This country-specific Q&A provides an overview of Public Procurement laws and regulations applicable in Germany.
Please summarise briefly any relationship between the public procurement / government contracting laws in your jurisdiction and those of any supra-national body (such as WTO GPA, EU, UNCITRAL)
The national public procurement / government contracting laws are largely determined by EU law, in particular the different EU Directives on public procurement. The latter are interlinked with supra-national rules like the WTO GPA.
What types of public procurement / government contracts are regulated in your jurisdiction and what procurement regimes apply to these types of procurements?
In addition to any central government procurement regime please address the following: regulated utilities suppliers (e.g. water, gas, electricity, coal, oil, postal services, telecoms, ports, airports) military procurements non-central government (local, state or prefectures) and any other relevant regime. Please provide the titles of the statutes/regulations that regulates such procurements.
The EU laws governing public procurement are (both for central and non-central authorities) – besides the TFEU:
Directive 2014/24/EU on public procurement
Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors
Directive 2014/23/EU on the award of concession contracts
Directive 2009/81/EC on defence and sensitive security procurement
Regulation No 1370/2007 on public passenger transport services by rail and by road
Remedies Directive for the public sector (Directive 89/665/EEC)
Remedies Directive for the utilities sector (Directive 92/13/EEC)
Both Remedies Directives were substantially amended by Directive 2007/66/EC.
Those Directives have been transposed in national law, in particular:
Gesetz gegen Wettbewerbsbeschränkungen (GWB)
Verordnung über die Vergabe öffentlicher Aufträge (VgV)
Verordnung über die Vergabe von öffentlichen Aufträgen im Bereich des Verkehrs, der Trinkwasserversorgung und der Energieversorgung (SektV)
Verordnung über die Vergabe von Konzessionen (KonzVgV)
Vergabeverordnung für die Bereiche Verteidigung und Sicherheit (VSVgV)
Vergabe- und Vertragsordnung für Bauleistungen Teil A
In addition, there are national laws governing public procurement beneath the EU financial thresholds, such as state laws, chapter 1 of the Vergabe- und Vertragsordnung für Bauleistungen Teil A and the Unterschwellenvergabeordnung (UVgO).
As you see, the legislation regulating the public procurement domains is quite heterogenic. But basic legal principles prevail in all sectors and across all regulations: the principle of competition, equal treatment and non-discrimination, transparency and proportionality. Those principles help to securely navigate the various public procurement ecosystems.
Are there specified financial thresholds at which public procurement regulation applies in your jurisdiction?
The current EU financial thresholds (net of VAT) are
Directive 2014/24 /EU: all service contracts other than those listed in Annex XIV and awarded by central government authorities (cga), all design contests organised by cga; all supplies contracts awarded by cga not operating in the field of defence; supplies contracts concerning products listed in Annex III awarded by contracting authorities operating in the field of defence.
Directive 2014/24 /EU: All subsidised services, all supplies contracts and all design contests awarded by sub-centrals contracting authorities (sc); all services other than those listed in Annex XIV awarded by sc; supplies contracts for products not listed in Annex III awarded by contracting authorities in the defence field.
Directive 2009/81/EC on defence and sensitive security procurement: all supplies contracts, all service contracts, all design contests.
Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors: all supplies contracts, all service contracts (except for services listed in Annex XVII), all design contests.
Directive 2014/24 /EU: Services listed in Annex XIV (Social and other specific services)
Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors: Services listed in Annex XVII (Social and other specific services)
Directive 2014/24 /EU: All works contracts, all subsidised works contracts.
Directive 2014/23/EU on the award of concession contracts: all works or services concessions.
Besides, there are different thresholds in the national law which are applicable beneath the EU financial thresholds, e. g. for the application of simplified procedures.
Are procurement procedures below the value of the financial thresholds specified above subject to any regulation in your jurisdiction? If so, please summarise the position.
Yes, there are national, state and communal budget laws also regulating public procurement, and in addition state procurement laws in several German states. Besides, there a secondary procurement regulations in other laws such as the law on the posting of workers, and in state aid schemes.
For the procurement of complex contracts*, how are contracts publicised? What publication or journal is used for these purposes?
In general, contracts, framework agreements, concessions etc. exceeding the EU financial thresholds– complex or not – must be published in the Supplement to the Official Journal of the EU (TED – Tender Electronic Daily). In addition, contracting authorities are free to publish the contracts etc. on national platforms or outlets, their websites etc.
For economic operators interested in public procurement in the EU it’s key to have intelligent search patterns established in their TED accounts.
For the procurement of complex contracts, where there is an initial selection stage before invitation to tender documents are issued, what are typical grounds for the selection of bidders?
If there are differences in methodology between different regulated sectors (for example between how a utility might undertake a regulated procurement procedure and how a government department might do so), please summarise those differences?
Complex contracts are usually procured in a competitive procedure with negotiation, a competitive dialogue or an innovation partnership. These types of procedures are defined by EU and national law and have a call for competition as an initial selection stage. Calls for competition are in general made by a contract notice in TED. Alternatives in the utilities sector are a periodic indicative notice or a notice on the existence of a qualification system. For the award of services and works concessions, however, the contracting entity has the freedom to organise the procedure leading to the choice of concessionaire subject to compliance with the Directive 2014/23/EU.
Contracting authorities establish objective rules and criteria for the exclusion and selection of tenderers or candidates which are governed in varying detail in the different Directives and national laws. Those rules and criteria must be made available to interested economic operators in the contract notice. The selection criteria and conditions for participation must be non-discriminatory, related and proportionate to the need to ensure the ability of the economic operator to perform the concession, taking into account the subject-matter of the contract or concession and the purpose of ensuring genuine competition and equal treatment.
Does your jurisdiction mandate that certain bidders are excluded from tendering procedures (e.g. those with convictions for bribery)? If so what are those grounds of mandatory exclusion?
There are mandatory and discretionary grounds for exclusion. Mandatory grounds comprise convictions for violation of a variety of penal laws such as corruption, fraud, money laundering, or a breach of obligations relating to the payment of taxes or social security contributions.
Discretionary grounds are for example conflicts of interest, distortion of competition from the prior involvement of the economic operator, significant or persistent deficiencies in the performance of public contracts by an economic operator in the past or undertaking serious misrepresentation in supplying information or unduly influencing the decision-making process of the contracting authority.
Please described a typical procurement procedure for a complex contract. Please summarise the rules that are applicable in such procedures.
A typical procurement procedure – if any – for a complex contract is the negotiated procedure with a prior call for competition aka competitive procedure with negotiation which is at least a two-stage process.
The initial stage of the selection of candidates, based on their requests to participate, according to pre-defined objective, non-discriminatory, transparent and proportionate selection criteria has been illustrated in answer 6. This first stage, including the selection of participants, usually takes at least around six weeks from the publication of the contract notice.
The succeeding negotiation phase may be designed freely by the contracting authority within the limits of the applicable rules. In particular, competitive procedures with negotiation may take place in successive stages with or without reducing the number of tenders to be negotiated by applying the specified award criteria. Depending on the number of negotiation rounds this process usually takes a minimum of two months but may also wear on for over a year.
Thus, a competitive procedure with negotiation takes at least 3 months, but for a complex contract sometimes even several years.
If different from the approach for a complex contract, please describe how a relatively low value contract would be procured?
Contract procedures below the EU financial thresholds usually are significantly shorter. Up to applicable financial thresholds, e. g. EUR 50.000,-, oftentimes negotiated procedures with 3 tenderers are sufficient.
What is seen as current best practice in terms of the processes to be adopted over and above ensuring compliance with the relevant regime, taking into account the nature of the procurement concerned?
For the contracting authorities, preparation is key in public procurement. Since equal-treatment and competition principles require all the relevant content of the procedure, including technical specifications, selection and award criteria to be defined in a clear and transparent manner from the outset there is not much leeway for decision-altering moves during the procedure, at least without the need to reiterate parts or all of the process.
Economic operators, on the other hand, should always very carefully prepare requests to participate and tenders in order to avoid the exclusion of their tender and to come as close as possible to the top-scoring in the evaluation process. Also, the remedies regulations contain a number of preclusion provisions which require economic operators to seek the rectification of procedure defaults as early as possible and/or within certain time limits from the contracting authority. Thus, it is highly recommendable to run legal due diligences of procurement documents as early as possible in critical procedures.
Please explain any rules which are specifically applicable to the evaluation of bids.
In general, tenders are evaluated in four steps. First, tenders are scrutinized for formal deficiencies. If those occur, the contracting authority has, depending on the nature of deficiency, sometimes discretion to allow the tenderer to remedy the defect. Secondly, exclusion grounds and selection criteria are evaluated, as far as not done during a potential prior selection stage. Thirdly, the tender is scrutinized in technical and financial aspects. Contracting authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services. Fourthly, the evaluation of the tenders according to the pre-defined objective, non-discriminatory, transparent and proportionate award criteria takes place.
Please describe any rights that unsuccessful bidders have that enable them to receive the reasons for their score and (where applicable in your jurisdiction) the reasons for the score of the winning bidder.
Yes, before the award of contracts, framework agreements and concessions exceeding the EU financial thresholds it is mandatory to notify the award decision to all non-successful tenderer during a standstill period of at least 10 days, giving them the relevant information which is essential for them to seek effective review. This notification needs to include the reasons why the respective tender was not successful.
While this information is important for the tenderers to apply for review of the procedure, tenderers should bear in mind that infringements already discernible during the procedure might be subject to preclusion rules and thus must be notified to the contracting authority within certain time limits, sometimes as early as the due date for requests to participate or tenders.
What remedies are available to unsuccessful bidders in your jurisdiction?
For procedures exceeding the EU financial thresholds, tenderers might apply for the review of the procurement procedure at a review body which has to be specified the contract notice, in case a notification of the infringement to the contracting authority did not bear fruit. The review body will immediately bar the contracting authority from awarding the contract for the time of the procedure. This is a strong remedy for economic operators maintaining their chances to receive the contract award in case of success.
Besides this instrument, an economic operator has the right to claim damages in case a procurement infringement lead to financial loss. This might in certain cases comprise the loss of profit from a contract which was unduly awarded to another tenderer.
Are public procurement law challenges common in your jurisdiction?
Public procurement challenges are indeed quite common. The overall number of court cases might be rather low. However, not every challenge leads to a court case. The mere possibility of a review procedure oftentimes leads to corrections in the procedure. In general there are no reputational harms to be feared for economic operators. After all, it is however always a question on how those review procedures are run and what kind of people are involved. The claim cost are dependent on the value of the contract, 5% of which is the litigation value, and the complexity and the duration of the procedure.
Typically, assuming a dispute concerns a complex contract, how long would it take for a procurement dispute to be resolved in your jurisdiction (assuming neither party is willing to settle its case).
There are two levels of jurisdiction. On the first level, the law provides for a decision within 5 weeks. However, this time limit is oftentimes prolongated up to 2 or 3 months. On the second level, the duration is at least the same, however oftentimes the appeal courts take longer. A review procedure over two levels of jurisdiction might easily take half a year. On each stage, at least one court session is common.
What rights/remedies are given to bidders that are based outside your jurisdiction?
Review procedures are open to tenderers from other jurisdictions, as well. According to a common understanding, membership of the host state in the EU or GPA is not a prerequisite.
Where an overseas-based bidder has a subsidiary in your territory, what are the applicable rules which determine whether a bid from that bidder would be given guaranteed access to bid for the contract?
Yes. However, a national subsidiary is usually not even required to participate in the procurement or review procedures.
In your jurisdiction is there a specialist court or tribunal with responsibility for dealing with public procurement issues?
Yes, see answer 15. There are review bodies in all German states responsible for review procedures taking place in the respective states. There is also a specialist review body for central government procurements.
Are post-award contract amendments/variations to publically procured, regulation contracts subject to regulation in your jurisdiction?
There are rules governing the relevance of contract amendments during their execution from a public procurement perspective. Such amendments might lead to the necessity of terminating the contract and procure a new one. Changes in the identity of the contractor might indeed constitute a modification which requires a new procedure. However, there is no general answer to these questions as any judgment is highly dependent on the individual circumstances.
How common are direct awards for complex contracts (contract awards without any prior publication or competition)?
Contracting authorities may use a negotiated procedure without prior publication where the works, supplies or services can be supplied only by a particular economic operator. Also, contracts might be awarded directly based on specific exclusions from the procurement laws such as public contracts between entities within the public sector. However, any of these cases are exceptional, and the contracting authorities bear the burden of proof for the justifying circumstances. A contract awarded without any prior publication might be challenged for up to 6 months after contract conclusion by competing economic operators in a review procedure.