The following classic public agencies are covered:

• ministries (all ministries and also the Office of the PM "Miniszterelnökség");
• central purchasing bodies delegated by the Government (currently one entity: Public Procurement Directorate (Közbeszerzési és Ellátási Főigazgatóság, KEF);
• the State and all budgetary authorities (National Media Authority, Competition Authority, Procurement Authority), public foundations, municipal governments, local and nation-wide nationality self-governments, associations of municipal governments and nation-wide nationality self-governments, regional development associations of local authorities, territorial development councils;

Private entities may fall under the public procurement if (i) they qualify as public interest entities (ii) they are controlled / financed by public agencies; or (iii) their procurement is subsidized by a public agency or the State.

Public interest entities

"Public interest entities" are generally - but not exclusively - established as private companies (generally as companies limited by shared). In general, these companies are exclusively state-owned, but meeting three conjunctive requirements will result in their qualification as "public interest entities": (i) their purpose of public interest; (ii) legal capacity and (iii) directly or indirectly controlled or financed by the above-mentioned entities. Examples include such large companies as MÁV Zrt (Hungarian Railways), BKV Zrt (Budapest Metropolitan Area Transport), Magyar Közút Zrt (Hungarian Public Roads), ÁKK Zrt. (Government Debt Management).

Controlled entities

Those legal persons may be subject to public procurement rules over which a contracting authority is deemed to exercise decisive control as follows:

• a control similar to that which it exercises over its own departments, where it exercises a decisive influence over both strategic objectives and significant decisions of the controlled legal person, provided there is no direct private capital participation in that controlled legal person and more than 80 per cent of its net annual income stems from contracts concluded or to be concluded with the controlling contracting authority or with a legal person controlled in the same way by the contracting authority; or
• jointly with other contracting authorities a control similar to that which it exercises over its own departments, where the contracting authorities are able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person, provided there is no direct private capital participation in that controlled legal person and more than 80 per cent of its net annual income stems from the contracts concluded or to be concluded with the controlling contracting authority (contracting authorities) or with a legal person controlled in the same way by the contracting authority.

Examples include: Szerencsejáték Zrt. (Hungarian Gambling Zrt.); Egészségügyi Szoltáltató Zrt. (Health Care Provider Zrt.); Honvédelmi Minisztérium Elektronikai, Logisztikai és Vagyonkezelő Zrt.

The PPA defines the classic public agencies; public interest entities and the controlled entities as "contracting authorities", which is the central notion of the PPA. The Public Procurement Authority maintains an up-to-date database of the registered contracting authorities, which is publicly available at http://www.kozbeszerzes.hu/adatbazis/keres/ajanlatkerok/

Subsidized companies

A body or person whose procurement is financed, for the most part, directly by one or more of the contracting authorities where the estimated value is equal to or greater than the EU procurement threshold, or subsidized directly by one or more of the same public agencies / controlled entities. by more than 75 %t and the estimated value of which is below the EU threshold, but equal to or greater than the national procurement threshold:

• where those contracts involve civil engineering activities,
• where those contracts involve building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes, or
• where those contracts involve services which are connected to the above two works.

In addition to the above, if a project is funded by non-repayable grants, the body or person, whose procurement is intended for the supply of goods or services, or for works is subsidized directly by one or more of the contracting authorities by up to at least HUF 40 millions, with the following exception

• by investment aid awarded by the individual decision of the Government (EKD subsidy)
• by aid granted on a case-by-case basis for the creation of new jobs;
• by training, and aid for the setting up and development of workshops;
• by aid for research and development and innovation;
• by aid granted to business entities for the purpose of re-industrialization; or
• by any aid from Union or national resources requested before 1 November 2015.

Addition to a. and b.

Note that additional rules are in place to transpose the provisions of the Utilities Directive. Government decree 307/2015. (X. 27.) regulates specific public procurement rules for public service contracts. In line with the Utilities Directive, these are (i) public agencies or (ii) entities controlled by public agencies which provide fixed networks intended to provide a service to the public

• in connection with the production, transport or distribution of drinking water, or the supply of drinking water to such networks;
• in connection with the production, transport or distribution of gas or heat, or electricity, or the supply of gas or heat, or electricity to such networks;
• activities relating to the provision or operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable;
• the exploitation of a geographical area for the purpose of the provision of airport, maritime or inland port or other terminal facilities to carriers by air, sea or inland waterway and to carriers of passengers, extracting oil or gas, or exploring for, or extracting, coal or other solid fuels;
• postal services.

Examples include: Magyar Posta Zrt (Hungarian Post); HungaroControl Zrt., Fővárosi Vízművek Zrt, (Budapest Metropolitan Water) Magyar Gáztranzit Zrt; MAVIR Zrt. (Hungarian Transmission Operator)

Note that companies, who provide services based on an exclusive or special right may also qualify as public service provider. Notable example is Budapest Airport Zrt.

In certain cases, co-operation between public bodies may be exempted from the public procurement regime.

Conditions of exemption are assessed vis-à-vis each contract to be concluded. Exemption applies to contracts concluded by a contracting authority with one or more other contracting authorities, for cooperation between the participating contracting authorities with the aim of ensuring that the public services they have to perform are provided with a view to achieving objectives they have in common, where the implementation of that cooperation is governed solely by considerations relating to the public interest, and the annual net turnover of the participating contracting authorities does not exceed 20 % from the activities concerned by the cooperation performed on the open market.

Furthermore, the following co-operations may also be exempted:

• contracts concluded by a contracting authority with a controlled legal person provided there is no direct private capital participation in that controlled legal person and more than 80 per cent of its net annual income is from the performance of the contracts concluded or to be concluded with the controlling contracting authority or with a legal person controlled in the same way by the contracting authority;
• contracts concluded by a contracting authority rwith a controlled legal person provided there is no direct private capital participation in that controlled legal person and more than 80 per cent of its net annual income is from the performance of the contracts concluded or to be concluded with the controlling contracting authority (contracting authorities) or with a legal person controlled in the same way by the contracting authority;
• to procurements of works, supplies and/or services through a central purchasing body by way of public procurement procedures by bodies on whose behalf the central purchasing body has awarded the relevant public contracts, including ancillary purchasing services provided by the central purchasing bodies.

The PPA covers the contracts the subject of which is: (i) the purchase of goods; (ii) purchase of services; (iii) construction projects; (iv) construction concessions; and (v) service concessions; provided that the goods or services are provided for consideration, the value of which reaches the respective minimum amounts defined by the PPA.

Generally speaking, substantial amendments to existing contracts require new procedures. Failure to conduct a new procedure results in the invalidity of the contract.

A modification of a contract is considered to be substantial, where (i) the terms affected by the amendment would have allowed the participation of other tenderers or the success of another tender instead of the successful tender, if those terms had been indicated in the procurement procedure preceding the conclusion of contract, (ii) where the amendment shifts the economic balance of the contract in favor of the successful tenderer; or (iii) where the amendment extends the subject-matter of the contract over a new, significant element compared to the tenderer's obligations imposed by the original contract.

New procedure for the amendment may be avoided, if:

• the amendment is considered unsubstantial.
• de minimis changes: the increase in the counter-value occurring as a result of the modification or, where several successive modifications are made the net cumulative value of the successive modifications, reaches neither the EU threshold nor 10% of the initial contract value in the case of public service, public supply and works concession or service concession and 15% of the initial contract value in the case of public works; moreover, (as of 1 January 2017.)
• specific set of circumstances: the contract clearly stipulates the precise conditions and content of the subsequent changes of the determined substantial elements of the contract (including the right of option) and those conditions and contents are known in advance by all tenderers and for additional works, services or supplies by the original contracting party that have become necessary and that were not included in the initial procurement where a change of the contracting party cannot be made for economic or technical reasons such as requirements of interchangeability or interoperability with existing equipment, services or installations procured under the initial procurement; and would cause significant inconvenience or substantial duplication of costs for the contracting authority. However, any increase in price or, where several successive modifications are made the net cumulative value of the successive modifications, cannot exceed 50 % of the value of the initial contract.

Framework agreements are permissible, but the term of a framework agreement may not exceed four years, except in duly substantiated cases, taking into consideration the subject-matter of the framework agreement. In this respect, it shall be considered whether the specific features related to the given framework agreement require the setting of a longer fixed term, and whether it results in a disproportionate restriction of competition.

Framework agreements with multiple suppliers are admissible and single orders under multiple supplier framework agreements may be realised (1) through a direct purchasing order placed by the contracting authority with the tenderer(s) selected pursuant to the objective criteria established in the framework agreement or (2) through reopening the tender. Direct purchasing orders are permissible if the framework agreement specifies the objective criteria based on which the contract for the execution of the given public procurement will be concluded and sets out all terms of the contract(s), unless the notice launching the relevant procurement procedure prescribes reopening the tender.

Similarly, if the framework agreement was concluded with one tenderer, including those cases in which the procedure had been aimed at the conclusion of a framework agreement with several tenderers, but finally it was concluded with the sole valid tenderer, the implementation of the given public procurement may take place by way of a direct purchasing order on the condition that the framework agreement sets out all terms of the contract aimed at the implementation of the public procurement based on it, and that the notice launching the relevant procurement procedure does not prescribe otherwise. If direct purchasing orders cannot be used, then the written consultation procedure is employed, in the course of which the tenderer shall submit a tender which is similar to or more favourable than the terms of the framework agreement. In such cases, the framework agreement needs to specify which terms may be subject to written consultation.

There is no official definition of PPP in Hungarian law, no clear distinctions can be made when categorising a project as a PPP project. Hungary does not have a separate PPP law establishing the framework for PPP projects.

Please also note that PPP model is currently not a model favoured or used for new projects in Hungary. In the mid-2000s the Build-Operate and the Build-Operate-Transfer models were the most frequently used models. When the financial crisis hit Hungary, the government announced a moratorium on PPP projects and initiated a review of the existing PPP contracts.

For the award of the concession contracts, a dedicated chapter of the PPA applies. Thus, concessions form a special part of the procurement regime.

It follows from the above that the concept of concession is very similar to the concept of a public contract. However, two additional elements are to observed: (i) operational risk and (ii) concession privilege. The PPA defines both the operational risk and who can be considered a concessionaire. Such conjunctive conditions are fully met is the operational risks are assigned to the concessionaire, otherwise there is no concession. It is considered that the concessionaire is liable for operational risk if it is uncertain whether the investments and costs incurred in the creation and operation of the works or services subject to the concession are recoverable.

Furthermore, construction or service concession may be awarded exclusively for a fixed period of time.

In order to avoid anti-competitive conduct, the PPA provides that in the same public procurement procedure (i) a bidder must not submit a bid together with another bidder, (ii) a bidder should not be the subcontractor of another bidder, and (iii) a bidder should certify the eligibility of another bidder.

Section 11 of the Hungarian Competition Act prohibits agreements restricting economic competition. This provision implicitly covers the prohibition of bid rigging. Bid rigging in public procurement is the only antitrust violation that is punished by criminal law in Hungary: it is punishable by imprisonment of up to five years. Participation in bid rigging may also lead to exclusion from future public procurements. Some of the highest fines in the HCA's history were imposed on cartels targeting public procurement. In 2010, a fine of HUF 7.2 billion (approximately €23.2 million) was imposed on a railway construction cartel and in 2009, cartelists in the motorway construction industry were fined almost HUF 3 billion (approximately €9.4 million).

If the contracting authority notices the obvious violation of Section 11 of the Hungarian Competition Act or Article 101 of Treaty on the Functioning of the European Union, or assumes such violation with good cause, it must notify the Hungarian Competition Authority.

The Hungarian Criminal Code defines a crime regarding agreements in restraint of competition in public procurement and concession procedures, as follows:

"Any person who enters into an agreement aiming to manipulate the outcome of an open or restricted tender published in connection with a public procurement procedure or an activity that is subject to a concession contract by fixing the prices (charges) or any other term of the contract, or for the division of the market, or takes part in any other concerted practices resulting in the restraint of trade is guilty of felony punishable by imprisonment for up to five years.

Any person who partakes in the decision-making process of an association of companies, a public body, a society or similar organization, and adopting any decision that has the capacity for restraining competition aiming to manipulate the outcome of an open or restricted tender published in connection with a public procurement procedure or an activity that is subject to a concession contract shall also be punishable as set forth in Subsection.

The punishment shall be imprisonment for a misdemeanor for up to two years, if the act specified in the above subsections if the value of the public contract involved is below substantial value.

The perpetrator of a criminal act defined in the above subsections shall be exonerated from punishment if he confesses the act to the authorities first hand and reveals the circumstances of the criminal act. Authorities shall also mean the bodies supervising competition and financial operations and the body which reviews procedures in connection with public procurement contracts".