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Promoting green public procurement in Hungary

Promoting green public procurement in Hungary with a focus on life-cycle costing

In Hungary, the use of green (environmental) criteria in public procurement procedures is quite limited despite the enabling policy and regulatory environment in place. This is especially the case for life-cycle costing (LCC) methods, which are very rarely used. LCC is a methodology that moves beyond the initial purchase price of a good or service and evaluates all other significant cost flows over the entire life period of works, supplies or services, such as installation, operation, maintenance and end-of-life (disposal) costs. A comprehensive LCC analysis also takes into consideration the costs of mitigating/reducing (external) environmental impacts.

The main obstacle to the greater uptake of green criteria and specifically LCC is the lack of competence within contracting authorities in defining meaningful green criteria and conducting LCC. The use of LCC tools is perceived to be burdensome and complicated. In addition, Hungarian contracting authorities do not approach costs in a systematic manner, they focus mainly on the initial purchasing price and do not consider any other cost elements in their evaluation framework.

The Hungarian Public Procurement Authority issued a detailed Guidance on life-cycle costing methods in March 2017. The Guidance explains the theoretical background for LCC, the common use-cases of LCC and methodologies for LCC calculations; however, it does not include product or service specific LCC tools. Consequently, further efforts are needed to develop and promote tools and methodologies that support the greater uptake of green public procurement, and especially LCC in Hungary.

The Office of the Prime Minister of Hungary and the European Commission have called upon the OECD to provide technical support to Hungary on the matter. Funded by the European Union through DG REFORM Technical Support Instrument, the key objective of this Project is to support the Hungarian Government in developing and promoting the use of green public procurement criteria, and especially of LCC tools.

Fast Facts

©Marvdrock/Nounproject 

Country: Hungary

©Adrien Coquet/The noun project Timeframe: September 2021 – February 2023
©Shashank Singh/ The Noun project

Counterparts:

  • European Commission (DG REFORM)
  • The Office of the Prime Minister of Hungary
  • Public Procurement Authority of Hungary
©The Icon Hero/Noun Project

Areas of focus:

List of Deliverables

  • Stocktaking report on the current practices of LCC use in Hungary and good examples for LCC use and for LCC tools from other OECD and EU countries.
  • Product/service-specific LCC tools and supporting materials with practical examples and sample documents.
  • Capacity building workshops on LCC to strengthen expertise and capacities required to implement LCC approach.

 

Timeline

  • 28 September 2021: Kick-off meeting of the project
  • September 2021 – January 2022: Mapping the current practices of LCC use in Hungary and existing LCC tools in other OECD countries, and drafting the stocktaking report on the current practices of LCC use in Hungary
  • 10 March 2022: Opening conference with presenting good practices on LCC from other OECD countries
  • December 2021 – December 2022: Identifying the purchasing categories and developing the product/service-specific LCC tools and supporting materials
  • September 2022 – February 2023: Capacity building workshops on LCC to strengthen expertise and capacities required to implement LCC approach
  • February 2023: Closing conference to raise awareness on green criteria and the life cycle approach
  • February 2023: Preparing a final report to summarise the main findings of the support that will serve for future guidance for contracting authorities in applying LCC more confidently

Content of the project

The Project will support the Hungarian authorities to:

 (i) establish comprehensive and user-friendly methodologies and tools for green criteria in public procurement, especially for life-cycle costing and

(ii) increase awareness amongst Hungarian authorities, business sector and other relevant stakeholders about the value of using LCC methodology and other green public procurement criteria.

The project will be comprised of three (3) outputs as follows:

  1. Stocktaking the current practices of LCC use in Hungary. In particular, the analysis will focus on the following elements: (i) the current use of LCC by contracting authorities, (ii) purchasing categories where LCC has been used, (iii) available tools, methodologies to support the use of LCC, (iv) challenges that contracting authorities are facing in the use of LCC tools, (v) measures taken to promote strategic procurement, in particular, guidance and tools, and (vi) the identification of national and international good examples that can be shared as good practices. The stocktaking report will include recommendations and a way forward based on the analysis of current practices. The report will also include good examples from other OECD countries and EU Member States that can serve as inspiration for the LCC tool development in Hungary.
  2. Developing product/service-specific LCC tools (up to 3) and supporting materials for the purchasing categories identified together with the Office of the Prime Minister and the Public Procurement Authority.
  3. Organising capacity-building workshops on LCC (up to 3) to strengthen expertise and capacities required to implement LCC approach.

Outputs and resources