"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

Brief analysis on the cronyism in Hungary

December 24th 2017

Before the issuers publish their calls for tenders, they have to calculate the estimated price of the procurement. This calculation can be based on their experience from previous tenders and on the results of market research.  The price drop between the estimated value and the actual contract price can be regarded as a proxy for measure the intensity of competition. The higher competition between the bidders will result in more intense price competition what should lead to lower prices in the end. So, we consider this indicator as a measure of intensity of competition: the greater magnitude of price drop is the higher level of competition intensity can be traced in the public tenders. The low or zero value of price drop means low level or lack of competition. It can be assumed that this measure will indicate higher level of competition in the cases of public procurement with less or without corruption risks and price distortion than in the cases of the tenders with higher potential of corruption and price distortion.  In this research note we analyse the magnitude of rate of price drop in several groups of tenders (won by companies owned by Orban’s cronies and family members; won by two multinational firms; and ordinary Hungarian companies). We show the difference amongst these group of tenders concerning the rate of price drop.

 

 

Part II.  The OLAF, the MGTS group and the case of  Istvan Tiborcz (in Hungarian, pdf)

Part I. (in Hungarian, pdf )