On 7 April 2025, Mr. János Lázár, Hungary’s Minister of Construction and Transport announced via social media his intention to introduce a major legislative initiative designed to overhaul the oversight of public investments.
The proposed law would grant the Government the authority to examine the entire chain of contractors involved in public investments, extending down to the actual subcontractors executing the work. This initiative is seen as a response to long-standing concerns about the lack of transparency in state-initiated projects and the dominance of foreign multinationals in the sector.
According to the Minister, the proposed changes have two core aims: first, to protect Hungarian small and medium-sized enterprises from being marginalized in favor of large, often foreign-owned corporations; and second, to understand how extensively these foreign firms have profited from public contracts in recent years. He specifically cited three companies that have reportedly received around 1,200 billion forints (approximately 3 billion euros) in subcontracted work in Hungary in recent years.
A key issue the legislation seeks to address is the state’s current inability to trace the full path of public funds once a primary contractor receives them. Without visibility into the full contractor chain, several problems can arise:
- Lack of accountability: If something goes wrong (delays, cost overruns, or quality issues), it becomes difficult to pinpoint responsibility when subcontractors are obscured behind layers of agreements.
- Corruption risks: Hidden layers of subcontractors can serve as channels for inflating prices or funneling contracts to connected businesses, reducing the integrity of the procurement process.
- Reduced efficiency: Fragmented responsibility and poor coordination among multiple, often unknown, contractors can lead to inefficient execution and miscommunication.
- Disadvantage to local firms: Large general contractors may subcontract to familiar international partners, bypassing smaller, competitive local companies that might offer better value or quality.
- Public trust erosion: A lack of transparency undermines citizen confidence in how public money is spent, particularly when project outcomes are poor or costs spiral.
By requiring full disclosure of the contractor network, the proposal would position Hungary to better oversee how public funds are used and ensure that a fair share of state investments benefit local businesses. The Government is expected to begin formal legislative work on the proposal soon, to close regulatory gaps and restore public confidence in state-funded development. If enacted, the legislation would enable the Government to scrutinize the full subcontracting structure of state-funded projects, promoting greater accountability and potentially fostering a more equitable environment for domestic businesses.
By Denes Glavatity, Attorney-at-Law, KCG Partners Law Firm
