German public procurement law has implemented the 2014 EU Procurement Directives (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; and Directive 2014/23/EU on concessions). Different legal regimes apply, depending on whether or not the value of a public procurement contract exceeds the corresponding EU thresholds (see 1.3 Type of Contracts Subject to Procurement Regulation).
Regulations Applicable to Public Contracts at a Value Equal to or Above the EU Thresholds
Part IV of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB) provides rather general rules on the award of public contracts and concessions and the corresponding procurement and review procedures. More specific provisions are set out in the following regulations.
Regulations Applicable to Contracts with a Value Below the EU Thresholds
Public contracts with a value below the relevant EU thresholds are governed, at national level, by the first part of the Rules on Procurement and Contract Procedures for Construction Works (Vergabe- und Vertragsordnung für Bauleistungen, VOB/A, 1. Abschnitt – not to be confused with VOB/A EU), the Regulation on the Award of Public Contracts below the EU thresholds (Unterschwellenvergabeordnung – UVgO), and by federal budgetary law.
The German federal states (Bundesländer) enjoy certain discretion to apply alternative regulations (such as the Rules on Procurement and Contract Procedures for Supplies and Services (Vergabe- und Vertragsordnung für Leistungen – Teil A, VOL/A) instead of the UVgO) or to implement additional state-specific procurement law which may provide for particular award criteria or requirements, such as the respect of minimum wages or compliance with collective labour agreements.
In Germany, public procurement law is to be observed by all entities being contracting authorities as defined in Section 98 GWB. This definition is very broad and covers not only government authorities but also a wide variety of (even private) entities and organisations having a certain connection with the state or performing state tasks in a broader sense. The GWB distinguishes three categories of contracting authorities.
Public procurement law applies to every public contract, ie, a contract for pecuniary interest entered into by a contracting authority (see 1.2 Entities Subject to Procurement Regulation) with undertakings for the procurement of goods, works or services (Section 103 GWB).
The question of which precise statutes and regulations apply to a given contract depends, inter alia, on whether or not the contract value exceeds the corresponding EU thresholds (see 1.1 Legislation Regulating Procurement of Government Contracts), which, in turn, vary with the category of the contracting authority involved (see 1.2 Entities Subject to Procurement Regulation) and the type of contract to be awarded.
These EU thresholds currently amount to:
Several German federal states (Bundesländer) have defined additional thresholds below those set up by the EU, which are relevant as to what type of procurement procedure may be chosen to award contracts of a specific value. Still, all public contracts, irrespective of their value, are subject to public procurement law. A direct contract award (ie, without carrying out a formal award procedure) is generally only admissible subject to very specific conditions (see 5.2 Direct Contract Awards).
In principle, any economic operator who deems itself willing and able to supply the required goods, works or services is free to participate in any tender, subject to the following exceptions.
Specific types of procedure allow restrictions to participate (see 2.8 Restriction of Participation in Procurement Process). In these cases, a contracting authority may invite only a limited number of participants to submit a tender, who have qualified in a prior call for competition under objective, transparent and non-discriminatory criteria. Furthermore, public procurement law requires that public contracts be awarded only to undertakings who are eligible (ie, qualified, authorised and able; see 2.7 Eligibility for Participation in Procurement Process) to perform the contract in question and do not fall under specific criteria which either allow for or require their exclusion from the procedure (Sections 123 and 124 GWB).
Public contracts exceeding the relevant EU thresholds (see 1.3 Type of Contracts Subject to Procurement Regulation) have to be put out to tender within the entire European Union. Foreign tenderers from inside the EU are subject to the same requirements as national tenderers, including the requirement to submit their tender in German language, unless stated otherwise.
Interested parties from outside the EU may participate in tenders worldwide, under the Agreement on Government Procurement (GPA). The GPA is a multilateral agreement within the World Trade Organization framework aiming at mutually opening government procurement markets among its parties who commit to fair and transparent conditions of competition in government procurement. GPA rules do not apply to all of a party's procurement activities, but only to a limited set of constellations explicitly listed in so-called coverage schedules, which involve specific (i) contracting entities, (ii) goods, services or construction services, (iii) value thresholds, and (iv) specifically exempted activities. Hence, the scope of procurement activities falling under the GPA can be very limited, depending on a given party's individual coverage schedule.
Public procurement law constitutes the following five key principles to be observed by public contractors (Section 97 paragraphs 1-6 GWB).
Public contractors are required to open their procurements to competition wherever and to the utmost extent possible. Contracts exceeding certain values must be put out to tender within the entire European Union, not only on the national market. Since public contractors are usually (to a varying extent) publicly funded and not subject to profit maximisation, they have a limited inherent incentive, compared to private undertakings, to act efficiently. The obligation to source themselves in a competitive environment counts among the most effective instruments to ensure this. Therefore, competition can be regarded as the most important principle of all.
When competing for a public contract, tenderers are seeking to match the public contractor’s requirements to the best extent, at the lowest price possible. In order to do so, they need access to all relevant information. The public contractor, on the other hand, will obtain the best matching offers if it makes its requirements as transparent as possible by translating them into a set of valid criteria to which the tenderers can respond to their best ability. This mechanism makes transparency a critical factor for an efficient, well-functioning market. Therefore, public procurement law requires a contracting authority to publish all information relevant for a procedure, in particular the selection and award criteria as well as their relative importance (which may be reflected by weighting factors), to all of the tenderers equally, completely and as early as possible, and to keep these criteria unchanged during the procedure. However, any information on the identity of the tenderers and on details of their tenders are highly classified and may never be disclosed to other tenderers, in order to protect business secrets, ensure competition within the procedure and prevent collusive behaviour among the tenderers. Any leak of information of this sort may seriously endanger the entire procedure and may eventually require it to be discontinued.
Public contractors are required, upon every purchase, to seek the most favourable ratio between the purpose pursued and the means to be spent thereon. Within the concept of EU law, cost-effectiveness was merely understood as a critical factor for identifying the best offer (ie, the one featuring the best quality-price ratio). In German public procurement law, however, it has become a principle on its own, the scope of which goes beyond the mere award decision but also covers already the planning phase of a procurement (as to determine the required scope, quantity and nature of what shall be purchased).
Any decision taken by a contracting authority should always remain in a reasonable relation to the objective pursued. This principle, which is anchored in EU law, is particularly relevant when it comes to defining the requirements and efforts to be imposed on the participants to a tender procedure or to excluding a participant from the procedure.
The principle of equal treatment requires that essentially identical situations be treated equally and substantially unequal situations be treated unequally (Section 97 paragraph 2 GWB). In public procurement law, this principle can take, among others, the following manifestations.
Beside these main principles, contracting authorities must also consider certain strategic aims. In this regard, they enjoy certain discretion to set up requirements that are not directly linked to the quality of the procurement itself, but rather policy-driven, such as fostering quality and innovation as well as social and environmental standards (Section 97 paragraph 3 GWB).
Additionally, contracting authorities are required to consider the interests of small and medium-sized enterprises (SME) in the conceptual design of their procurements (Section 97 paragraph 4 GWB). As a consequence, large contracts which could not easily be performed by SME due to capacity constraints, have to be divided, wherever possible, into several smaller units (partial lots) and/or be grouped by type of work or trade (trade-specific lots), and be awarded separately.
Generally all award procedures at a value above the relevant EU threshold must be advertised by publishing a contract notice within the Official Journal of the European Union (OJEU, www.ojeu.eu) and in the EU public procurement database (Tenders Electronic Daily - TED, www.ted.europa.eu). Contracting authorities must ensure that the procurement documents can be accessed directly, without restrictions and in full by electronic means and free of charge.
For contracts at a value below the EU thresholds, the medium of publication varies, depending on the applicable regulations (see 1.1 Legislation Regulating Procurement of Government Contracts).
For the sake of transparency, the contracting authority must disclose, upon publication of the contract notice, the procurement documents and all essential information relating to the tender.
The procurement documents are usually provided via an electronic address and usually include: (i) the cover letter, particularly the invitation to submit requests to participate or to submit tenders or cover letters for submission of the requested documents; (ii) the terms and conditions to participate (Bewerbungsbedingungen), which include specifications on the selection and award criteria (unless already specified in the contract notice); and (iii) the contract documents, which consist of the tender specifications (Leistungsbeschreibung) and the contract terms.
Furthermore, the contracting authority must publish in the contract notice (advertisement) all essential information, inter alia, about the contracting authority itself; the object of the contract; legal, economic, financial and technical information (inter alia, eligibility criteria); as well as information about the procurement procedure and complementary information, like the body responsible for appeal. For contracts above the EU thresholds, the contracting authority must use the standard form provided in Annex II of the Implementing Regulation (EU) 2015/1986, which further details the information to be published. The information to be published with regard to contracts of a value below the EU thresholds may differ slightly.
A contracting authority is free to conduct market research in preparation of a procurement procedure and to inform undertakings of the procurement plans and requirements (Section 28 VgV), however, it is not permitted to conduct a procurement procedure solely for the reason of market research or price assessment. Therefore, a prior market consultation is an appropriate and sometimes necessary instrument to find out whether the envisaged object of procurement is available on the market at all and, if so, at what price or cost, what alternative products may exist and how competitive the market is.
Where a contracting authority chooses to inform undertakings of its procurement plans and requirements, any possible advantage resulting thereof must be compensated in a later procurement procedure by disclosing this information to all potential tenderers.
The types of tender procedure to be used for the award of a public contract are determined by the applicable procurement law, which depends, inter alia, on the type and value of the contract in question (see 1.1 Legislation Regulating Procurement of Public Contracts and 1.3 Type of Contracts Subject to Procurement Regulation). In this answer, we will focus on the regime for contracts valued at or above EU thresholds (GWB and VgV) as a general guideline; variations apply to sector-specific procurement legislation and legislation governing public contracts at a value below EU thresholds.
Public contracts above EU thresholds are to be awarded by way of either an open procedure, a restricted procedure, a negotiated procedure (with or without prior call for competition), a competitive dialogue or an innovation partnership (Section 119 GWB). Contracting authorities are free to choose between the open and the restricted procedure, with the latter always requiring a prior call for competition. The other three types of procedure may be used only under specific circumstances set out in Part IV of the GWB (see 2.4 Choice/Conditions of Tender Procedure).
In an open procedure, the contracting authority will publicly invite an unlimited number of undertakings to submit a tender, usually within a period of at least 35 days. All tenders submitted are evaluated under the published award criteria (unless they fail to meet the published selection criteria or are to be excluded on specific grounds). The use of the open procedure is not subject to any further requirements. It is a rather basic and highly formalised type of procedure leaving practically no scope for variation, once the procedure has started. Therefore, it may not suit for more complex procurements requiring some flexibility during the course of the procedure. On the other hand, it is easy to control for the contracting authority and – if carried out correctly – provides a high degree of legal certainty. The contracting authority may approach tenderers only in order to request clarification regarding their tender or eligibility. Negotiations on pricing or other modifications of a tender are prohibited.
In a restricted procedure, the contracting authority will publicly invite any interested undertaking to submit requests to participate (referred to as a "call for competition"). The contracting authority will then invite a limited number of participants, which have been selected in the previous call for competition under objective, transparent and non-discriminatory criteria, to submit their tenders. The use of the restricted procedure is not subject to any further requirements. The contracting authority may approach tenderers only in order to request clarification on their tender or their eligibility. Negotiations on pricing or other modifications of the tender are prohibited.
In a negotiated procedure, the contracting authority will approach - either with or without a prior call for competition - a number of selected undertakings in order to negotiate with them the terms of the envisaged contract. Negotiations should aim at improving the tenders and may concern every aspect except minimum requirements and the award criteria. The tenderers will then be granted sufficient time to modify and re-submit their tenders, based on what has been negotiated. When the contracting authority intends to close the negotiations, it will inform the remaining tenderers accordingly and set a deadline to submit any new or revised final tenders. Negotiations on these final tenders are no longer permitted.
In a competitive dialogue, the contracting authority will publicly invite any interested undertaking to submit requests to participate (referred to as "call for competition"). The contracting authority will then invite a limited number of participants, which have been selected in the previous call for competition under objective, transparent and non-discriminatory criteria to enter into a dialogue. During the following dialogue, the contacting authority may discuss all aspects of the procurement with the chosen participants in order to identify and define the means best suited to meet the contacting authority’s requirements. When the contracting authority intends to close the dialogue phase, it will inform the remaining tenderers accordingly and request them to submit their final tenders based on the solution presented and specified during the dialogue phase. These tenders may further be clarified, specified and optimised at the request of the contracting authority, however, at this stage, changes to the essential aspects of the tender or of the public contract including the needs and requirements set forth in the contract notice or in the procurement documents are no longer permitted.
In an innovation partnership, the contracting authority will seek offers for the development of innovative supplies, works or services that are not yet available on the market and then purchase these supplies, works or services without having to put these purchases out to tender separately. Following a prior call for competition, a limited number of undertakings is invited to submit a tender for one or more R&D projects which may be run in parallel with different tenderers, if required. The public contracting authority will then negotiate with the selected undertakings in several phases on their initial and modified tenders and eventually set a deadline for submitting the final tenders. Negotiations should aim at improving the offered solutions and may concern every aspect except minimum requirements, the award criteria and the final tenders. The innovation partnership is then entered into with one or more tenderers and carried out in two successive phases: (i) a research and development phase, which includes the production of prototypes or the development of services; and (ii) a performance phase during which the previously developed goods, works or services are supplied.
For the applicable statutes and regulations, see 1.1 Legislation Regulating Procurement of Government Contracts.
Where negotiations are permissible (ie, in a negotiated procedure or innovation partnership), they may be conducted on the initial and all subsequently revised offers in order to further improve them, however not on thefinal offer. Negotiations may relate to every aspect of an offer, such as quality, quantities, prices or cost of the envisaged supplies, business clauses and social, environmental and innovative aspects, unless they constitute minimum requirements or award criteria, as specified in the procurement documents.
Public contracts above EU thresholds are to be awarded by way of either an open procedure, a restricted procedure, a negotiated procedure, a competitive dialogue or an innovation partnership (Section 119 GWB, see 2.3 Tender Procedure for Award of Contract). Contracting authorities are free to choose between the open and the restricted procedure. The other three types of procedure are available only to the extent that they are permitted by law (VgV in particular):
The negotiated procedure with prior call for competition and the competitive dialogue are permitted under specific circumstances as set out in Section 14 paragraph 3 VgV. These include cases where:
The negotiated procedure without prior call for competition is permitted only under specific exceptional circumstances, which are to be interpreted strictly (Section 14 paragraph 4 VgV). The most common cases are where: (i) no (suitable) tenders have been submitted in an open or restricted procedure; (ii) the contract can be performed only by a specific undertaking due to unique (artistic, technical or legal) characteristics; or (iii) additional supplies have to be purchased from the original supplier.
The innovation partnership is admissible as a procedure if the contracting authority requires the development of innovative supplies, works or services that are not yet available on the market and if the contracting authority is also willing to acquire, in a second step, the innovations that have been developed in the first step.
Legislation governing public contracts at a value below EU thresholds may vary, as several German federal states (Bundesländer) have implemented threshold-based legislation as to what type of procurement procedure may be chosen.
In general, contracting authorities must make the procurement documents available in full, usually via an electronic address, at the time of the contract notice or of the invitation to confirm interest (Section 41 VgV, see 2.1 Prior Advertisement of Regulated Contract Award Procedures). Exceptions apply to certain kinds of documents in two-staged procedures (ie, those with a prior call for competition) which are not crucial for the participants’ decisions to be taken during the first stage, such as draft contracts, schedules, mappings or detailed specifications of the goods or services in question. These documents can later be provided to only the successful candidates upon entering into the actual award procedure.
The time limits for the receipt of requests to participate or the submission of tenders depend on a number of factors eg, the type of procedure used, whether electronic submission is accepted or whether there is particular urgency. The minimum time limits for the receipt of requests to participate range between 15 and 30 days and for the submission of tenders between 10 and 35 days. In a typical procurement procedure, the contracting authority would allow at least 30 days for the receipt of requests to participate and at least 30 to 35 days for the submission of tenders. When fixing the time limits, contracting authorities shall take reasonable account of the complexity of the subject matter and hence the time required to prepare the tenders.
Under all types of procedure, the candidates have to prove, based on a set of criteria (Section 122 GWB) the contracting authority may choose from, that they are eligible (ie, qualified, authorised and able) to properly execute the contract and that there are no grounds to exclude them from the procedure (Sections 123 and 124 GWB). These assessments are mandatory, whereas the chronological order may vary, depending on the type of procedure chosen (see 2.3 Tender Procedure for Award of Contract).
Grounds for Exclusion
Grounds on which to exclude tenderers from the procedure may be either mandatory (Section 123 GWB) or facultative (Section 124 GWB).
A public contractor must exclude a tenderer from the procedure at any time, if it learns that either the tenderer as a company or one or more individuals controlling or representing the tenderer in a responsible function have been convicted of any crime listed in Section 123 GWB – among others, organised crime, terrorism, money laundering, fraud, bribery, human trafficking, forced labour or (relating to companies) evasion of taxes or social security contributions. Companies may, under certain conditions, prevent their exclusion by proving that effective and appropriate self-cleaning measures have been taken (Section 125 GWB).
A public contractor may exclude a tenderer from the procedure at any time, taking into account the principle of proportionality, if it learns that the tenderer has featured any form of misconduct listed in Section 124 GWB, mainly relating to the breach of environmental, social or labour standards or other forms of misconduct having resulted in competitive distortion in connection with public contracting or giving rise to substantial doubts about the tenderer's integrity.
A tenderer who does not fall under either of the above exclusion criteria must also demonstrate that it is eligible to perform the contract (ie, that it meets all of the selection criteria established by the contracting authority). These criteria may exclusively relate to a tenderer's:
More specific criteria exist for architectural and engineering services (Section 75 VgV) and for construction works (Section 16b VOB/A EU). These criteria (including a deadline for them being fulfilled, if applicable) must already be advertised in detail in the contract notice, the prior information notice or the invitation to confirm interest.
Tenderers may prove their eligibility by self-declarations but can also participate in prequalification systems. Prequalification is the examination of an undertaking's eligibility to perform the envisaged contract, prior to or independently of the award procedure. Other than that, contracting authorities have the right to demand additional proofs and appropriate documentation of a tenderer’s eligibility.
For procurement contracts concerning all types of services (including construction works) and at a value of or above the EU thresholds, undertakings have the option to use the European Single Procurement Document (ESPD) instead of certificates in order to prove their eligibility (Section 50 paragraph 1 VgV; Section 6b paragraph 1 VOB/A). They can also reuse an ESPD on future tenders as long as the declarations made therein remain true and valid. Contracting authorities have to accept this format as an – at least preliminary – proof of eligibility, but may request additional documentation at any time in the course of the procedure. A complete separate documentation is to be provided only by the winning tenderer at the end of the procedure.
Where a tenderer cannot meet the required eligibility criteria on its own, it can form a consortium or refer to the capacities of other entities, resources of which it intends (and is entitled) to use. The latter is referred to as so-called "borrowed eligibility" (Eignungsleihe).
Examination of Eligibility
The examination of eligibility (Eignungsprüfung) is an independent step within the tender evaluation as a result of which a tenderer is found either eligible or non-eligible. This step has to be distinguished and carried out separately from the evaluation of the economic aspects and quality of the offer. In particular, the criteria, which have been used to assess eligibility, cannot be reapplied in quality assessment or other subsequent steps (a pitfall of high practical relevance that often puts the entire procedure at risk). The aim here is to determine which candidates or tenderers have the necessary expertise and capacity to fulfil a specific contract. If a tenderer is found non-eligible, it will be excluded from the procedure.
The point in time within the tender procedure when the examination of eligibility is carried out depends on the type of procedure chosen. During an open procedure, the examination takes place after the tenders have been submitted and before the most economically advantageous tender is identified. In the case of two-stage procedures (eg, restricted procedure, negotiated procedure with a prior call for competition – see 2.3 Tender Procedure for Award of Contract), the examination is carried out after the call for competition.
The examination of eligibility is carried out in two steps. In the first step, the contracting authority will assess whether all required documents and proofs have been handed in.
In the second step, the contracting authority will examine whether a tenderer meets the required eligibility criteria, resulting not in a ranking but merely in a yes or no decision. If any of these criteria are not met, the tenderer is to be excluded from the procedure. Otherwise, this would constitute a violation of the principle of equal treatment (see 1.5 Key Obligations). Since the contracting authority enjoys a certain margin of discretion in applying the eligibility criteria, the results are open to judicial review only to a certain extent, for example, as to whether all mandatory procedures have been followed, whether the contracting authority has consistently applied the established criteria, whether it has consistently and accurately identified all relevant facts and has not otherwise based its decisions on irrelevant or inappropriate considerations.
A contracting authority may limit the number of qualified candidates it intends to invite to tender or to engage in dialogue with in all types of procedures, except for the open procedure (Section 51 VgV), and provided that there is a sufficient number of qualified candidates. In order to select these candidates, the contracting authority has to apply objective and non-discriminatory criteria (see 2.7 Eligibility for Participation in Procurement Process) which must be specified beforehand in the contract notice or the invitation to confirm interest.
For EU-wide tender procedures, the minimum number of candidates to be invited is no fewer than five in a restricted procedure, and no fewer than three in all other types of procedure. For tender procedures below the EU thresholds, the minimum number is usually three in all types of procedures but may vary under state-specific legislation(see 1.1 Legislation Regulating Procurement of Government Contracts).
A public contract shall be awarded to the economically most advantageous tender, ie, the one offering the best price-quality ratio, based on the award criteria as specified by the public contracting authority. These may include not only qualitative and cost-relevant aspects, but also environmental or social benefits (Section 127 GWB).
For transparency reasons, the contracting authority must disclose the selection criteria in either the contract notice, the prior information notice or the invitation to confirm interest. The award (evaluation) criteria and their weighting must be specified in the contract notice or the procurement documents (see 2.1 Prior Advertisement of Regulated Contract Award Procedures).
In procurement procedures relating to contract values at or above EU thresholds, a contracting authority must inform all unsuccessful candidates, immediately and on its own initiative, of its decision to reject their application to participate in a dynamic purchasing system. (The same applies to other substantial decisions such as the award decision or decisions to repeal or reinitiate the award procedure, Section 62 paragraph 1 VgV). In addition, upon request of acandidate, the contracting authority has to inform the unsuccessful candidate within 15 days of the reasons for the rejection of its application in writing or by email (Section 62 paragraph 2 VgV).
However, a contracting authority must inform candidates on its own initiative, in writing and without delay before the successful tenderer has been notified of the award decision, of the reasons for the rejection of their application, as well as of other substantial circumstances, such as the name of the successful tenderer and the envisaged closing date. Exemptions from this obligation apply with regard to matters of urgency, defence or security (Section 134 paragraphs 1 and 3 GWB).
The legislation governing public contracts at a value below the EU thresholds varies across the German federal states (Bundesländer) as well as subject to other factors and may provide for different notification obligations.
In procurement procedures relating to contract values at or above EU thresholds, a contracting authority must inform all tenderers, immediately and on its own initiative, of its award decision. In addition, upon request of a tenderer, the contracting authority has to inform the unsuccessful tenderer in the tender procedure within 15 days in particular of the reasons for the rejection of its tender in writing or by email (Section 62 paragraph 2 VgV).
However, a contracting authority must inform tenderers in writing, without delay and on its own initiative before concluding the contract with the successful tenderer,: (i) that their tenders have been rejected; (ii) who the contract will be awarded to; (iii) which considerations were decisive for not awarding the unsuccessful tenderers; and (iv) the envisaged closing date. Exemptions from this obligation apply with regard to matters of urgency, defence or security (Section 134 paragraphs 1 and 3 GWB).
The legislation governing public contracts at a value below EU thresholds varies across the German federal states (Bundesländer), as well as subject to other factors, and may provide for different notification obligations.
A standstill period of either ten or 15 days, depending on whether the information has been sent out by electronic means (including fax) or by post, has to be observed between the notification of the contract award decision and the conclusion of the contract (Section 134 paragraph 2 GWB).
With regard to contracts above the EU thresholds, the competence for legal protection at first instance lies with special review authorities, called public procurement tribunals, at either federal (Vergabekammern des Bundes) or regional level (Vergabekammern der Länder), depending on which administrative level the contracting authority pertains to (Sections 155 and 156 GWB).
The unsuccessful party to a first instance review proceeding may file an immediate appeal (sofortige Beschwerde) to the competent Higher Regional Court (Oberlandesgerichte).
For contracts below the EU threshold, legal protection can, in general, be sought before the competent civil courts (see 4.2 Remedies Available for Breach of Procurement Legislation, with some Federal states' laws providing for exceptions).
Public procurement law provides for two spheres of legal protection.
In EU-wide procurement procedures, a candidate or tenderer who has unsuccessfully complained to the contracting authority (see 4.4 Challenging Awarding Authority's Decisions and 4.5 Time Limits for Challenging Decisions) can seek primary legal protection by filing an application with the public procurement tribunal to review whether the applicant's rights have been violated (Nachprüfungsantrag). If the findings of the public procurement tribunal confirm that the applicant's rights have been violated, it may take suitable measures to remedy such violation and to protect the applicant's interests affected (eg, by ordering the contracting authority to rework the tender documents or to re-evaluate the offers).
Where a public contract has already been awarded, these findings may result in the contract being deemed ineffective from the outset, if the public contracting authority has (i) violated its information and standstill obligation under Section 134 GWB or (ii) awarded the contract without prior publication or announcement in the OJEU without this being expressly permitted by law (Section 135 GWB).
A public contract which has been awarded during and despite a pending review proceeding is void by law (Section 134 German Civil Code – Bürgerliches Gesetzbuch – BGB).
Damage claims(relating tosecondary legal protection) can be enforced pursuant to paragraph 181 GWB and/or the respective provisions of civil law (Section 311 paragraphs 2 and 3, Section 241 paragraph 2, Section 280, Section 823 paragraphs 1 and 2 BGB). Where a review proceeding has been initiated abusively, eg, based on false statements, merely in order to delay the contract award, to harm a competitor or with a view to withdrawing the application for review in exchange for money or other advantages, additional damage claims arise (paragraph 180 GWB) which would include the legal fees incurred as well as the cost relating to the abusive delay of the contract award.
For contracts below the EU thresholds, a review procedure under public procurement law is not admissible. Primary legal protection can usually be sought before the competent civil court (with some federal states' laws providing for exceptions). A candidate or tenderer whose rights have been violated may try to prevent the contract from being awarded by applying for an interim injunction (Section 935 or 940 of the Code of Civil Procedure – Zivilprozessordnung - ZPO).
Damage claims(relating tosecondary legal protection) can likewise be enforced under the respective provisions of civil law (Section 311 paragraphs 2 and 3, Section 241 paragraph 2, Section 280 BGB; Section 823 paragraphs 1 and 2 BGB) before the competent civil court.
Where contracts above the EU thresholds are concerned, an application for review (Nachprüfungsantrag) will automatically suspend the contract award, ie, as soon as a contracting authority has been informed of a review proceeding being filed, it is not allowed to award the contract until the proceeding has been completed and the time limit for an immediate appeal has expired (Zuschlagsverbot,Section 169 paragraph 1 GWB).
However, in order to accelerate the award procedure, the public procurement tribunal may, under certain circumstances (eg, matters of predominant public interest, defence or security) and upon request of either the contracting authority or the potential contractor, permit the contract to be awarded, even before the review proceeding has been completed (Section 169 paragraph 2 GWB).
If a candidate or tenderer is jeopardised in another way than by the imminent award, the public procurement tribunal may, upon request, intervene through further interim measures (Section 169 paragraph 3 GWB), eg, by ordering the contracting authority to extend the deadline for the submission of tenders.
In order to prevent the award of a contract below the EU thresholds, a candidate or tenderer may apply for an interim injunction before the competent civil court (Section 935 or 940 ZPO, see 4.2 Remedies Available for Breach of Procurement Legislation).
To be eligible for filing a review proceeding (Nachprüfungsverfahren) concerning contracts above EU thresholds, a tenderer or candidate must strictly observe its obligation to file a complaint (Rüge) with the contracting authority regarding the potential violation of procurement law it might wish to have reviewed in a later proceeding (Rügeobliegenheit, Section 160 paragraph 3 GWB).
A review proceeding can be initiated upon application of a tenderer or candidate (Nachprüfungsantrag) and subject to the following conditions (Section 160 paragraph 2 GWB): the applicant must (i) have a general interest in the public contract or the concession (which is generally deemed proven by the mere fact that the applicant has submitted an offer); (ii) further establish that its rights have been infringed, due to non-compliance with applicable public procurement law; and (iii) demonstrate that it either has been or is at risk of being harmed by the alleged violation.
With regard to contracts below EU thresholds, unsuccessful tenderers can challenge the awarding authority’s decisions before the competent civil courts under largely the same conditions.
In order to be entitled to file a review proceeding concerning a contractabove the EU thresholds, the tenderer or candidate must first file a complaint (Rüge) to the contracting authority in writing about the alleged violation of public procurement law within ten calendar daysafter having become aware of such violation. If the contracting authority refuses to redress the alleged violation(s) the applicant may apply to the public procurement tribunal for review (Nachprüfungsantrag) within 15 calendar daysof receipt of the refusal.
The public procurement tribunal will then try the case, usually within a period of five weeks, which may be extended in cases of particular factual or legal difficulties by another two weeks. The unsuccessful party may then file an immediate appeal to the competent appellate court within a (non-extendable) period of two weeks upon notification of the decision by the public procurement tribunal.
Compensation for damages under secondary legal protection (see 4.2 Remedies Available for Breach of Procurement Legislation) can be claimed within three years (ie, the standard limitation period under German civil law, Section 195 BGB, starting on the last day of the calendar year in which (i) the claim has arisen or (ii) the damaged party has obtained knowledge of its rights being violated, whichever occurred last, Section 199 BGB).
The length of proceedings relating to a procurement claim depends on a number of factors eg, to what extent the parties make use of the relevant periods for submitting applications, documents or for notification, whether and how often extension of these periods are granted and, in particular, on the complexity and specific circumstances of the individual case.
To the authors' experience, proceedings at first instance (from complaint to the contracting authority to decision of the public procurement tribunal) typically range from two to four months, whereas proceedings at second instance (from decision of the public procurement tribunal to decision of the competent appellate court) usually take another three to eight months.
Based on statistics for the last two decades, the average number of procurement claims brought before German public procurement tribunals amounts to approximately 1,000 per year, whereas the average number of appeals before the Higher Regional Courts amounts to approximately 200 per year.
The costs for challenging an awarding authority’s decision depend on a number of factors, in particular the contract value, whether or not the decision at first instance is appealed against, whether and to what extent external legal, technical or economic expertise is required and the overall duration of the proceedings.
The legal fees for a review proceeding at first instance usually range from EUR2,500 (for contract values of approximately EUR80,000) to EUR50,000 (for contract values of approximately EUR70 million). Where appropriate, the minimum fee can be reduced to EUR250 whereas, in individual cases of particular complexity and economic significance, the maximum fee can be increased up to EUR100,000.
The legal fees for an immediate appeal are calculated pursuant to the schedule of costs annexed to the Court Fees Act (Anlage 1 und 2Gerichtskostengesetz – GKG) and depend on several factors. For a contract value of up to EUR80,000, the basic fees would amount to EUR3,144, and for a value of EUR500,000 to EUR14,144. Since proceedings before the Higher Regional Courts require representation by a lawyer, this will also have to be budgeted.
The prevailing party to either of the above-mentioned proceedings will usually be entitled to be reimbursed some or most of their litigation costs by the unsuccessful party, depending on the circumstances of the individual case.
The modification of a public contract during its term is usually not permitted and will require a new procurement procedure, unless the changes made are only immaterial (Section 132 GWB). A change is considered material, in particular if it introduces conditions that would have attracted a different target group of potential tenderers or otherwise affect essential provisions like the scope of or the parties to the contract or the risk allocation among the latter.
Exceptions apply, inter alia, where precise review provisions or options for changes were already featured in the initial procurement documents or where additional services are required that no one other than the initial contractor can provide, eg, for technical reasons. Modifications are also permissible if the overall nature of the public contract as a supply, work or service contract remains unchanged and the contract value is not affected significantly, meaning that the thresholds set out under 1.3 Type of Contracts Subject to Procurement Regulation are not exceeded and that the initial contract value increases by no more than 10% in the case of supplies and services contracts and by no more than 15% in the case of works contracts.
For contracts above the EU thresholds, direct awards are only permitted if Part IV of the GWB is not applicable due to explicitly regulated exceptions which have to be interpreted narrowly.
Further exceptions exist for the award of public contracts by sector contracting entities (Section 137 GWB), in the fields of defence and security (Section 145 GWB) and for licences (Sections 149, 150 GWB).
For contracts below the EU thresholds, direct awards are permitted within the scope of UVgO where the estimated contract value does not exceed EUR1,000 (excluding taxes), and within the scope of VOB/A if under EUR3,000 (the latter being effective since 1 March 2019, see 5.4 Legislative Amendments Under Consideration). Further legislation applicable to public contracts below the EU thresholds may differ slightly.
In 2019, there have been quite a few court decisions which affect both contracting authorities and tenderers, three of which are stated as examples below.
By its decision of 13 May 2019 (case No VII-Verg 47/18), the Higher Regional Court of Düsseldorf related to the contracting authority’s obligation to provide, in the contract notice, an electronic address where the corresponding procurement documents can be accessed directly, in full, free of charge and without restrictions (Section 41 paragraph 1 VgV; see 2.1 Prior Advertisement of Regulated Contract Award Procedures). The court specified that these requirements were not met where parts of the documents are made available via secondary electronic addresses that are disclosed under the main address but not in the contract notice itself. As a consequence, contracting authorities need to ensure that all procurement documents can be accessed directly and in full via the electronic address specified in the contract notice.
In a decision dated 20 November 2019 (case No 14 U 191/13), the Higher Regional Court of Celle stressed the obligation of tenderers to thoroughly scrutinise the procurement documents prior to submitting an offer. Even though there is no general obligation for tenderers to point out errors in the procurement documents to the public authority, they may not simply accept or ignore tender specifications being manifestly incomplete or incorrect and use the resulting margin of interpretation in their favour. They rather must proactively address and eliminate such ambiguities before submitting an offer. Where a tenderer fails to do so and instead chooses to submit an offer based on mere speculation or wishful thinking, such offer will be binding and may not be altered due to his misinterpretation, once he is awarded the contract.
In a judgment dated 17 September 2019 (case No X ZR 124/18), the German Federal Court of Justice (Bundesgerichtshof - BGH) ruled on the preconditions necessary for participants to an award procedure to obtain secondary legal protection (see 4.2 Remedies Available for Breach of Procurement Legislation). The court held that the prior filing of a complaint by means of an official review proceeding due to irregularities that have occurred in the award procedure is no precondition necessary for subsequent claims for damages. Consequently, a participant who has become aware of irregularities is not obliged to initiate an official review proceeding, should he later wish to claim for the resulting damages.
Following the implementation of the 2014 EU Procurement Directives in 2016, electronic means of communication were introduced into German public procurement law as preferred means for transmitting and storing data in award procedures above the EU thresholds (Section 97 paragraph 5 GWB). As a consequence, on 18 October 2018, the use of electronic means became mandatory for both contracting authorities and tenderers in all fields of public procurement in Germany relating to contractsabove the EU thresholds. As of 2020, the same rules extend to those contracts below the EU thresholds that fall under the scope of the Regulation on the Award of Public Contracts below the EU Thresholds (Unterschwellenvergabeordnung – UVgO, Section 38 paragraph 3 and Section 7). This regulation applies to all authorities of the German federal government (Bundesbehörden) and to the authorities of those federal states (Bundesländer) which have chosen to implement the UVgO rather than their own state-specific procurement law (see 1.1 Legislation Regulating Procurement of Government Contracts).
The German federal government’s plans (as per its 2018 coalition agreement) to consolidate the procedural rules for the award of goods and services (VgV) on the one hand, and for construction works (VOB/A) on the other, into one single procedural code were rejected in December 2019 by a joint working group of the Federal Ministry for Economic Affairs and the Federal Ministry of the Interior.
However, an amended version of the Rules on the Procurement and Contract procedures for Construction Works (VOB/A 2019) entered into effect in two stages on 1 March 2019 and on 18 July 2019 after some necessary adjustments were made to the VgV and the Procurement Regulation on Defence and Security (VSVgV). This new VOB/A 2019 helps facilitate procurement procedures for construction works, for example, by allowing for the direct award of contracts valued below EUR3,000 or by lowering the administrative requirements for certain proofs of eligibility.
Another modification of the VSVgV, the Law on the Acceleration of Procurement in the Fields of Defence and Security and on the Optimisation of Procurement Statistics (Gesetz zur beschleunigten Beschaffung im Bereich der Verteidigung und Sicherheit und zur Optimierung der Vergabestatistik), entered into effect on 2 April 2020. It provides, inter alia, for shorter procedural deadlines in cases of particular urgency and facilitates the direct award of certain types of contracts; for example, in relation to key technologies or the fight against terrorism and organised crime.
There are no other major changes of national or EU procurement legislation expected in the near future.