is committed to ensuring that SMEs are fully engaged with public sector procurement and the opportunities it presents. In conjunction with the Department of Jobs, Enterprise and Innovation, the OGP has set up a high-level group on SME access to public procurement. Apart from promoting access, the group is linked to the Government’s Action Plan for Jobs, and specifically those actions aimed at maximising procurement opportunities for SMEs in the public sector. (OECD, 2018[30])
An additional example of the specific consideration given to SMEs within centralised purchasing activities can be found in SKI, the central purchasing body of Denmark. SKI has set up a specific policy for SME inclusion. When designing tenders, it analyses the supply structure relevant to the contract and identifies the role SMEs could play in the tender. Subsequently, the tender is conceived in a way that facilitates the participation of SMEs. In addition, SKI regularly organises seminars for SMEs on how to participate in public procurement. Along the same lines, the procurement portal is an online feature that helps SMEs find consortium partners for joint bids. (OECD, 2018[30])
Besides collaborative approaches, dividing contracts into lots can also help foster access to procurement opportunities, and especially to SMEs. Indeed, as shown by data analysis in Hungary, dividing the tender into lots seems to lower the incidence of single bidding (see Figure 4.10). One-lot tenders represent slightly more than one-third of the dataset, and such tenders are predicted to receive only a single bid for at least 19.6%. This share drops to 18.3% in cases when the tender is split into multiple lots. These results are both significant and substantial.
Source: Procurement data from EKR and KA
The OECD Recommendation on Fighting Bid Rigging in Public Procurement highlights that contracting authorities should, whenever possible, allow bids on certain lots or objects within the contract, or on combinations thereof, rather than bids on the whole contract only. However, when dividing the contract into lots, the principle of proportionality should be applied, taking into account the market analysis undertaken by the contracting authority (see Box 4.19).
Dividing public procurement contracts into lots can be used for pursuing several aims, such as promoting competition in the tender, promoting competition in the market, or for other strategic goals such as increasing SMEs’ participation in public procurement. However, this approach is not “one size fits all”, and the contracting authorities should take into account the following elements:
The trade-off between potential competition gains and efficiency losses: Efficiency losses can emerge if there are complementarities (e.g. economies of scale and scope) between different parts (lots) of the contract. If these complementarities are strong, firms will face uncertainty driven by the fact that they do not know which other lots they will win when placing their bid on a given lot.
The relevance of the number of firms in the market for choosing the number of lots: The ratio between the number of potential bidders and the number of lots has been shown to be another crucial consideration when deciding on the configuration of contract division, and having more lots than expected tender participants may deliver more competition for the lots and reduce the risk of collusive agreements.
The role of new entrants for the tender outcome: Promoting tender participation by new entrants (i.e. firms that have not participated in a procurement before) is one of the keys in procurement planning. New entrants to the tender can introduce competition for the lots and weaken the conditions for collusion.
The relative size of lots and the risk of collusion: Heterogeneity on the size of lots may play a role in reducing the scope for market sharing arrangements.
Source: (OECD, 2015[36]).
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