The Government Procurement Review: Germany
German public procurement law provides different requirements and review procedures for tenders above and below EU thresholds.
At or above EU thresholds, contracting authorities and entities must comply with public procurement provisions of the Act against Restraints of Competition (GWB) and several delegated acts. The GWB lays down the procurement principles, provisions on the scope of application and exemptions, definitions of contracting authorities and entities, covered contracts and concessions, as well as general rules on procedures, eligibility, exclusion, award criteria and review procedures. Delegated acts, including the following, cover different contract types and areas of public procurement:
- The Ordinance on the Award of Public Contracts (VgV) applies generally to service and supply contracts.
- Section 2 of the Construction Contract Procedures – Part A (VOB/A) and certain provisions of the VgV contain provisions on public works contracts.
- The Ordinance on the Award of Concessions (KonzVgV) governs concession awards.
- The Ordinance on the Award of Public Contracts by Entities operating in the Water, Energy and Transport Sectors (the Utilities Ordinance (SektVO)) covers public procurement in the utilities sectors.
- The Ordinance on the Award of Public Contracts by Contracting Authorities or Entities in the Field of Defence and Security (VSVgV) applies to defence and security contracts.
Various EU and national laws apply to concessions and public service contracts for public passenger services, depending on the form of transportation.2
Below EU thresholds, public tendering, in principal, is considered a matter of budgetary law.3 The harmonised national Procedural Rules on the Award of Public Supply and Service Contracts below EU Thresholds (UVgO) were enacted at the federal level in 2017, as well as in most federal states except for Hesse, Rhineland-Palatinate, Saxony and Saxony-Anhalt. Pursuant to the federal and state (budgetary) laws, the first Chapter of the VOB/A remains applicable for public works contracts. While the UVgO and the first Chapter of the VOB/A generally mirror the provisions of the VgV and the second Chapter of the VOB/A, the contracting authorities have more flexibility below EU thresholds.
Contracts and concessions above and below EU thresholds are further subject to the fundamental procurement principles of competition, transparency, cost effectiveness, equal treatment, non-discrimination and proportionality. Additionally, the interests of small and medium-sized enterprises must be taken into account mandatorily and public contracts generally have to be divided into lots in Germany. Aspects of quality and innovation, as well as social and environmental considerations, need to be considered too. In addition, most federal states have enacted procurement laws requiring adherence to tariffs, minimum wage levels and other social criteria.
Germany has not established a central body defining government purchasing or procurement policies or enforcing compliance. In particular, at federal level, several guidelines, such as the Federal Procurement Handbook on works, have been published and use of certain standard terms and conditions is required; for example, for information technology (IT) supplies and services. Furthermore, institutions such as the Federal Competence Centre for Sustainable Procurement offer assistance to federal, state and municipal authorities on these aspects of procurement.
Public procurement in Germany – as in other EU Member States – is also subject to the World Trade Organization Agreement on Government Procurement (GPA).
Year in review
Given the tremendous global and national impact of the covid-19 pandemic, the federal ministries, most German states and the European Commission swiftly published interpretative guidelines on how to use exemptions for urgent procurements. In particular, goods and services required for the containment of the pandemic (e.g., medical equipment) and any short-term management related thereto or for ensuring the functioning of the public administration during an essential lockdown (e.g., IT equipment for remote work) can be procured in negotiation procedures without a call for competition because of the urgency caused by the pandemic.
For procurements below EU thresholds, the federal government and several states further adopted new, or adjusted the existing, threshold values for negotiated procedures or direct procurements. Pursuant to the temporary federal guidelines, negotiation procedures with or without a call for competition are available for contracts of up to €100,000 (supply and services) or €1 million (works). To ensure transparency and competition, contracting authorities have to publish any contract with an estimated value exceeding €25,000 on the federal website http://www.bund.de prior to the contract award. Several federal states established even higher threshold values, with some of them not even limited to the duration of the pandemic. Other federal states did not adjust the thresholds at all or only raised them for certain goods and services relevant to combating the pandemic.
Administrative guidelines also address the effects of the covid-19 pandemic on ongoing public works and construction delays.
Legislative changes to accelerate procurement in defence and security came into force in 2020. They exempt certain key technologies in the security and defence sector from the procurement rules under Article 346 of the Treaty on the Functioning of the European Union (TFEU). They also define certain urgent military or security cases that do not require a negotiated procedure with a call for competition (e.g., foreign military missions, defence against terrorist attacks, major damage situations).
Several changes to the Ordinance on Procurement Statistics for Public Contracts and Concessions 2016 (VergStatVO) provide for data that enable a more reliable overview on public procurement in Germany by the Federal Statistical Office. As from 1 October 2020, contracting authorities and contracting entities have to report to the Federal Ministry for Economic Affairs and Energy information about any concluded public contract and concession above EU thresholds. Below EU thresholds, the VergStatVO includes information on contracting authority contracts with a value exceeding €25,000.
In 2019, the Court of Justice of the European Union (CJEU) ruled that the minimum and maximum tariffs of the binding Fee Ordinance for Architects and Engineers (HOAI) infringe the freedom to provide services.4 A reform of the HOAI to ensure conformity with EU rules came into force on 1 January 2021. Following this reform, remuneration for architectural and engineering services can generally be agreed by contract. The new fee tables of the HOAI contain non-binding orientation fees only. If no fee agreement is concluded, the basic fee rate, which corresponds to the previous minimum rate, is deemed agreed. The consequences of the CJEU ruling for contracts concluded before the HOAI reform remain controversial.5 The Federal Court of Justice forwarded a question to the CJEU on how the invalidity of the minimum and maximum tariffs affects existing contracts.6
The European Commission's request to Germany pursuant to Article 258 TFEU to rectify violations of EU rules regarding a provision for architectural planning services is still pending. Pursuant to the request only lots for similar planning services have to be taken into account in the calculation of the contract value of the relevant construction project.7 The federal government has defended the regulation in question. German review bodies showed some caution in applying the provision because of the alleged conflict with EU law.8
Scope of procurement regulation
i Regulated authorities
German procurement law implements the EU procurement definitions of contracting authorities and contracting entities, including in particular the common contracting authorities (i.e., federal, state, regional and municipal authorities and their respective special funds) and the bodies governed by public law (i.e., public and private legal entities established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, either publicly financed or majority-controlled by the common contracting authorities, as well as their respective associations).9 For example, the CJEU confirmed that statutory health insurance schemes and public broadcasting corporations qualify as contracting authorities. Further, public and private entities qualify as contracting authorities for certain projects that are more than 50 per cent state-funded.10
Contracting entities in the utilities sector comprise all contracting authorities, as well as any persons or companies that have a specific activity in the water, energy and transport sector, and either operate on the basis of special or exclusive rights granted by a competent authority or over which contracting authorities may exercise directly or indirectly a dominant influence by virtue of their ownership, their financial participation or the rules that govern them.11 Unlike the 2014 Utilities Contracts Directive, postal services are not covered by the German utilities regime. Production and wholesale of electricity from conventional sources, retail supply of electricity and gas12 and, to a certain extent, exploration and extraction of petroleum, gas and coal13 have been exempt based on their exposure to competition.
Below EU thresholds, typically only the common contracting authorities are subject to public procurement requirements pursuant to the federal and state budgetary laws.
ii Regulated contracts
Generally, public contracts on services or supply of goods (VgV) and works (VOB/A) as well as concessions (KonzVgV) are subject to public procurement requirements, each with specific provisions for utilities (SektVO) and defence and security (VSVgV). The VSVgV – with most recent changes in 2020 (see Section II) – covers contracts on the supply of military equipment or equipment awarded under a classified contract, as well as other supplies, works and services directly connected to such equipment, and works and services specifically for military purposes or works and services awarded under a classified contract. The definition of works and service concessions of the 2014 Concession Contracts Directive has been exactly transposed into the KonzVgV.
Certain social, health, legal and other services are subject to less restrictive public procurement requirements.14
The GWB, in accordance with the 2014 Procurement Directives, exempts certain contract matters from public procurement requirements15 (e.g., the acquisition and lease of real estate, the necessity to protect essential security interests of the Federal Republic of Germany within the meaning of Article 346 TFEU (see Section II), and certain financial instruments). However, exempted contracts may still be subject to the procurement principles derived from the TFEU and federal or state budgetary laws. The CJEU has decided that the scope of the exemption for emergency services in Germany is not fully in accordance with EU law.16 The Federal Constitutional Court rejected a constitutional complaint on procedural grounds as the complainant should first have sought a remedy from the procurement review bodies.17
Substantial modifications of public contracts or concessions generally require a (new) tender procedure.20 Modifications are considered substantial in particular if the modification extends the scope of the contract considerably or introduces conditions that would have allowed for the admission of other candidates or for the acceptance of other tenders, unless the modification has been provided for in a clear, precise and unequivocal review clause in the initial procurement documents. A transfer of the contract to another contractor generally requires a new procurement procedure, unless the transfer forms part of a corporate restructuring and the new contractor is eligible under the initial tender requirements.
Special contractual forms
i Framework agreements and central purchasing
Framework agreements can be awarded under the procurement schemes for values both above and below EU thresholds. Framework agreements are defined as agreements between one or more contracting authorities and one or more economic operators, the purpose of which is to establish the terms governing contracts to be awarded during a given period, in particular with regard to price and, where appropriate, the quantity envisaged.21 Framework agreements are generally subject to the same public procurement requirements as other public contracts, including public notice requirements. Individual contract orders under a framework agreement are awarded pursuant to the rules of the framework agreement, which can provide for a mini competition between framework contractors. The maximum contract term for framework agreements is generally limited to four years (seven years for security and defence contracts and eight years in the utilities sector), in each case possibly longer under exceptional circumstances.
Central purchasing means that a contracting authority provides centralised purchasing activities and, possibly, ancillary purchasing activities for other contracting authorities. Central purchasing is an option22 but not that frequently used in Germany other than for standard products. At the federal level (e.g., the Federal Ministry of the Interior, Building and Community, as well as the Federal Ministry of Defence) central purchasing bodies have been established (Federal Procurement Office; Federal Office of Bundeswehr Equipment, Information Technology and In-Service Support), which, inter alia, set up the fully electronic Federal Department Store to meet the standard demands of all federal authorities (e.g., office supplies).
Under the SektVO, contracting entities can use qualification systems. The publication of a qualification system has the function of a call for competition. The contracting entities can use such systems to procure specific contracts exclusively among economic operators pre-qualified under the system.23 Beyond the utilities, procurement laws provide for other pre-qualification procedures (especially for public works); however, these only simplify the eligibility documentation and do not substitute a call for competition.
ii Joint ventures
Germany has transposed the EU criteria for in-house procurement derived from CJEU case law, as specified in the 2014 Procurement Directives, in the GWB.24 In-house procurement is exempt from public procurement requirements if the contracting authority exercises control over the contractor that is similar to that contracting authority's control over its own departments, as long as the contractor provides more than 80 per cent of its services or supplies to the contracting authority or to other legal persons controlled by that contracting authority. The contractor may not have any private shareholders. The control may also be exercised jointly with other contracting authorities. The in-house exemption also applies in horizontal and inverse (bottom-up) control scenarios.
Further, contracts between contracting authorities are exempt from public procurement requirements if (1) the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common; (2) the implementation is governed solely by public interest considerations; and (3) the market activities of the participating contracting authorities count for less than 20 per cent of their activities covered by the cooperation. This 'inter-municipal' cooperation has its roots in several German cases heard by the CJEU. In 2020, the CJEU clarified that to qualify as a cooperation it is not sufficient for a partner only to pay for the costs, and that such a cooperation must not grant a competitive advantage to a private undertaking.25 The mere formation of a special purpose association linking local authorities for joint performance of certain tasks, which is common in the transport sector or for waste management, is generally not subject to public procurement requirements.
Public–private partnerships (PPPs) can require a public tender in different respects. For example, the selection of a private partner has to be tendered for an 'encapsulated' contract. If the private partner has not been selected by public tender, the later award of a contract to the PPP has to be tendered, unless an exemption (e.g., the in-house exemption) applies. The PPP itself is bound by procurement requirements if it qualifies as a contracting authority (e.g., because of predominant financing or control by a contracting authority); see also Section III.i.
The bidding process
Above EU thresholds, all calls for competition in Germany have to be transmitted via electronic standard forms to the Publications Office of the EU, which publishes the notices in the online version of the Supplement to the Official Journal of the EU, the platform 'Tenders Electronic Daily' (TED). The notice may only be published at the national level after it has been published by the Publications Office or 48 hours after the Publications Office's confirmation of receipt of the notice. Apart from essential data on the contracting authority and the subject matter of the contract (including CPV codes for the goods, services and works), in particular all eligibility criteria and their respective proof requirements have to be contained in the notice. The notice must also include a link through which the procurement documents can be retrieved free of charge. While case law used to be very strict about including all eligibility criteria explicitly in the notice itself, more recent decisions allow contracting authorities to make a precise reference in the notice to the eligibility criteria in the online procurement documents and to provide only certain parts of the procurement documents upon publishing the notice in a two-stage or multi-stage procedure.26
The mere intention to tender a public contract in the future can be published through an indicative notice, which decreases the minimum time frames for a subsequent tender.
The award of a contract has to be published within 30 days of the award of the contract; and within 48 days for the award of concessions and in the area of defence and security. The notice has to include the name of the successful tenderer.
A notice on TED is also required for certain exempt contracts. Apart from explicit requirements of this kind, a transparency notice may be required in light of fundamental EU principles. In this case, publication on TED is not necessary, but certainly sufficient.
Below EU thresholds, public notices of the tender in adequate federal, state, regional or local publications are common. Nevertheless, any notice subject to UVgO must be available online and via the federal platform http://www.bund.de.
The procurement laws generally provide for open, restricted and negotiated procedures (with or without a call for competition) as well as competitive dialogues and innovation partnerships.27 Any interested party is invited to submit a bid in an open procedure. Tenderers first have to submit a request for participation (RfP) in a restricted or a negotiated procedure. Contracting authorities typically limit the number of tenderers for the bidding phase of such procedures based on an evaluation of the eligibility of the RfPs. Unlike an open or restricted procedure, a negotiated procedure allows for negotiation of the (initial) bids, provided that the substance of the tender is not modified. Competitive dialogues are rarely used in Germany. Innovation partnerships are still fairly new, but certainly an interesting option for contracting authorities and contractors.
Contracting authorities are generally free to choose an open or restricted procedure. A negotiated procedure is only available under limited circumstances, for example, if the procurement needs cannot be met by readily available solutions without adaptation or if the contract includes innovative solutions.
Under the SektVO, contracting entities are free to choose any procedures with a call for competition. Under the Security and Defence Procurement Ordinance, the open procedure is not available.
The procedures for tenders below EU thresholds are similar to the procedures at or above the EU thresholds, but provide more flexibility.
iii Amending bids
Before the end of the submission deadline, tenderers can typically withdraw their bid and also submit a new bid instead. Once the submission deadline has expired, amendments to bids are not permissible and tenderers may only clarify their bids upon the contracting authority's request, unless the applied procurement procedure allows for negotiations (see Section V.ii). The contracting authority may subsequently request missing or incomplete information. Such information must not change the application or bid.28 The contracting authority has to further evaluate the pricing and underlying calculation if the price of the tender appears unusually low.
Amendments of or additions to the contracting authority's procurement documents by the tenderers are inadmissible. They qualify as mandatory grounds for exclusion if the procurement documents were clear and if these amendments or additions cannot be interpreted in a way that is in conformity with the procurement documents. The contracting authority may, however, explicitly permit variants if it sets up minimum requirements for the variants and the award criteria apply to both the main tender and the variants. The contracting authority is free to determine the minimum requirements for variants, provided that they are objective, transparent and non-discriminatory.29
i Qualification to bid
Contracting authorities typically define selection criteria for the tenderers' eligibility.30 These criteria may concern the tenderers' suitability to pursue their professional activity, their economic and financial standing and their technical and professional ability. The criteria must be adequate and proportionate for the subject matter of the contract and be published in the contract notice. They regularly include a request for references on past comparable contracts. Any minimum eligibility requirements have to be stipulated clearly. Self-declarations are sufficient, unless the contracting authority requests particular documents for proof.
A tenderer can rely on the capacity of other economic operators, provided that the tenderer can prove that it will have at its disposal the other operators' capacities necessary for the contract (i.e., 'capacity loan'). The availability of the capacities can be proven through a declaration of commitment signed by the applicable capacity lending operator. A joint liability can be required in the case of a capacity loan for economic and financial ability. Actual performance shall be required in the case of a capacity loan for technical and professional ability.
Contracting authorities may have to exclude economic operators from a particular tender. They are generally obligated to exclude economic operators (mandatory grounds for exclusion), inter alia, in cases of criminal convictions or administrative fines for bribery or money laundering.31 Convictions can – in the German implementation of the directive – be imputable to a tenderer if the convicted person has acted as the responsible person for the management of the undertaking, including supervision of management or the exercise in another manner of control in a managerial position. It is at the contracting authorities' discretion to decide on the exclusion of an economic operator (facultative grounds for exclusion); for example, for having provided false information to influence the contracting authority's decision, having violated a major requirement under a former public contract, or for indications of anticompetitive behaviour.32 Economic operators shall not be excluded based on convictions or past major failures if they can prove self-cleaning or if specified periods have lapsed.33
The Federal Competition Register, which was activated by the Federal Cartel Office in March 2021, is intended to facilitate decisions of this kind (see Section X).
The SektVO provides for more leeway on the part of the contracting entity. The number of eligibility criteria is not limited, but essentially they have to be adequate, objective, transparent and non-discriminatory. Further, any exclusion – even if based on grounds that are mandatory grounds for exclusion in the general procurement regime – is at the discretion of the contracting entity.
ii Conflicts of interest
Representatives of a contracting authority exposed to a conflict of interest may not participate in a tender procedure.34 A conflict of interest exists if the representative is involved in the conduct of the procurement procedure or may influence the outcome of that procedure and, at the same time, that representative (or a close relative) has a direct or indirect financial, economic or personal interest that might be perceived to compromise impartiality and independence in the context of the procurement procedure. This conflict is assumed for persons who are tenderers or advise, support or represent a tenderer or are employed or work for a tenderer or for a company that has business relationships with both the contracting authority and the tenderer. In principle, any violation may be challenged by tenderers and may require repetition of the steps in question without the conflicted person. As ultima ratio, a violation may lead to the suspension of the procurement process, if necessary.
The principle of secrecy of competition requires that tenderers – as well as the contracting authority – keep generally confidential the tenderer's participation in a tender, as well as information on bids. A bid that has been prepared with knowledge of relevant details of another tenderer's bid usually has to be excluded from the procurement procedure.
Having been involved in the preparation of a procurement procedure does not automatically lead to exclusion.35 The contracting authority has to take all necessary measures to ensure a level playing field for all bidders before considering exclusion as a last resort.36
iii Foreign suppliers
In accordance with the EU principle of non-discrimination, no difference shall be made directly or indirectly between tenderers from Germany or any other EU Member State.
In general, German procurement provisions do not discriminate against non-EU tenderers (those coming from GPA signatory states or even from countries without a multilateral or bilateral procurement agreement). These third-state tenderers can generally resort to the same rights as tenderers from Germany and the EU. However, contracting entities in the utilities sector can reject bids for supply contracts where the proportion of the products originating in third countries exceeds 50 per cent. Third countries are countries other than members of the EU or EEA that have not signed an agreement on reciprocal access to markets.
The introduction of the International Procurement Instrument proposed by the European Commission in 2016 to ensure more reciprocity in international public procurement markets, in particular with a view to state-subsidised tenders, is still pending. Following further discussions in the European Council in 2020, a proposal on a specific regulatory approach by the European Commission is expected in 2021, in line with its industrial strategy and including a tightening of the rules for foreign direct investments in the EU and assessment of third-country subsidies.
i Evaluating tenders
The contract has to be awarded to the most economically advantageous tender.37 This can be the best price or a combination of the price and qualitative criteria adequately linked to the subject matter of the contract. In the field of security and defence, three quality criteria are explicitly mentioned: interoperability, operating capability and supply reliability. The award criteria and their relative weight have to be published in the notice or in the procurement documents.
The award criteria must be comprehensible and concrete to allow all bidders to prepare their bids accordingly. After years of a more restrictive understanding by some higher regional courts, the Federal Court of Justice has clarified that 'school grades' or other point scales for evaluating qualitative criteria can generally be used with certain specifications.
For the award of concessions, the authority may, inter alia, subsequently change the weighted order of the criteria in cases of bids with an unpredictable, innovative solution.38 In that case, the authority has to inform the bidders of the modification and issue a new invitation to submit tenders.
ii National interest and public policy considerations
Considerations of national interest cannot be used as award criteria. The principles of non-discrimination and equal treatment generally prohibit preference of domestic suppliers (see Section VI.iii). However, particular considerations of national interest may exceptionally lead to exemption from public procurement requirements where it is necessary for the protection of the essential interests of the security of the Federal Republic of Germany (see Section III.ii) or may imply strict requirements when handling sensitive or classified information, in particular pursuant to the VSVgV.
Among other criteria, public policy considerations can generally be included in procurement proceedings if they are related to the subject matter of a contract (see also Section X). In particular, social and environmental criteria can be used as award criteria (e.g., life cycle costs) and tenderers may have to be excluded for violations of environmental or social law. Further, contracting authorities can require certain social or environmental conditions for contract implementation (e.g., adherence to tariffs or energy consumption limits).
If the contracting authority requires certain quality labels for the offered product or service, these quality labels must be based on objective, reviewable and non-discriminatory criteria and have been designed in an open and transparent procedure involving all interested parties. Comparable quality labels must be accepted.
The notice and in particular the procurement documents must contain all information relevant for an economic operator to decide whether to participate in the procurement proceedings and to prepare his or her bid. Tenderers may ask questions about the tender documents or the performance specifications. To ensure equal treatment and a competitive tender process, the answers to these questions have to be made available to all tenderers.
The contracting authority has to inform the tenderers whose bids have not been successful prior to the contract award. This information has to include the name of the successful tenderer, the reasons for the rejection of the tenderer's tender and the earliest date the contract can be awarded.39 The contracting authority may award the contract at the earliest 10 calendar days after the information has been sent out electronically or via fax (15 calendar days after dispatch in the case of a postal information letter). Contracting authorities can restrict the information provided to unsuccessful bidders in the field of security and defence, inter alia, if the information would be contrary to the public interest or if it would prejudice the legitimate commercial interests of a particular economic operator. At present, the provision of information to unsuccessful bidders together with a standstill period is not required40 for contracts below EU thresholds (except in a few federal states).
During and after the procurement procedure, the contracting authority has to protect the confidentiality of the tenders submitted. Equally, tenderers may not disclose confidential information received from the contracting authority.
A tenderer can file an application for review to the competent public procurement tribunal, based on alleged violations of procurement law above EU thresholds,41 provided that the tenderer has previously raised an objection against the alleged violation in relation to the contracting authority within 10 days of positive knowledge of the potential infringement or, as applicable, prior to the end of the relevant RfP or bid deadline. Public procurement tribunals are part of the federal or state administration, but the proceedings are quasi-judicial. Each federal state has one or two regional public procurement tribunals and, at the federal level, two public procurement tribunals have been set up at the Federal Cartel Office.
Review procedures are only admissible if the applicant can show an interest in the public contract (usually indicated by its participation in the procurement procedure) and is potentially harmed by the alleged procurement law violation. Also, an application for review must be filed within 15 calendar days of the contracting authority decision constituting the alleged violation.
Review procedures should generally be concluded within five weeks, with a potential two-week extension; however, on several occasions they are extended further. The public procurement tribunal decision can be appealed to the competent higher regional court. The Federal Court of Justice only decides on referrals by a higher regional court regarding deviations from other higher regional court decisions to ensure harmonised application of procurement law in Germany. Public procurement tribunals can, and higher regional courts must, refer a question on the interpretation of the procurement directives and regulations or the EU treaties to the CJEU if they consider that a decision on the question is necessary to enable them to render a judgment.
Almost 1,000 applications for review were filed with the public procurement tribunals in 2020. The number rose about 25 per cent compared to 2019. Approximately 7 per cent of the applications were not submitted to the contracting authority because they were considered obviously inadmissible or without merit (see Section IX.iii). Applicants were successful in approximately 12 per cent of the public procurement tribunal decisions. In approximately 160 cases, the unsuccessful party appealed to a higher regional court. Appellants were successful in approximately 21 per cent of the appeal decisions.
Only Hesse, Saxony, Saxony-Anhalt and Thuringia provide for particular review proceedings for tenders below EU thresholds, otherwise the civil or administrative courts – depending on the subject matter of the envisaged contract – have jurisdiction.
ii Grounds for challenge
The review body assesses whether the contracting authority has violated the applicant's rights under procurement law, namely any provision that shall protect the tenderers or competition between tenderers, which is essentially almost all public procurement provisions (apart from, inter alia, the obligation for contracting authorities to consider the energy efficiency of products or to limit the contract award to bidders with a tariff conformity declaration).
Violations of other requirements beyond public procurement laws are only reviewable if they are referred to in the procurement provisions and have a close link to the procurement or procurement procedures, namely in particular certain aspects of competition, state aid law and the provisions on the economic activity of municipal undertakings. Because of the limited scope of procurement review procedures, potential non-compliance of contractual provisions with, for example, requirements for standard terms and conditions42 do not have to be raised in procurement review procedures to be considered in later civil court proceedings.43
Unless the public procurement tribunal considers the application obviously inadmissible or without merit, it forwards the application to the contracting authority, which is then barred from awarding the contract until (at least) two weeks from the public procurement tribunal's decision in the review proceedings.44 In the event of an appeal to the higher regional court, the appellant can apply for, and is typically granted, an extension of the suspensory effect of the review proceedings until the court's decision.
In its decision, the public procurement tribunal has to order the contracting authority to take the appropriate measures to redress the violation of the applicant's rights and to prevent any damage to the applicant's interests. The public procurement tribunals have broad discretion but may only prescribe such suitable and proportional actions as are necessary to remedy the infringement. If the contracting authority still intends to proceed with the procurement, the tribunal typically orders the authority to redo the deficient procurement steps taking into account the legal consideration of the review body.
After an award of a contract, a public procurement tribunal can declare the contract ineffective only if the contracting authority did not adhere to the prior award notice and standstill period or if the contracting authority has not published a required contract notice or not conducted a required public tender (de facto procurement).45 The complaint must be filed within 30 days of the bidder information letters or award notice or, in the absence of this information or notice, not later than six months from the conclusion of the contract.
The review bodies cannot impose administrative fines for breaches of procurement law. However, procurement procedures may be subject to administrative supervision and review by audit offices.
Bidders can claim compensation for the costs of bid preparation and participation if they would have had a reasonable chance to be awarded the contract in the absence of the violation of procurement law.46 Other grounds for compensation remain applicable; however, claims for compensation of expected profits (i.e., the positive interest in the contract) are rarely successful. Compensation claims generally have to be filed with the civil law courts (seldom with the administrative law courts) and do not necessarily require a remedy to have been sought in a previous procurement review procedure.47
The coming months will show how the covid-19 pandemic will further affect procurement procedures and legislation (see also Section II). Most alleviations, such as the raising of value thresholds for the use of negotiated procedures with or without a call for competition, have been prolonged until 31 December 2021.
The Federal Statistical Office expects to do a first analysis and plausibility checks of the new procurement statistic data (see Section II) in the first half of 2021. The Federal Ministry for Economic Affairs and Energy plans to publish the first results in 2021.
Under the long-term objective of a climate-neutral federal administration until 2030 and in line with the European Green Deal, the federal government plans to adopt an administrative guideline in 2021 that shall further foster climate-friendly procurement. These plans follow reforms on energy efficiency in 2020 that require public authorities to procure the product with the highest efficiency class available.
The federal government also plans to implement binding rules on supply chain management for large companies. The federal parliament will discuss the proposal in the spring of 2021 and it will be adopted before the next federal elections in the autumn of 2021. According to the proposal, responsible supply chain management violations shall also allow for facultative exclusion of a bidder from procurement procedures. Administrative fines for such violations shall also be listed in the Federal Competition Register (see below).
Although the German Competition Register Act48 on the establishment and operation of a register for the protection of competition for public contracts and concessions has been in force since 29 July 2017, its technical implementation took several years. The Federal Cartel Office activated the Federal Competition Register at the end of March 2021, commencing the obligation for public authorities to report any relevant final criminal judgments, penalty orders and fines to the Register. Six months after the activation of the Federal Competition Register, the rules requiring public authorities to request information from the register shall apply. Until then, the state competition and (anti-)corruption registers remain in place.
1 Jan Bonhage is a partner and Simone Terbrack is a senior associate at Hengeler Mueller Partnerschaft von Rechtsanwälten mbB.
2 Such as Article 5 of Regulation (EC) No. 1370/2007, Section 131 GWB, Sections 8a and 8b of the German Public Transport Act (PBefG). See CJEU C-266/17 and C-267/17, Rhein-Sieg-Kreis.
3 This chapter covers only tenders above EU thresholds, unless specifically indicated otherwise.
4 C-377/17 Commission v. Germany.
5 See OLG Hamm, decision of 23 July 2019, 21 U 24/18 (direct effect only on the Member State, not on the contracting parties) as opposed to OLG Celle, decision of 14 August 2019, 14 U 198/18, KG, decision of 13 September 2019, 7 U 87/18, and OLG Düsseldorf, decision of 17 September 2019, 23 U 155/18 (no more application of rule on ineffectiveness of fee agreements that undercut HOAI tariffs).
6 Federal Court of Justice, decision of 14 May 2020, VII ZR 174/19.
7 Section 3(7) sentence 2 VgV.
8 OLG München, decision of 13 March 2017, Verg 15/16; CJEU, C-574/10 Commission v. Germany.
9 Section 99 No. 1-3 GWB.
10 Section 99 No. 4 GWB. Cf. Article 13 of the 2014 Public Contracts Directive, which instead defines regulated contracts, not authorities, in these cases.
11 Sections 100, 102 GWB.
12 Section 140(1) GWB; Commission implementing decisions of 24 April 2012 (OJ L 114, p. 21) and of 15 September 2016 (OJ L 253, p. 6).
13 Section 143 GWB.
14 Sections 130, 153 GWB.
15 Sections 107, 116, 117, 137 to 140, 145, 149 to 150 GWB.
16 C-465/17 Falck Rettungdienste GmbH, Falck A/S v. Stadt Solingen.
17 Federal Constitutional Court, decision of 30 March 2020, 1 BvR 843/18.
18 Section 46 EnWG.
19 Section 61 TKG.
20 Section 132 GWB.
21 Section 103(5) GWB.
22 Section 120(4) GWB.
23 Sections 37, 48 SektVO.
24 Section 108 GWB.
25 C-796/18 Informatikgesellschaft für Softwarre-Entwicklung; C-429/19 Remondis.
26 OLG Düsseldorf, decision of 17 October 2018, VII-Verg 26/18, and of 11 July 2018, VII-Verg 24/18. See also OLG Celle, decision of 19 March 2019, 13 Verg 7/18, OLG München, decision of 25 February 2019, Verg 11/18, and of 13 March 2017, Verg 15/16.
27 Section 119 GWB.
28 OLG Karlsruhe, decision of 14 August 2019, 15 Verg 10/19.
29 OLG Düsseldorf, decision of 20 December 2019, VII-Verg 35/19.
30 Section 122 GWB.
31 Section 123 GWB.
32 Section 124 GWB.
33 Sections 125, 126 GWB.
34 Section 6(1) VgV; Section 6(1) SektVO; Section 5(1) KonzVgV.
35 C-21/03 and C-34/03 – Fabricom.
36 Section 7 VgV; Section 7 SektVO.
37 Section 127 GWB.
38 Section 31 II 1 KonzVgV.
39 Section 134 GWB.
40 OLG Celle, decision of 9 January 2020, 13 W 56/19, KG, decision of 7 January 2020, 9 U 79/19. Tending towards a general standstill period below EU thresholds: obiter dictum of OLG Düsseldorf, decision of 13 December 2017, I-27 U 25/17.
41 Section 155 et seq. GWB.
42 See for consequences of (inadmissible) terms and conditions of a bidder: Federal Court of Justice, decision of 18 June 2019, X ZR 86/17.
43 OLG Koblenz, decision of 21 November 2019, 1 U 298/19 (pending at Federal Court of Justice, VII ZR 287/19); OLG Celle, decision of 19 March 2019, 13 Verg 7/18. Against: OLG Celle, decision of 18 January 2018, 11 U 121/17.
44 Section 169(1) GWB.
45 Section 135 GWB.
46 Section 181 GWB.
47 Federal Court of Justice, decision of 17 September 2019, X ZR 124/18.