The Hungarian Parliament adopted a long awaited amendment of the new Public Procurement Act (“PPA”) on 15 December 2015. The amendment is expected to be published within a few days. The two main reasons behind the amendment were the relaxation of public procurement obligations for subsidised procurements and more flexible contract modification rules for contracts awarded under the old PPA.
1. SUBSIDISED PROCUREMENTS
The PPA entered into force on 1 November 2015 and originally prescribed that public procurement proceedings are required in situations where entities’ procurement is subsidised by contracting authorities with least HUF 25 million (approx. EUR 80,000). This public procurement threshold appeared to be unreasonably low in light of the new EU Procurement Directives and entailed significant uncertainty and unease as private companies, who are otherwise outside the scope of the PPA, were obliged to conduct lengthy and burdensome public procurement proceedings to spend their subsidies – a task for which they are obviously not prepared. The amendment relaxes this rule by making the following subsidies exempt from the “HUF 25 million rule”:
- investment subsidies granted in individual government decisions;
- individual subsidies for job creation;
- subsidies for training, workshop creation and development;
- subsidies for R + D projects and innovation;
- subsidies for reindustrialisation investments of large enterprises; and
- any subsidy from the EU or Hungarian budgetary resources requested before 1 November 2015.
2. MODIFICATION AND EXAMINATION OF CONTRACTS
The Amendment prescribes that the rules of the PPA regarding contract modification apply retroactively to contracts awarded under the old public procurement rules, i.e. tenders launched and contracts awarded before 1November 2015. This means that parties may be able to amend their public contracts more freely as the new PPA enables more flexible contract modification. However it is still not possible to amend contracts in a way that exempts the bidder from its obligations arising from a breach of the contract or for the contracting authority to take over unjustifiable risks and additional costs from the bidder. Based on the PPA, the contracting authority and the Public Procurement Authority shall monitor the modification and performance of the “old” contracts more closely and if an examination reveals serious breach of public procurement rules, proceedings before the Public Procurement Dispute Board or court may result.