Hungary amends public procurement rules to enhance control over the use of EU funds


Hungary has adopted several important legislative amendments as remedial measures under Regulation 2020/2092 to ensure prudent and transparent use of EU funds, which also affect important provisions of the Hungarian Public Procurement Act. Most of the changes came into effect on 12 October, but certain provisions will apply from 30 November 2022.

As part of the changes, a new organisation known as the Integrity Authority, which will begin operations in mid-November 2022, has been established to investigate fraud and corruption in the use of EU funds. The Authority has the power to initiate proceedings following a complaint, but can also act ex officio. If the Authority detects fraud, it must inform the European Anti-Fraud Office and the European Public Prosecutor's Office, among other organisations.

If there is a suspicion of material irregularity in connection with the use of EU funds in an EU-funded tender, the Integrity Authority will have the power to suspend the public procurement procedure for two months. In such cases, all relevant tender deadlines will be extended during the suspension. During investigations, the Integrity Authority will have full access to all data – with the exception of classified information – regarding the relevant public procurement procedure and contracts financed by EU funds.

The Integrity Authority will also have rights regarding exclusions from tenders. The authority will maintain the registry of bidders excluded from tenders due to having committed criminal offences, and will have the right to determine the exclusion period (four years maximum) and to accept self-cleaning attempts of bidders excluded after committing certain criminal offences.

The amendment to the Public Procurement Act also enhances transparency over the subcontractors of the winning bidders. After 30 November, contracting authorities must make available in the publicly accessible Electronic Public Procurement System the details of the subcontractors involved in the performance of each public procurement contract, the percentage of subcontractor performance and the value of the consideration specified in the subcontractor contract. Winning tenderers must provide this information to contracting authorities at the conclusion of the tender contract, and each time an agreement is made with a new subcontractor.

The Public Procurement Act also aims to update the conflict-of-interest rules so that these are fully in compliance with the relevant EU directive. The new rules place additional obligations on contracting authorities to prevent and remedy conflicts of interest. Consequently, contracting authorities will have a greater role in this process that includes requesting non-conflict declarations from actors participating in the preparation of a tender and taking all necessary measures to eliminate conflicts of interest and restore the legality of procedures.

The modified rules do not affect current exemptions. As a general rule, providing information upon the request of the contracting authority or participating in preliminary market consultation will not result in a conflict-of-interest situation.

The updated rules also confirm that public trust funds performing a public function and legal persons established or maintained by them fall under the Hungarian public procurement regime.

For more information on the updated public procurement rules, contact your CMS client partner and local CMS experts.