Closing of investigation no. III_97_1_2023 – infrastructural developments and the construction of a fruit-processing plant in Tolna County

The Integrity Authority has launched an investigation ex officio into two GINOP (the EU’s business development programme) and two Rural Development Programme (RDP) projects of three Tolna County-based companies. The three companies received a total of HUF 1.3 billion in funding from the four projects.

GINOP infrastructural developments

There are overlaps between two companies’ projects for the procurement of CNC machines and infrastructure development, and between the ownership of the companies. Based on their management and ownership structures, the companies belong to the same stakeholder group, the directors of which are presumed to be related to one another.

In collaboration with the Deputy State Secretariat for the Implementation of Economic Development Porgrammes, the Authority has conducted an unannounced on-the-spot inspection at the production hall in Tolna County, which is also the site of both GINOP projects.

The Authority has found that the metalworking activities of the two companies were completely intertwined. It has also been found that every machine included in the project produced for only one company in 2023. There is a strong suspicion that the objective of the tender for the procurement of CNC machines by the company whose main profile is construction, while giving the impression that it was procuring the machines for its own use, was only to indirectly expand the equipment stock of another company with identical stakeholder and ownership interests.

RDP fruit-processing plant development

In addition to the GINOP project sites, two projects funded as part of the Rural Development Programme and having identical technical content in relation to the construction of a fruit-processing plant by companies with identical family interests are also underway.

The Authority has found that the two beneficiaries had not previously been active in the target area of the RDP call (fruit and vegetable processing), the two projects were identical in their main characteristics (e.g. technical description, project objective, raw material suppliers, buyers, subcontractor, etc.), they were located in the close vicinity of one another on a jointly fenced area, and that the owners of the two beneficiaries were related to each other.

The Authority has found that the relevant call for tenders sets out permissive and insufficiently delimiting conditions, which also give too much leeway as to the possible range of tenderers and projects they may realise. This means that not only companies with several years of professional experience that are actually engaged in agricultural activity but even recently established businesses that have not previously been active in the field may also be eligible. The call contains no restrictions for companies with connected ownership either.

There is a suspicion that the procurement was targeted and the bids do not reflect the real costs. The Authority has found that there was a significant difference between the bids submitted by the same tenderers for projects with identical technical content and that the same subcontractor worked on both VP projects discussed in the report.

The Integrity Authority has obliged the managing authority to conduct irregularity proceedings to investigate the above-mentioned points.