Public Procurement & Government Contracts 2020

Last Updated April 06, 2020

Austria

Law and Practice

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Schoenherr is a leading full-service law firm providing local and international companies stellar advice that is straight to the point. With 15 offices and four country desks, Schoenherr has a firm footprint in Central and Eastern Europe. Schoenherr's lawyers are recognised leaders in their specialised areas and have a track record of getting deals done with a can-do, solution-oriented approach. Quality, flexibility, innovation and practical problem-solving in complex commercial mandates are at the core of Schoenherr's philosophy. Schoenherr's public procurement team has worked on some of the most complex public procurements and public-private partnership projects in CEE/SEE, across all major industries (such as health, energy, infrastructure and public transport), and is well-versed in the economic, legal and industry-related challenges and expectations (such as sustainable and green procurement).

The procurement of government contracts is regulated in Austria by the Federal Public Procurement Act 2018 (BVergG 2018), the Federal Public Procurement Act for Concessions (BVergG - Konzessionen) and the Federal Defence and Security Procurement Act (BVergGVS). The BVergG 2018 implements the Directives 2014/24/EU and 2014/25/EU and 2007/66/EC and therefore covers the legal framework for the awarding of both public contracts from public entities and entities in the utilities sector. The BVergG - Konzessionen transposes the Directive 2014/23/EU and the BVergGVS transposes the Directive 2009/81/EC covering the procurement procedures in the defence sector.

In addition, there are eight State Acts (regulating the competent jurisdiction and the appeal proceedings before the State Administrative Courts ("Landesverwaltungsgerichte" or LVwG" for those appeal procedures that are in the responsibility of the States. Appeal proceeding being in the responsibility of the Federal State are covered by the BVergG 2018.

The public procurement regulations generally apply to public procurement procedures of public purchasers, such as the Federal State, the States, the municipalities and municipality associations (territorial entities). Furthermore, the public procurement regulations covers (all) entities which are controlled, financed, or supervised by territorial entities or other public entities which have been established for the specific purpose of meeting needs in the general interest, which do not have an industrial or commercial character, and which do have legal capacity at least in part (eg, ASFINAG, ÖBB, ORF, public hospitals, universities, etc). Subsequently, associations consisting of one or more public entities are also covered by the BVergG 2018.

Furthermore, the public procurement regulations also apply to contracts awarded by purchasers other than public entities (as described above) engaging in at least one of the utilities activities pursuant to special or exclusive rights granted by an authority having jurisdiction over them.

The procurement regulation (BVergG 2018, BVergGVS, BVergG Konzessionen) cover award procedures for the procurement of public supply contracts, works contracts/works concessions, service contracts/service concessions. However, the (national) procurement rules only apply in case certain thresholds are exceeded, currently EUR100,000. Contracts falling below that threshold can be directly awarded without following a certain procedure. Besides the relevant EU thresholds determining the obligation to initiated EU-wide tender proceedings. These threshold values are:

  • EUR5.3 million for works contracts and works concessions;
  • EUR214,000 for supply contracts and service contracts;
  • EUR139,000 for supply and service contracts awarded by centralised public authorities;
  • EUR428,000 for service and supply contracts awarded by utilises; and
  • EUR428,000 for service and supply contracts in the defence and security area.

Generally, the Federal Public Procurement Act also applies to the award of contracts to companies from third countries. Therefore, generally all companies, irrespective of their nationality or country of origin, have the right to participate in public tenders of Austrian public or utilities contracting authorities. However, the public procurement regulation provides for the possibility to excluded bidders from the participation in procurement procedures which are seated in states that are neither party to the GPA nor to the EEA.

The key obligations under legislation follow the basic (underlying) principles of public procurement law, namely the fundamental freedoms under Community Law, and the ban on discrimination on the basis of the principles of free and fair competition and equal treatment of all applicants and tenderers. Hence, public procurement contracts shall be awarded in transparent proceedings to qualified, capable, and reliable entrepreneurs at reasonable prices.

Any restrictions as to territory or certain professions are not permitted. These principles are applicable for all procurement procedures (above and below the thresholds mentioned in 1.3 Types of Contracts Subject to Procurement Regulation) and serve as the main principles and guidelines for the interpretation of the BVergG.

Generally, unless certain exemptions are provided, any regulated contract award procedure shall be advertised in certain publication media.

Public procurement procedures above the relevant EU threshold have to be advertised at Union level through the Publications Office of the European Union (Publications Office) by using the standard forms introduced by Regulation (EU) No 2015/1986. The standard forms can be found at http://simap.ted.europa.eu/web/simap/standard-forms-for-public-procurement. The advertisement is published in OJEU. Besides the announcement at Union level, there is also an obligation to advertise public procurement procedures in Austria on a national level.

This obligation applies to public procurement procedures above the EU threshold and below the EU threshold. Since march 2019 contracting authorities are obliged to announce public procurement procedures via Open Government Data (OGD). The respective announcement can be found under the following link: https://ausschreibungen.usp.gv.at/at.gv.bmdw.eproc-p/public/tenderlist.

However, contracting authorities are free to additionally advertise tender procedures on their homepage or in other media, such as regional newspapers.

Content wise, advertisements shall include the following minimum information: Name, identification number (where provided for in national legislation), address including NUTS code, telephone, fax number, email and internet address of the contracting authority and, where different, of the service from which additional information may be obtained; information where and how the procurement documents are available, type of contracting authority and main activity exercised; information whether the contracting authority is a central purchasing body or that any other form of joint procurement is involved, CPV codes; information whether the contract is divided into lots, NUTS code for the main location of works, supply or services; and a description of the procurement including the nature and extent of works, the nature and quantity or value of supplies and the nature and extent of services.

Where the contract is divided into lots, this information shall be provided for each lot: estimated total order of magnitude of contract(s); admission or prohibition of variants; time-frame for delivery or provision of supplies, works or services and, as far as possible, duration of the contract/framework agreement or dynamic purchasing system; conditions for participation, including a list and brief description of eligibility and selection criteria; information on the type of award procedure; and information re the contract award criteria, information regarding the bid/tender submission (deadlines, address, language, format, etc), name and address of the review body.

Contracting authorities are entitled to carry out market surveys in preparation for the launch of an award procedure. In this context the contracting authority may, inter alia, consult companies that are potential candidates or tenderers in order to gather ideas for that procedure.

Within the scope of this consultation (market exploration), information on the planned award procedure (eg, problem descriptions, schedules) can already be disclosed to these companies. This consultation can also be carried out with third parties (independent experts, authorities or other companies). The information obtained can be used to plan and implement the respective award procedure, provided that this does not distort competition or violate the principles of public procurement.

The public procurement legislation generally provides for a closed catalogue of available procurement procedures. (Public) contracts can be awarded in the course of an open procedure, restricted procedure (with and without prior notice), negotiated procedure (with and without prior notice), direct award procedure, direct award with prior notice, competitive dialogue, dynamic purchasing system, electronic auction, design and realisation contests, a framework agreement or an innovation partnership.

The open procedure is characterised by the fact than an unlimited number of entrepreneurs is publicly invited to submit tenders.

In the case of restricted procedures (with prior notice), any economic operator may request to participate but only candidates invited to do so may submit a tender. Hence, in the restricted procedure, the contracting authority preselects a limited number of qualified entrepreneurs (either directly or based on a request to participate) to be directly invited to submit tenders.

As a rule, the contracting authority must not conduct any negotiations in the open procedure and in the restricted procedure.

In the negotiated procedure with prior notice, applicants selected from an unlimited number of entrepreneurs are publicly invited to submit applications to participate. Based on the evaluation of the applications to participate a certain number of entrepreneurs is selected and invited to submit tenders. Contrary to the open procedure and the restricted procedure the full scope of the procurement can be negotiated with the tenderers.

In the negotiated procedure without prior notice, the contracting authority directly invites preselected candidates of its choice to submit offers and subsequently negotiate full scope of the procurement with them.

The direct award procedure is characterised by the fact that services, works or products are directly obtained from a freely chosen entrepreneur. As the case may be, purchasing entities may request binding bids or price indications from one or more entrepreneurs prior to the direct award. 

By contrast, in case of a direct award with prior publication, contracting authorities are requested to publish the main characteristics of the intended purchasing activity (eg, the subject of the procedure, selection criteria) at the beginning of the procedure. However, the subsequent procedure is not regulated and can be designed freely by the contracting authority.

The competitive dialogue procedure is designed for awarding complex contracts if the technical solutions or the legal and/or financial makeup of a project cannot be defined sufficiently. The competitive dialogue is conducted in several stages and comparable with the negotiated procedure. After pre-selection of the tenderers in the course of a pre-qualification phase selected candidates are invited in order to define the best solution for the project in several dialogue phases. Candidates submit their final tenders based on the findings in the course of the dialogue.

A contracting entity may hold an electronic auction to award a contract. The electronic auction can be applied only after a procurement procedure (such as an open or restricted procedure) has taken place. Before proceeding with the electronic auction, the contracting authority shall make a full initial evaluation of the tenders in the course of a procurement procedure.

All tenderers who have submitted admissible tenders shall be invited to take part simultaneously by electronic means. Bidders can subsequently optimise their offers during several phases.

Framework agreements are agreements between one or more economic operators and one or more contracting authorities and are characterised by the fact the contracting authority can obtain services/supplies/works within the framework agreement by initiating one or several call offs. However, there is no obligation to obtain any service, supply or works. Framework agreement shall only be concluded after conducting an open, restricted, or negotiated procedure and selecting the respective bidders.

As the dynamic purchasing system is a completely electronic process, an unlimited number of entrepreneurs are publicly invited to submit non-binding declarations for the provision of commercially available services. Subsequently, all economic operators satisfying the selection criteria are invited to submit a bid.

Design contests are procedures serving to provide purchasers in particular those in the fields of zoning, city planning, architecture, construction/civil engineering (design contests); promotion or data management with a plan or design to be selected by a jury on the basis of certain evaluation criteria with or without awarding prizes. Realisation contests lead to a negotiated procedure in which a public service contract is awarded after carrying out a design contest.

The innovation partnership aims at the development of an innovative product, service or works and the subsequent purchase of the resulting supplies, services or works. Similar to the negotiated procedure the innovation partnership is structured in successive phases following the sequence of steps in the research and innovation process, which may include the manufacturing of the products, the provision of the services or the completion of the works.

As a rule, contracting authorities can generally freely choose between the open procedure and the restricted procedure (with prior publication). All other procedures are subject to certain conditions.

The negotiated procedure with prior publication and the competitive dialogue may generally be applied, inter alia, if the services to be performed prevent defining contractual specifications as required to award the contract with the provisions for an open or restricted procedure, if the subject of the award procedure is the acquisition of innovative products or if the complexity of the contract requires negotiations.

Procurement procedures without prior publication may only be applied in exceptional circumstances (such as extreme urgency or if the specific contract can only be carried out by a particular contractor for certain reasons) due to the lack of transparency (such as the negotiated procedure or the restricted procedure without prior publication). The direct award procedures may only be conducted in case the estimated contract value falls below certain threshold (EUR100,000 and EUR130,000, respectively).

As a rule, all tender documents (including the pre-section questionnaire, the invitation to tender, the full list of services or the draft contract) shall be unrestricted and freely available once the contract notice is published.

However, due to the current wording of the law, it is currently unclear whether contracting authorities are also obliged to grant access to the contract and certain other documents with the contract award notice in case of two-step procedures (eg, negotiated procedure with prior publication or restricted procedure with prior publication).

As a rule, contracting authorities shall take into account the complexity of the contract and the time required for drawing up tenders when setting the procedural time limits. Additionally, the public procurement regulations provide for certain minimum time limits for the receipt of expressions of interest and of tenderers. The specific minimum time limit depends on both, the specific type of award procedure and whether the contract value exceeds or falls below the EU threshold.

Above the relevant EU threshold, the minimum time limit for submitting an expression of interest varies between 15 days (in case of extreme urgency) and 30 days. The minimum time limit for the tender submission varies between ten to 15 days (in cases of extreme urgency) and in regular proceedings between 25 days (restricted procedure and negotiated procedure with prior publication) and 30 days (open procedure).

For award procedures below the EU threshold shorter minimum time limits apply (eg, 20 days for the submission of tenderers in the open procedure). 

As a rule, public procurement contracts shall only be awarded to qualified, capable and reliable entrepreneurs at reasonable prices. Therefore, the regulation provides for a catalogue of eligibility criteria, namely the suitability to pursue the professional activity, economic and financial standing the technical and professional ability and the reliability/non fulfilment of exclusion grounds that have to be fulfilled by interested parties in order to participate.

The regulation further provide for a closed catalogue of means of proof for the fulfilment of the above-mentioned criteria. Solely in relation to the financial and economical capability the regulation leaves a certain discretion to the contracting authority when it comes to specifying the required means of proof.

Contracting authorities may limit, ie, reduce, the number of qualified bidders in two stage procedures (namely restricted procedures with prior publication, negotiated procedures with prior publication, competitive dialogues and innovation partnerships) based on selection criteria.

Selection criteria must be disclosed in the tender documents and are required to be objective, non-discriminatory, related and proportionate to the subject of the contract. Usually, certain eligibility criteria (such as the average turnover or previous projects in the past) are applied. However, as a rule the number of qualified suppliers may generally not fall below three.

Once the bids have been submitted, the contracting authorities enter the phase of evaluating the tenders, resulting in the contract being awarded. When evaluating tenders, the contracting authority shall evaluate whether the tender complies with all formal requirements (such as the observance of time limits, signature requirements, etc) and with the qualification and selection criteria (as the case may).

As a rule, tenders may not deviate from the requirements set forth in the tender documents and the contract award notice. The remaining bids will be evaluated corresponding to the contract award criteria specified in the tender documents and the contract notice. Contracts may be generally awarded based either on the lowest price or on the most economically advantageous tender/lowest cost (MEAT). In the latter case, further criteria related to the subject-matter of the contract shall be established, such as quality performance criteria, social criteria or environmental criteria.

However, the public procurement regulation generally establishes a preference towards the MEAT principle. A focus on the pure price competition (lowest price principle) is, generally, only permissible if the quality standard of the service has been specified in the service description so clearly and unambiguously in technical, economic and legal terms that the submission of comparable tenders at a defined (quality) level is guaranteed.

Furthermore, the procurement legislation provides for a closes catalogue of situations/procedures where the application of the MEAT principle is mandatory. Pursuant to the public procurement legislation the award of the contract shall be made to the technically and economically most advantageous tender in the following situations

  • A contract shall be awarded for the provisions of intellectual services which are to be awarded by negotiated procedure
  • A contract shall be awarded based where the description of the performance is essentially functional,
  • A public works contracts with an estimated value of at least EUR1 million shall be awarded
  • The contract is awarded by means of a competitive dialogue, or an innovation partnership

Finally, criteria used for the selection or qualification of tenderers may not be used as award criteria.

Selection criteria, qualification criteria and contract award criteria shall be disclosed either in the contract notice or in the tender documents. Furthermore, the contract notice and/or the tender documents shall provide information in relation to the relative weighting of the criteria (including potential sub criteria).

While the procurement regulations do not explicitly provide for the obligation to disclose the evaluation methodology, both the common practice as well as the relevant case law confirm that the evaluation methodology has to be disclosed in the tender documents for transparency reasons.

Contracting authorities are obliged to notify interested parties who have not been selected for participation in the contract award procedure of the reasons for this decision. The reasoning provided must be sufficient detailed in order to enable the unsuccessful bidder to evaluate whether he should initiated appeal / review proceedings. This should occur immediately and, at the latest, within one week of an award decision.

Contracting authorities are obliged to inform unsuccessful bidders in writing (e-mail, fax, letter, etc) regarding decisions reached in relation to the award decision. The contract award decision has to provide substantial reasoning (characteristics and relative advantages of the tender selected, characteristics and reasoning why the unsuccessful bidder has not been selected as well as the name of the successful tenderer or the parties to the framework agreement, etc). Furthermore, the notification has to provide information about the end of the "standstill period".

The public procurement regulations provide for a standstill period between the notification of the contract award decision and the conclusion of the contract of at least ten calendar days (in case of electronic availability of the contract award decision) or 15 days (in case of transmission vie postal delivery), respectively. As a rule, any contract award during the standstill period shall be null and void.

The Austrian public procurement review system is characterised by different authorities on the federal state level and the state level. With regard to procurement procedures attributed to the federal state, the competent review body is the Federal Administrative Court ("Bundesverwaltungsgericht" or BVwG). At the state level, the competent review bodies are the individual Administrative Courts at the state level ("Landesverwaltungsgericht" or LVwG). Both decisions of the LVwG as well as decisions of the BVwG can be appeal before the Constitutional Court and the Supreme Administrative Court within six weeks after the respective decision has been rendered.

Before signing of the contract aggrieved applicants or bidders can file an application for challenging and declaring specific decisions of the contracting authority as null and void. The public procurement regulation provides for an exhaustive list of contracting authority's decisions being subject to an appeal (such as the contract notice, the tender documentation, the decision to exclude a bidder, the invitation to bid or the contract award decision).

After the signing of the contract, a declaratory proceedings ("Feststellungsverfahren") procedure may be initiated with the aim of stating defects within the award procedure being challenged (declaratory decision) and the annulment of an illegal direct award, as the case may be. If the contract cannot be declared as null and void (eg, due to predominantly public interest) the contracting authority can be fined with a penalty up to 20 % of the contract value.

Furthermore, aggrieved applicants or bidders may demand compensation in the civil courts if the procurement regulations was infringed and the contracting authority was to blame for the infringement in question. In principle, the aggrieved enterprises may demand compensation for the costs of preparing the tender, compensation of participating in an award procedure, or (alternatively) compensation for lost profits, provided the bidder would have been awarded the contract if the infringement had not occurred.

However, a declaratory decision of the competent review authority stating the non-conformity of the procurement procedure/contract award constitutes a mandatory requirement and therefore the basis for damage claims before the civil courts. Accordingly, a complainant seeking damages must first obtain a respective declaratory decision from the review authority.

Since challenging a specific decision of the contracting authority does not stop the specific award procedure applicants are required to apply for an interim measure (for example, so as to suspend the contract award procedure, to suspend the standstill period or to suspend the opening of the bids) jointly with the respective appeal.

In order to file a contestation, economic operators must have a claim to having an interest in obtaining the respective contract and to being harmed by the alleged infringement or being in jeopardy of incurring a loss due to the alleged infringement of the award provisions. Therefore, the standing to file a complaint is denied if the prospective filer’s request to participate or lodge a bid is out of the question.

Consequently, an enterprise that did not submit a bid has no standing in challenging the award decision. Furthermore, bidders who have been excluded or who must necessarily be excluded have, generally, no standing. Finally, neither subcontractors nor single members of a bidding consortium do have a standing to file an appeal.

The time limits for filing a contestation depend on the subject of contestation (tender documentation or another contestable decision of the contracting authority). In general, any separately contestable decision has to be contested within ten days after the bidder becomes aware of the contested decision. Tender documents shall be contested at latest seven days prior to the deadline for submitting applications to participate or the bid submission deadline.

The (Federal/State) Administrative Courts generally have to rule on a review application within six weeks after the application has been filed. However, in practice review proceedings take between six weeks and three months, depending on how heavy the workload is at Courts. Proceedings aiming for a declaratory decision have to be finalised within six months after the filing of the respective application.

The average number of procurement claims per year significantly deviate by the respective review body.

While the number of pubic procurement claims filed before the Federal Administrative Court amount to 270 per year the average number of public procurement claims filed before the nine State Administrative Courts ("Landesverwaltungsgerichte") amount to approximately 300 (and as such, approximately 35 files per State Administrative Court). All in all, approximately 600 public procurement claims are filed in Austria per year.

The typical costs involved in challenging an awarding authority’s decision significantly depend on:

  • the value of the respective contract being tendered;
  • the type of award procedure chosen and
  • the competent review body.

Considering these factors, the cost (court fees) range from EUR324 to almost EUR40,000 for filing an appeal to the Court. Additionally – as the case may be – the cost for applying for interim measurers (preliminary injunction) have to be considered amounting to half of the costs for the appeal, while the court fees have to compensated by the unsuccessful party each party has to carry its own lawyers' fees.

Pursuant to the public procurement regulations modifications of a public contract after award generally require a new procurement procedure, unless a certain (exhaustively listed) exemption explicitly provides for the possibility to change or extend a contract.

The public procurement regulations provide for the following exemptions that make modifications permissible following the contract award:

  • the subject and circumstances of the modification is provided in the original tender documents in clearly, precisely and clearly formulated contract amendment clause;
  • the modification covers additional works, services or supplies by the original undertaking that have become necessary and that were not included in the initial procurement provided that a change of the undertaking cannot be made for technical or economic reasons;
  • the modification has become necessary due to circumstances which a diligent contracting entity could not foresee, provided that the modification of the contract does not alter the overall nature of the contract;
  • a new contract partner replaces the undertaking to whom the contracting authority had originally awarded the contract provided that such change of the contracting partner is clearly formulated in the contract or the change of the contracting partner is caused be legal succession (including acquisition, merger, acquisition or insolvency) provided that the new contractor meets the initial eligibility criteria;
  • the public contracting authority itself assumes the obligations of the main undertaking from its subcontractors;
  • the modifications are only minor and do neither exceed the relevant threshold nor 10% (service and supply contacts) or 15% (works contracts) of the initial contract value; and
  • the modification is not materially different to the original contract awarded, demonstrating the parties’ intention to renegotiate the contract’s essential terms.

The public procurement legislation provides for the possibility to direct award a contract if the estimated contract value falls below EUR100,000. The legislation provides for the possibility to conduct exclusive negotiations with only one entrepreneur in extraordinary situations, such as extreme urgency, only a specific entrepreneur can provide the required services due to technical reasons or exclusive rights or the new services consist in the repetition of similar services, and the contract is awarded by the same contracting authority to the undertaking who has received the original contract and such a subsequent award has been reserved in the initial tender documents.

Most of the last years decisions issued by the Supreme Administrative Court subjected the public procurement legislation before the implementation of the Directives 2014. However, the below mentioned decision are also relevant for the current legislation in force.

In its decision of 22 March 2019 (VwGH, 22.03.2019, Ro 2017/04/0022) the Supreme Administrative Court ruled that a subcontractor as defined in the procurement legislation is an entrepreneur who undertakes to produce parts of the contract concluded with the contractor by himself or to have them produced under his personal responsibility. An enterprise (merely) that enables the contractor to perform the contract, is an "auxiliary enterprise" (and no subcontractor).

In order to assess the subcontractor status, it is necessary in each case to determine the concrete contractual agreement reached between the bidder participating in the award procedure and the respective third party company - in the case of a chain of contracts also the determination of the other contractual relationships establishing the performance obligation - which is to provide services for the bidding company within the framework of the performance of the contract. The delamination between subcontractors and auxiliary enterprises is important since only subcontractors have to be disclosed in the tender.

In its decision of 27 February 2019 (VwGH, 27.02.2019, Ra 2016/04/0103) the Administrative Supreme Court stated that the weighting of the contract award criteria may not be changed throughout the whole procedure; however, a contracting authority may, after the deadline for submission of tenders expired, set weighting coefficients for sub-criteria which essentially correspond to criteria previously brought to the attention of tenderers.

The Administrative Supreme Court further stated that it is not permissible under public procurement law to submit two tenders that correspond to the invitation to tender and differ only in price; the situation is different in the case of tenders submitted by one tenderer that also show a difference in the service offered that is relevant for evaluation.

Currently, there are no legislative amendments to the procurement legislation expected.

Schoenherr

Schottenring 19
A-1010 Wien

+43 1 534 37 0

+43 1 534 37 66100

office.austria@schoenherr.eu www.schoenherr.eu
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Law and Practice

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Schoenherr is a leading full-service law firm providing local and international companies stellar advice that is straight to the point. With 15 offices and four country desks, Schoenherr has a firm footprint in Central and Eastern Europe. Schoenherr's lawyers are recognised leaders in their specialised areas and have a track record of getting deals done with a can-do, solution-oriented approach. Quality, flexibility, innovation and practical problem-solving in complex commercial mandates are at the core of Schoenherr's philosophy. Schoenherr's public procurement team has worked on some of the most complex public procurements and public-private partnership projects in CEE/SEE, across all major industries (such as health, energy, infrastructure and public transport), and is well-versed in the economic, legal and industry-related challenges and expectations (such as sustainable and green procurement).

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