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This would have been a dream project for Orbán’s son-in-law, but the government stepped in

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In the past one and a half year, the energetic company co-owned by István Tiborcz, son-in-law of Hungarian Prime Minister has had an easy time. Many public procurements of public lighting projects included specific requirements that could have been met only by his firm or just a very small circle of companies.

Now here is the first sign that this series might come to a halt.

“Restrictive” and “unreasonably restricts competition” – among others, these were the comments enclosed by the Prime Minister’s Office in mid-March, when it sent back to Jászberény their draft of the public procurement announcement about the modernization of the town’s public lighting system. Jászberény, a town about 80 kilometers east of Budapest won HUF 410 million (EUR 1, 35 million) of EU funds for this project in last December. As the expected value of the work is estimated to be over HUF 310 million (EUR 1,03 million), the project’s public procurement announcement has to be preliminary approved by the Prime Minister’s Office responsible for supervising how EU funds are spent. This is the rule for every EU-funded project worth more than HUF 300 million (EUR 0,99 million).

Direkt36 obtained Jászeberény’s draft of the tender announcement and the quality control report of the Prime Minister’s Office dated 13th March. The refused tender announcement is very similar – many times, identic word by word – to those public procurements where Elios Innovatív Ltd., the company of PM Vitor Orbán’s son-in-law won projects of the modernization of public lighting systems in the past months. The Prime Minister’s Office raised so many objections in the preliminary quality control report that the public procurement announcement has to be practically rewritten entirely to make it comply with the regulations.

Source: Közbeszerzési Értesítő - Direkt36 - Text Compare
On the left you can see the text of a recently announced tender from Vác won by Elios – this tender should have been monitored and approved by the Prime Minister’s Office in advance. On the right there is the same section of the refused Jászberény tender. The highlighted text is different, all the rest is the same – Source: Közbeszerzési Értesítő, Direkt36, Text Compare

According to the quality control report, Jászberény’s draft does not comply with the basic principles of public procurements, nor the “principle of efficient and sound financial management” required by the European Union. Out of the thirty examined points of the draft twelve were qualified of high risk, and five of low risk. A public procurement cannot be announced if even one of its points is qualified of high risk.

We asked the Prime Minister’s Office what the reason was for raising so many objections against the draft, which is significantly similar to other public procurement announcement won by Elios, and preliminary examined and approved by the Prime Minister’s Office. We have not received a meaningful answer since mid-April, the Prime Minster’s Office only told that the question was very complex and therefore they asked for more time.

This is how Tiborcz’s firm dominated the public lighting tender

In our article published in March we showed that the majority of the public procurements for the modernization of public lighting, worth more than HUF 100 million (EUR 0,33 million) included specific requirements that could have been met only by Elios or just a very small circle of companies. The announcements of tenders subsequently won by Elios determined the type of lamps they required, even detailing the colour code of the painting used for the lamp’s surface. These strict requirements helped Elios, but it was even more favourable for the firm that many tender announcements requested professional references, but only accepted experience in LED-lamp public lighting modernization. This vastly restricted the number of potential bidders. What is more, in many cases such high-value professional reference was requested that – with the exception of two projects – only Elios was able to meet the requirements.

Cities received money for the modernization of public lighting system from European Union funds, with the exception of Pécs. Public procurements of higher value could only be announced with the preliminary approval of the Prime Minister’s Office. Before publishing our article in March, we asked the Prime Minister’s Office how many public procurements of public lighting modernization they monitored since December 2013, and whether they found any irregularities. The ministry replied that they had preliminarily monitored seven such tenders, and they made some comments for the preparation, but they did not experience any violation. The public procurements were later announced, meaning they had passed the quality control.

The ministry did not disclose which the seven public procurement were that they checked, but preliminary monitoring is only carried out in the case of construction projects worth more than HUF 300 million (EUR 0,99 million). There were only eight public lighting modernization projects of such scale, out of which seven was won by Elios. All seven public procurement announcements were very similar, and each of them determined those strict requirements that were favourable for Elios – similar requirements that the draft announcement of Jászberény determined, but which was refused by the Prime Minister’s Office.

Something has changed

Now the Prime Minister’s Office criticised, among others, those strict requirements that before had made possible for Elios to win previous tenders. According to the draft of Jászberény, only that bidder would have been eligible for the project that has a reference work of a LED public modernization tender, which is already finished, was worth at least net HUF 280 million (EUR 0,93 million), and involved then installation of at least 2560 LED-lamp. The Prime Minister’s Office found that the expected professional reference worth at least net HUF 280 million was excessive for a public procurement worth HUF 310 million (EUR 1,03 million), and therefore asked the city to reduce the value of the expected professional reference.

In our article published in March we wrote that experts of public lighting thought that it was professionally unreasonable that the public procurements subsequently won by Elios had expected bidders to have professional experience in LED lighting modernization. In March, the Prime Minister’s Office already had the same opinion: they commented on the corresponding point of Jászberény’s draft that the “required professional reference is too complex and unreasonably restricts competition”: They also noted that in December János Lázár issued a notice saying that “when defining the object of reference it is not needed to strive for defining the same object as the given tender’s detailed, specified object”, but for being able to determine the competence of the bidder.

The Prime Minister’s Office found that other requirements, which also appeared in earlier tender announcements, were restrictive too: for example they detailed that experts involved in the project needed to have a high-value reference in LED public lighting modernization, that they required the too many experts and even determined the minimum number of employees the bidder company should have.

The Prime Minister’s Office did not like either that the tender announcements determined the technical specifications, and even the type of the lamps to be installed. Although they included in the draft that equivalent lamps would also be accepted, but only if they fully comply with every parameters of the lamps required. According to the Prime Minister’s Office, the city determined so strict parameters that it would have been impossible to make an equivalent offer. They specifically called the city’s attention to a government regulation which states that it is not allowed to determine technical requirements in a way that it excludes some economic operators or products from the process. Not putting enough emphasis on the offered price at the time of bidder’s evaluation, or issuing only a small amount of penalty in case of delayed implementation did not pass the quality control either.

We asked who wrote the draft that the Prime Minister’s Office found restrictive, whether a new draft was made since then, and when the new public procurement is expected to be announced, but we did not receive any answers from Jászberény. The minutes published on the city’s website show that as many other public procurements of LED-lamp projects, subsequently won by Elios, Jászberény’s European Union project was also prepared by Sistrade Ltd.. The company is owned by Endre Hamar, former business partner of István Tiborcz. Hamar was a co-owner of Elios until last April.

At the beginning of March, Index wrote that a police investigation had been launched in connection with four public street lighting tenders won by Elios, on suspicion of an “agreement restricting competition in public procurement and concession process”. This suspicion might suggest that the connection between Sistrade and Elios is being investigated, but the police did not confirm this. We asked the police about the current state of the investigation, but they only repeated that the investigation is being carried out against unknown perpetrators, and due to the ongoing procedure they are not able to provide any further information.

UPDATE (04. 30. 2015. 18:33):

We asked the Prime Minister’s Office if they have disapproved any of the announcements similar to the one they blocked now. Our detailed questions went unanswered by the PM’s Office, but after the publication of this article the minister leading the office told at a news conference that every procurement is different, every procurement has to be examined in itself. “Every case and every announcement is different: every one of them is about a different subject, in a different city; there are no equal situations. We rigorously supervise every municipality and ever government body that announce public procurements”.

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