Public procurement law regulates the award of public-sector contracts and companies. The aim is to provide the contracting authority with material and personnel resources at the most economical conditions. Procurement law should also prevent corruption and nepotism and ensure fair competition, equal treatments and transparency of companies in the market. The contracting authorities include not only public bodies, but also private companies subject to public procurement law (for instance, energy companies or means of conveyance). Public procurement law is shaped by directives and regulations of the European Union.
Within the European Union, there are numerous directives and regulations that coordinate public procurement law within the member states. Those directives do not develop any rights and obligations for companies and public authorities and are only valid after implementation into national law. EU regulations instead, are directly applicable in the Member States. This concerns for instance the level of thresholds, the use of standard forms for notices or the CPV code (single classification system for public procurement). EU procurement law applies if the total value of an order exceeds the so-called threshold. The amount of the threshold depends on the type of service and the type of client. The conversion into national law takes place in Germany through the legislation on restriction of competition (GWB) as well as the regulation for public procurement (VgV), the awarding, contract for services (VOL – 2nd section), construction services (VOB – 2nd section) and professional services (VOF).
German Procurement Law
If the respective threshold is not reached for an EU-wide procedure, only the German regulation for the award of services (VOL – 1st section) and construction services (VOB – 1st section) regulate the tender procedure. There are some significant differences from the EU tender. For example, there is no possibility for tenderers to appeal to the German “Vergabekammer” (procurement supervisory committee) if the procedure has to be reproved. In addition, the obligation of reporting and publication on national procedures is not so distinct. The deadlines can be determined by the client in the national area. Despite the non-direct application of the EU directives, the international principle of equal treatment and competition also apply here.
Procurement law of the individual federal states
The individual German Federal States do not have particular regional regulations on procurement law, which must also be taken into account on a subsidiary basis.
What does “Procurement Law” concern?
Public procurement law includes the terms of contract for service (VOL), for construction services (VOB), for liberal professions (VOF), EU public procurement law, and parts of the GWB (Cartel Act) and the fee structure for architects and engineers (HOAI).
The public procurement law should give competing companies the opportunity to take action against a legally defective public procurement.
The Federal Ministry of Economics and Technology offers the relevant standards for downloading under the following topics:
- Law against Restriction of Competition (GWB, Antitrust Law)
The fourth part of the Antitrust Law (GWB) regulates the general principles of public procurement and also regulates the procedure for reviewing procurement procedures before the public procurement tribunals and the higher regional courts.
- Awarding Ordinance (VgV)
The Public Procurement Regulation (Vergabeverordung) has been revisited on the 11th of February 2003; this oblige contracting authorities to apply contracting awarding rules from a certain order amount. You can download the current procurement ordinance from the homepage of the Federal Ministry of Economics.
- Contracting regulations – Verdingungsordunungen (VOL/VOB)
The contracting regulations VOL / A and VOB / A contained the detailed provisions for the awarding of supply, service and works contracts. The VOF has been cancelled after the Procurement Law Reform of 2016. The VOB is deposited within the Federal Ministry of Transport, Building and Housing (BMVBW).
- Common Vocabulary for public commissions (CPV)
Since 1 January 1999, an updated version of the Common Procurement Vocabulary (CPV) describing the subject-matter of the contract has been taken into force, as recommended by the EU Commission. The current version of the CPV can be found on the following website: http://simap.eu.int
The German Federal Cartel Office Bundeskartellamt also offers a (free) publication of collected decisions proceedings.
Which principles shall be observed?
The following principles can be extracted from the German Antitrust Law Act (especially §§ 97, 101 GWB):
- Transparency (Publication of tendering, commitment to publication, documentation of the proceedings)
- Competition (free access to the proceedings, allowance of all offers from suitable bidders, participation of several bidders, prohibition of anti-competitive behaviour by the contracting entity and tenderers, establishment of a fair competition as a fundamental requirement)
- Equal treatment (right to equal treatment of all bidders, prohibition of discriminatory practices, principle of neutrality)
What kinds of award exist?
Open procedure (EU-Procurement Law)/ public tendering (national award)
We talk about open procedures (for national proceedings below the EU thresholds: public tendering) in the specific case of contracting authority publicly requesting an unlimited number of companies to submit their offers.
Restricted procedure (EU-Procurement Law/ restricted tendering (national award)
A procedure is considered restricted (Europe-wide) in case the contracting authority selects a limited number of companies on the basis of objective, transparent and non-discriminatory criteria (competitive bidding), before requesting a limited number of companies from the applicant group to tenders.
Negotiation procedure (EU-Law Granting) / direct award (national award)
The negotiation procedure (in the case of national procedures below the EU threshold: direct award), allows inter alia, negotiations on the terms of contract with the companies.
The negotiation procedure with competitive bidding has been subjected to more simplified admission requirements since the procurement law reform. It has to be taken into consideration in case of contracts for conceptual or innovative solutions, or in contracts that require prior negotiation on the basis of specific circumstances related to the nature, complexity or legal or financial framework and corresponding risks.
Competitive Dialog (EU-Procurement Law)
The competitive dialogue (only in the case of European procurement procedures), gives the contracting authority even more room for negotiation with tenderers.
Innovative Partnership (EU-Procurement Law)
In an innovative partnership (only in the case of European awarding proceedings), the contracting authorities negotiate initial and follow-up offers, subsequently to the competitive bidding, in several phases with the selected companies.
Which procurement procedures can be used?
In allocations above the EU threshold, section § 119 Abs. 2 GWB provides for an equality between a restricted and open procedure. It should be considered that the open procedures according to §119 (4) GWB of the Treaty requires a compulsory preliminary qualification competition.
The freedom of choice between the open and the restricted procedure in the upper threshold area should take account of the principles of transparency and competition.
Because of the compulsory prior participation in the restricted procedure, each company is in principle, free to participate in the competition. The selection has to be made subsequently by the contracting authority and shall be based on objective, non-discriminatory aspects and shall be documented in the Award Notice.
The contracting authority has to make a discretionary decision in the context of the licensing law, in particular taking into account the principle of competition, equal treatment and transparency as a form of general arbitrary prohibition.
In any event, the number of candidates admitted must ensure a genuine competition.
The other types of public procurement procedures in the upper ranks (negotiation procedure, competitive dialogue and innovation partnership) are only permissible, only if the respective requirements for authorization are met. The individual prerequisites for these types of procedures as well as the respective procedures are defined in §§ 17 ff. VgV.
Are SMEs´ interests to consider?
Public contracting authorities are obliged to take account of medium-sized interests in the award of public contracts (§ 97 para. 4 ARC). According to the GWB, the contracting authorities may allocate services in precise quantities divided (so-called Teillose) and separated by type or subject (so-called Fachlose),
What is to be considered in the public municipal tendering?
As long as the contract value exceeds 25000 € and stays under “de minimis” (according to EU law, see respective thresholds in the German Procurement Order- VgV), the German Procurement regulations are relevant and a national award is made with the following focus:
- Complete tendering documents
- Set deadlines, bid and offer period
- Invitation to a tender
- Opening of tenders by contracting authority and negotiating director
- Bid evaluation, possible exclusion of offers, partial or complete cancellation of the tender
- Award of contract.
If the contract value is over “de minimis” (according to EU law) the following prerequisites have to be checked, otherwise, European Procurement rules are relevant in order to have an European Award be done:
- Check whether VOL has been used,
- Choice of the type of awarding:
- Open procedure according to §3 No. 1 para. 1 VOB/A or VOL/A
- Exemptions: non-opened procedure pursuant to § 3 No. 1 para. 2 VOB/A or VOL/A; or §101para. 2 GWB; §3a no.1a VOB/A or §3a no.1(1) VOL/A
- Specific exceptions:
- None: open procedure
- In accordance with Section 3a (1) (4) or (2) VOB/A or VOL/A: Negotiation procedures with/without public procurement notice
- According to §3 No.1 paragraph 4 and No.3 VOB/A or VOL/A: Non-opened procedures with a compulsory competitive bidding
Which is the difference between restricted invitations to tenders and public procurement in the municipal sector?
Generally, the restricted invitations to tenders can be made for a contract value of up to € 25,000. „Exceptionally“, even in the case of public tenders, a limited allocation can be made despite exceeding the threshold of € 25,000. The traditional procedure is not particularly different; only the limitation of access of potential suppliers characterizes the restricted invitations to tenders.
When is a municipal direct award recommendable?
A direct awarding can be managed only if the contract value does not pass the amount of € 2500. However, this form of awarding is, in practice, often the common form of award.
In a broadest sense, a direct award for an order value of up to € 500 passes through the following steps:
- Informal price calculation for at least three bidders
- Acceptation of the bid
- Specify funds
- Inform the required offices.
From an order value of € 500 to € 2500, the following steps are generally required:
- Develop the tender documents (service description and contractual conditions)
- Market Analysis and selection of candidates based on this latter
- Invitation to submit a tender
- Contract award.
What is the meaning of the contract awarding regulation?
In accordance with the Procurement order, the contract awarding regulations are considered mandatory with regards to their A-Parts for the contracting authorities or exceeding thresholds. The binding obligation can be dropped only through legal structure conversion in the organization of private law.
This exemption is likely to be a reason for such legal changes, although the A-parts are merely regulatory administrative provisions and the B-parts are interpreted as general terms and conditions.
What can we do for you?
We will examine and support your tendering from the planning stage through the awarding of the contract, all the way up to the execution and termination of the so-called performance.
We will advise and represent you also in public or judicial tendering procedures before Public Procurement Tribunals.
What do we need in order to deal with your questions?
We normally have to know exactly which services are to be awarded, with which total value, at which conditions or if they have already been issued. Further details must be clarified in regard with your individual case.