With a new kind of advance payment to suppliers investments in the amount of HUF 252 billion may be launched 30 November 2012
The new kind of advance payment to the suppliers has affected a total of 142 pieces of public procurements from among the EU tenders, the total contracted amount of which is HUF 252 billion. In accordance with the government decree coming into force on 29 July 2012 an advance payment of 30% must be provided to the suppliers for public procurements, in the case of state and local government beneficiaries’ projects. The National Development Agency (NDA) data show that presently the total value of this is HUF 75.6 billion.
Nearly half of the so far committed EU funds in Hungary are linked to the local and central government sectors. The sector’s well-known, long-standing problems concerning solvency threaten not only the implementation of the developments, but ultimately the effective use of resources as well. The government and the NDA give priority to the question of providing advance payment to suppliers especially because this may make the requests of EU funds more effective. The measure will result in the fact that the implementers of the projects will not need to finance the investments from their own sources until their bills are paid, and this fact can give new impetus to the implementation of such projects that have been stalled because of a lack of own resources.
The main advantage of the advance payments to the suppliers is that they only have to be accounted for at the end of the fulfilment undertaken in the suppliers’ contract. In the framework of the new construction the money is directly paid to the main constructor who works on the project, while the beneficiary is omitted from the payment chain.
A further convenience is that natural persons can undertake a guarantee for the suppliers’ advance payment for up to HUF 150 million as a security measure. The guarantee, as a possible form of security, places those who apply for the funding in a more favourable situation as – contrary to the banking procedures - they do not have to pay the significant amount of the guarantee premium, and the use of the resources also becomes safer. Further advantage is that income, real estate; vehicle can also serve as collateral for the guarantee.
Currently there are a significant number of public procurement procedures in progress where the 30% advance payment must be provided to the suppliers, the contracted amount of these investments is more than HUF 252 billion.
On the effect of the suppliers’ advance payment and the recently introduced EU Own Source Fund implemented for local governments in the framework of the New Széchenyi Plan a significant amount of money is being infused into the economy, which will greatly support the requests of the EU funds and the development of our country.