09. April 2013
This contribution is designed to provide an overview of the public procurement legislative framework in Germany.The primary aim of public procurement law in Germany is to secure efficient use of public funds. With budget cuts on national, regional and local authority levels and the need to spend tax payers’ money wisely, the procedures applicable to the award of public contracts of many millions of euros plays and important role.
I. Introduction to German public procurement
The value and breadth of benefits public procurement can bring to both public authorities and contractors is sometimes underestimated. Yet due to lower thresholds being applied for European-wide public procurement contracts, most awards fall within a complicated regulatory framework which public authorities need to get used to using. While public authorities and contractors are beginning to recognise the potential of public contracts, there are also risks which need to be managed.
The following is a general overview of the highly relevant and exciting area of public procurement.
II. Germany’s public procurement legal framework
Rules laying down the framework for public authorities to follow when awarding public contracts were first introduced in the 20th century. In the 1920’s the then Imperial Government of Germany set up the Committee for Public Procurement (Reichsverdingungsausschuss). In 1926 the committee published official guidance containing standard rules for the award of public construction contracts.
After World War II the German Committee for the Award of Public Contracts in Construction (Deutscher Verdingungsausschuss für Bauleistungen) was created. This committee exists today under the name: German Committee for Public Procurement and the Award of Contracts in Construction (Deutscher Vergabe- und Vertragsausschuss für Bauleistungen). Its task is to revise the public procurement regulations in Germany.
European Union and German public procurement legislation
The European Union, formerly European Community, introduced measures to harmonise the public procurement legal framework across the EU’s member states. Legislation in the form of directives came into force to address the patchwork of regulation in the area of public procurement which had developed.
The two most important EU directives in the area of public procurement are directives 2004/18/EC and 2004/17/EC. These directives were transposed into German law and as a result it is probably more appropriate to speak of a codified EU public procurement law rather than German public procurement law. However, there are some unique characteristics and exclusions in Germany’s public procurement regulatory framework.
Transposition of the directives into German law occurred using a somewhat unusual procedure. Instead of adopting a new Act of Parliament introducing the EU’s measures into German law, the required changes were integrated into existing acts and regulations. The idea between this implementation process was to create a sort of filing system which could be cross-referenced to the type of public contract available. In this way, public authorities and prospective contractors would know which legal provisions apply in any specific case.
The initial result, however, was a confusing array of coinciding rules; yet on second glance the pieces of the puzzle begin to fall into place.
To implement the EU directives modifications were made to the following legislation:
- German Act Preventing Restriction of Competition – (Gesetz gegen Wettbewerbsbeschränkungen (GWB));
- Public Procurement Rules – (Vergabeordnung (VgV))
- Regulations on Public Procurement and the Award of Contracts in the Transport, Water and Energy Sectors – (Sektorenverordnung (SektVO))
- Rules on Public Procurement and the Award of Contracts for Construction Services – (Vergabe- und Vertragsordnung von Bauleistungen (VOB))
- Rules on Public Procurement and the Award of Contracts for Services – Vergabe- und Vertragsordnung für Leistungen (VOL)
- Rules on Public Procurement and the Award of Contracts for Freelance Services – (Vergabe- und Vertragsordnung für freiberufliche Dienstleistungen (VOF))
The first step to recognising which of the various public procurement rules apply to a certain case is to assess what financial threshold applies to the contract. There are two types of contract:
- Type 1: national public contracts (which are below an applicable threshold)
- Type 2: European public contracts (which exceed an applicable threshold)
The current threshold under public supply and service contracts awarded by top federal authorities and similar institutions is €130,000. The threshold for all other public supply and service contracts is €200,000. For public construction contracts the threshold is €5,000,000 (see §2 VgV).
The level at which a contract is being offered and its value affect which rules are applicable.
National public procurement contracts (awards below the threshold)
The national legislative framework applies to public contract awards which are under the applicable threshold. This means that European directives have no influence on the tendering process.
The Budgetary Principles Act and the Federal Budget Act set out the tendering process applicable to all public supply and service contract awards. This legislation applies unless the contract falls under one of the listed exceptions or the circumstances justify an exception to the process. County (Bundesland) and local authority budgetary legislation contains similar provisions. References are made in the legislation to the applicable rules in the VOB or VOL.
EU public procurement contracts
Harmonisation of member states’ public procurement procedures was completed with the introduction directives 2004/18/EC and 2004/17/EC. This legislation only applies to contracts which exceed a particular threshold.
The Rules on Public Procurement and the Award of Contracts for Freelance Services is applicable only to public procurement contracts awarded on a European level. They do not apply to national public procurement contracts.
Public procurement in certain sectors
Due to opposition from member states, specific rules were created for public procurement in the transport, water and energy sectors.
The reason for the specific regulation of public procurement in these sectors is because they represent public services which are traditionally provided by the state and local authorities. As such, their provision needs to be guaranteed and protected. The application of a regime designed for public procurement in “normal” service contracts seemed inappropriate.
As a result, the Regulations on Public Procurement and the Award of Contracts in the Transport, Water and Energy Sectors, (Sektorenverordnung (SektVO)) are applicable to public procurement contracts in these sectors.
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Categories: Business Law