"When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be."
Lord Kelvin

The detection of overpricing at EU funded public procurement in Hungary

 

September 7 2016

The analysis of first digits of contract prices indicates that the contract prices of all Hungarian public procurement fits into the theoretical distribution for the whole period. But there are crucial differences in price distortion among the contract prices in each year. Price distortion was increasing throughout the whole period; while in 2009 and 2010 contract prices fitted well into the theoretical distribution, after those years the ratio of price distortion got more and more significant. Our assumption is that this phenomenon indicates the frequency and the growing tendency of overpricing, which also signifies the weakening of competition and the increasing corruption risks.

While the prices of projects financed domestically loosely fit into the theoretically expected distribution, those financed by the EU do not fit at all. Therefore, the phenomenon of overpricing could be much more frequent or it could have a much wider scale in EU funded public procurement than in case of other public procurement.

Research Note in Hungarian (pdf)