The mining company of Viktor Orbán’s father, Dolomit Kft., offers its products at a significantly higher price – sometimes 60-70 percent higher than its main competitors – Direkt36 reveals based on its market research.
The mining company, which is majority owned by Győző Orbán Sr., sells various concrete elements in addition to crushed stone extracted from the dolomite mine. As we revealed earlier, the company regularly supplies such building materials for large infrastructure projects financed by the state. This means that the company receives public money for its products offered well above the average market price.
Sources in the construction industry have previously told Direkt36 that the main contractors responsible for state projects are generally very price sensitive and look for the cheapest suppliers.The company of Orbán’s father has remained a sought-after partner despite the high price of its products. Several sources also mentioned that Dolomit’s products are of good quality.
The company has produced spectacular growth in recent years, outperforming all of its major competitors in terms of profitability (last year, it reached a 45 percent profit margin).
The starting point of our market research was the official price list of Dolomit Kft. This list is not published online, but several copies are on display in the company’s reception hall. We took one of these when we traveled to the dolomite mine in Gánt in early November to ask Győző Orbán about his state-linked businesses.
The price list contains the current prices of Dolomit Kft. (valid from 15 March 2020 until revoked). We compared these with the price lists issued by the company’s main competitors on the market.
As an example, we chose one specific concrete element (a manhole ring, used for sewage constructions) that is available in each company’s portfolio in different sizes. Such a manhole ring was used, for example, in the village of Kulcs, where a sewer was built by a consortium led by a company of Lőrinc Mészáros, long-time friend of Viktor Orbán. When we went to the construction site in March 2019, we found some concrete elements next to the sidewalk – with the label of Dolomit Kft. on them.
We do not know how much money Dolomit Kft. received in 2019 for supplying these elements. On the other hand, a comparison of the current price lists of Dolomit Kft. and its main competitor shows that currently the company of Orbán’s father’s puts the highest price tag on these building materials: 19-72 percent higher than its competitors.
In addition to manhole rings, Dolomit Kft. also sells many other types of concrete products. These include many that do not appear in other companies’ portfolio, but we also found several products (such as manhole bases and reducing cones) offered at a much lower price in competitors’ offers.
However, several sources in the construction industry emphasized that the price lists published by the companies are rather indicative. “It depends on the pricing policy, this changes for every company, in the case of some orders, they might give big discounts compared to the price list,” said the sales director of a company that manufactures concrete elements.
For companies and mines selling crushed stone, it is less typical to publish their price lists, and several of them were also reluctant to share their prices with us upon request. “We work at a pretty similar price level. But no matter how important the price is, this is not the only thing that matters, it varies from project to project,” said the manager of a mining company.
According to the manager, in the case of larger state projects, it is very important that the commissioned mine has the appropriate production capacity. If a company offers a low price but it is unable to meet the daily demand, a delay would cost a lot more, the source explained.
The VIP suppliers
The main contractor for each public investment is selected through a public procurement, with the aim of giving the job to the company (or consortium) that had the best offer. Companies that supply building materials for the projects compete with each other in a similar way, however, the details of this process cannot be tracked in public databases.
After suppliers have submitted their offers, a negotiation process starts. According to a source in the construction industry, the first and most important consideration when selecting a supplier is that its products comply with requested the standards.
“If they all meet the standard, there cannot be huge quality differences between products offered by different companies. Then, it is a given for a construction company that it would not buy a product for a higher price if it can be purchased cheaper from somebody else,” the source said.
If construction company has an old, reliable supplier but gets a better offer from somebody else, the company might try to “steer” its old supplier “towards a better price”: this means that the old supplier will win the order on the condition that it lowers its bid to the level of the cheapest offer.
According to the source, before 2010, it was typical for customers to deviate from the cheapest offer by a maximum of 3-5 percent. “By now, that gap could be as high as 30 to 50 percent. Of course, this only applies to the prices of special, VIP suppliers. Like the daddy,” the source said, referring to the father of PM Viktor Orbán.
Viktor Orbán and Győző Orbán did not answer Direkt36’s questions on the matter.
For Hungarian company data, we used the services of Opten.