Public Procurement, Private Profit

Buying computer hardware and software is not an easy affair. Knowledge of the type of equipment required coupled with technical expertise to get it working properly makes it a daunting task for both individual users and private companies alike. For educational institutions in Hungary, however, a recent government law regulating public procurement has made this quandary all the more difficult to overcome.

"It's tying our hands and telling us what to do," remarked bitterly a project coordinator for a post-secondary institution on condition of anonymity. "We have no control over how money comes in and to whom it goes. We already have enough to do as it is in order to secure funding without being told where to spend our money."

At the beginning of this year the Hungarian government issued a decree which listed the companies from which institutions must officially purchase equipment. What has upset many project coordinators and those in charge of procurement for their institutions is that no details were made public of how this list had been compiled. What is more, many of the companies listed are not regarded highly. They are seen by many as offering equipment that is overpriced and of poor quality.

Public procurement doesn't have a good track record in Hungary. Computers and other type of equipment were usually purchased from a certain place not after a careful and comparative consideration of product, price, and service, but from where a spouse, family member, or relative of a colleague or friend happen to work. Whereas in most western countries such a practice is referred to as a "conflict of interest", in Central and Eastern Europe there is no such concept. Indeed, the practice was so widespread that it was (and to a certain extent, still is) tacitly accepted as a normal means of doing business.

One of the main reasons for this is because public procurement is traditionally seen by administrators as a shopping spree, with much of this "public" equipment eventually winding up in private hands. At one university in south western Hungary, for instance, the head of a language department (who also happened to be dean) purchased a stereo for his office from grant money that was specifically earmarked for teaching purposes. Subsequently, every time visits by the granting organisation were made, the sound system had to be hurried out of his office and hid somewhere. In another instance, a piano was likewise purchased by the department, which was then utilised only once or twice a year during staff parties.

Given this situation - which is endemic to most, if not all, post-secondary institutions throughout the country - it would appear that the rationale behind the government's recent law governing public procurement was to put an end to such practices, thus bringing the workings of Hungary's public sector more in line with those of the European Union. Critics of the new measures, however, point out that the problem is not being solved but, instead, institutionalized. "It's like a mafia organization," observed one person. "On the outside they make it look like a fair law, but behind the scenes it's the same old story. I'm sure if you dig deep enough you'll see that there are business links between those who drafted the law and those on the list."

The present government is no stranger to such criticism. Throughout its term it has been embroiled in one scandal after another involving conflicts of interest. The most famous was the Tocsik scandal, where a lawyer was paid over 800 million forints (approximately 8 million DEM) as a success fee for handling a privatization deal. When one considers that an average Hungarian is lucky enough to make a mere one thousandth of this amount in a year, the outcry that ensued is quite understandable.

Interestingly, the scandal came to light not because of a system of checks and balances, nor thanks solely to the tireless efforts of an investigative journalist. Rather, it was because corruption was at such a level that it could do no more than turn on itself. Tibor Vidos, a lobbyist and political consultant in charge of the Budapest office of GJW Government Relations (Tibor Vidos) explains: "The HUF 800 million success fee received by Ms. Tocsik for negotiating on behalf of the Privatization Company with local governments seems to have been too much for some otherwise well-paid employees at the agency. They leaked the documents first to the press and then to the opposition."

Apart from such public scandals, there are many more that lie hidden under a miasma of apathy and what psychologist Petrovics-Offner termed "learned helplessness", best summed up by the Hungarian attitude of "ez van" ("nichts zu machen"/"c'est la vie"). The establishment of the Socrates office is a case in point. Although the position for the head of the unit in Hungary was advertised (in accordance with present democratic practices), some applicants privately expressed the feeling that the position was already filled (in accordance with past communist practices), with the government merely going through the motions. Many based their claim on the fact that very few (if any) interviews were conducted, the selection procedure being anything but transparent. Still, no objections or enquiries were made by those who felt themselves wronged.

The public procurement law seems to fall in a similar category. Although many are upset by it, nothing has been done to rectify the situation. Nevertheless, this does not alter the fact that a change in attitude on the part of government and those who hold the reins of power is needed. The government may have had the best of intentions in drafting their procurement procedures; if so, this has not been reflected in the implementation of these procedures. Thus, there needs to be more transparency in what the government is doing, why it's doing it, and how it expects to accomplish its objectives. Failing to do so inexorably leads to distortion and public alienation.

Unfortunately, the relationship between those who rule and those being ruled is still one of a paternalistic nature in Hungary. Those in positions of power are not responsive (nor do they feel responsible or accountable) to those over whom they hold sway. Unless some of these attitudes change -- attitudes that haven't disappeared with the former regime and one that permeates through all levels of society, not just government - then any action taken under the guise of "democracy" and "reform" will be just that - a guise. The public procurement law as it stands is, without doubt, counter-productive, doing more harm than good. In trying to introduce the concept of tenders to procurement, the list issued by the government strait-jackets the whole idea. A tender is a formal offer that is developed in accordance with provided terms. These terms usually delineate the requirements that must be met in order to be able to submit an offer. These requirements are devised not as a limiting factor, but to ease the process of selection by filtering out those who would not be able to fulfill the order in the first place. In the public procurement directive, the list of companies from where a procurement must take place clearly doesn't fulfill such a function. Usually, those in need of services establish the tender conditions; in this case, it's the other way around.

Additionally, there are many who could provide the services sought by public institutions but just don't happen to be on the list. "I heard about [this list] not long ago from a friend," said one store owner. "I'm busy selling and servicing computers and don't have time to dig deep into what the government is doing. Of course I wouldn't mind selling some of my stuff to schools, I'm sure I could make them a good deal and it would be great business for me. But it seems like there's a big secret going on, for I have no idea what this list is exactly or how to get on it."

For those wishing to buy goods and services - much of it having to do with computers and computer-related services - there is disappointment because, simply, the public procurement directive restricts freedom of choice. On the other side of the coin, it's also unfair to business for it goes against one of the main principles of "the market economy", that is, competition. In effect, what the government has done is it developed command-economy style legislation for public institutions while at the same time it continues to sing the praises of free market capitalism.

What makes matters worse is little attention has been paid to the ones most affected by all this - the end users, namely teachers and students. They continue to be short-changed, this time not only by the corruption of their own administrators, but now by a government decree as well. By being forced to purchase equipment that is more expensive and second-rate (including after sales service), institutions aren't receiving value for their money. In turn, students and teachers will still be unable to achieve what they otherwise could, both in terms of quality and performance.