Behind the Bid Count: Procurement Competition and Politically Connected Suppliers in Hungary

Abstract Principals who cannot observe how public contracts are allocated often reward verifiable statistics instead. We examine what such a statistic revealed in Hungary, where lowering the share of contracts awarded after a single bid became a condition for European Union funds in 2022. We combine 3.3 million awards from eleven Central and Eastern European countries with Hungary’s contract registry and a published, dated list of politically connected companies. Relative to nationally funded procurement and the regional pattern, Hungary’s European Union-funded single bidding changed by −12.7 percentage points in 2016–2020 and −21.0 points in 2021–2023, with more awards attracting three or more bids and lower prices relative to buyers’ estimates. This divergence began years before the conditionality commitments. After the two-tender rule was introduced, nationally funded procurement shifted mainly from one bid to exactly two, the margin the rule rewarded. Allocation followed a different pattern. Listed companies won 2.5 per cent of valued contracts above European Union thresholds over 2010–2026 but 17.5 per cent of their value. In registry procedures under European Union-level rules in 2021–2023, they received 31.0 per cent of European Union-funded value, where single bidding had fallen most, against 19.4 per cent of nationally funded value. Across buyers, the estimated relationship between changes in participation and allocation is imprecise. Improved bid counts therefore did not establish that conditionality changed who received public contracts. Monitoring political favouritism requires evidence on recipients, not only on participation. JEL classification: D72; D73; H57; D44.