1 RELEVANT LEGISLATION
1.1 What is the relevant legislation and in outline what does each piece of legislation cover?
The legal core of the German public procurement regime for European public contracts, i.e. public contracts reaching or exceeding the applicable EU threshold (see question 2.4), is regulated in Part IV of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen – GWB). The GWB is complemented by the German Regulation on the Award of Public Contracts (Vergabeverordnung – VgV). The details of the procurement procedures are laid down by delegated legislation in various procurement regulations:
- Procurement Regulation for Public Works (Vergabe- und Vertragsordnung für Bauleistungen – VOB/A);
- Procurement Regulation for Public Supplies and Services (Vergabe- und Vertragsordnung für Leistungen – VOL/A); and
- Procurement Regulation for Professional Services (Vergabeordnung für freiberufliche Dienstleistungen – VOF).
Public procurement contracts concluded by regulated firms and entities operating in the sectors of transport, water and energy ("utilities") are regulated by a separate Sector Regulation (Sektorenverordnung – SektVO). In addition, the Public Procurement Regulation on Defence and Security (Vergabeverordnung Verteidigung und Sicherheit – VSVgV) regulates the public procurement of contracts in the fields of defence and security pursuant to section 99 para. 7 GWB (e.g. the supply of military equipment). For public works in the fields of defence and security, the VSVgV is supplemented by the regulations of section 3 of the VOB/A.
The above described multi-layered structure of legal rules transposes the current EU Procurement Directives (2004/18/EC, 2004/17/EC and 2009/81/EC). With regard to the future see question 9.1.
For national public procurement contracts, i.e. public contracts below the applicable EU threshold (see question 2.4), the GWB and the VgV do not apply. Instead, the relevant budget law of the federal, state (Bundesland) and local governments must be observed. Usually, state and local budgetary legislation refers to the first chapter of the VOB/A and of the VOL/A. It is also important to keep in mind the applicability of the primary law of the EU (for example, the principles of non-discrimination, transparency and competition) if the contract in question has an Internal Market relevance.
Almost all of the states (Bundesländer) have their own public procurement laws which make the decision on awarding a public contract dependent on extraneous criteria. These public procurement laws of the states apply to procurement procedures above and below the EU thresholds. Extraneous criteria are, for example, the observance of collective labour agreements and family-friendly working conditions as well as gender equality.
The following explanations and descriptions of German public procurement law focus on public contracts above the EU thresholds as it is assumed that this meets the demands of this International Comparative Legal Guide.
1.2 Are there other areas of national law, such as government transparency rules, that are relevant to public procurement?
The principle of transparency which is fundamental for tender procedures entails that the contracting entities are obliged to provide for reasonable documentation of the procedures. Except for § 111 GWB which regulates the right to access records used by the public procurement tribunals during the legal review (Vergabekammern), there are no specific provisions setting out conditions for access to the records. Consequently, access of the general public to the records kept by the contracting entity is subject to the general provisions of public and regulatory law. The Federal Government and several German states have enacted laws regarding the freedom of information (Informationsfreiheitsgesetze). However, all of these laws protect the legal interest of the participants in tendering procedures in the confidentiality of their trade secrets.
Other areas of national law related to public procurement are "the prohibition of an abuse of a dominant position" (§ 19 GWB) and "the prohibition of discrimination" (§ 20 GWB). Accordingly, aside from the remedies before the public procurement tribunal, a bidder can also request for the institution of antitrust proceedings. In addition, the violation of public procurement regulations may at the same time also infringe the Act Against Unfair Competition (Gesetz gegen unlauteren Wettbewerb – UWG). The bidder may thus obtain an injunctive relief under the UWG.
1.3 How does the regime relate to supra-national regimes including the GPA, EU rules and other international agreements?
As a Member State of the EU, Germany is obliged to comply with EU public procurement law. Germany is not a contracting party to the GPA. However, as the EU is one of the parties of the GPA and thus has to comply with obligations under the GPA, Germany is indirectly affected. Accordingly, as the EU thresholds in the EU Procurement Directives are geared to the thresholds as stipulated in the GPA, it can be said that in general, public procurements above the EU thresholds are covered by the GPA regime.
Another relevant international agreement in this context is the European Economic Area (EEA) Agreement. The EEA Agreement brings together the EU Member States, i.e. also Germany and the EEA EFTA States in a single market in public procurement.
1.4 What are the basic underlying principles of the regime (e.g. value for money, equal treatment, transparency) and are these principles relevant to the interpretation of the legislation?
German public procurement law is aimed at ensuring that the three basic principles of public contracting, i.e. transparency, equal treatment and competition are observed in every public tender procedure. These three core principles arise out of the EU Procurement Directives and the EU Treaties and they are highly relevant to the interpretation of the legislation. Further fundamental rules are the bidders' right of ensuring compliance with public procurement rules, the consideration of medium-sized companies, the competence and abilities of bidders and economic efficiency. All these basic principles and fundamental rules of German public procurement law are laid down in § 97 GWB.
1.5 Are there special rules in relation to procurement in specific sectors or areas?
As described in question 1.1, public procurement contracts concluded by utilities are regulated by a separate Sector Regulation (Sektorenverordnung – SektVO). Public procurement of contracts in the fields of defence and security is regulated in the Public Procurement Regulation on Defence and Security (Vergabeverordnung Verteidigung und Sicherheit – VSVgV) supplemented by provisions in the GWB. For public works in the fields of defence and security, the VSVgV is supplemented by the regulations of section 3 of the VOB/A.
2 APPLICATION OF THE LAW TO ENTITIES AND CONTRACTS
2.1 Which public entities are covered by the law (as purchasers)?
Public entities include all federal, state and local authorities (and their special funds) as well as other public law institutions such as universities, social insurance institutions, pension fund institutions, etc. Associations whose members are public entities as defined above are covered by German public procurement law as well.
2.2 Which private entities are covered by the law (as purchasers)?
Private entities are covered if they provide services meeting non-commercial needs in the general interest and are mainly funded or supervised by federal, state or local authorities or by associations covered (e.g. waste management companies, regional development companies, publicly funded football clubs). Private associations are covered if their members are private entities as defined above.
Private entities operating in the transport water and energy sectors are covered if these activities are exercised on the basis of "special or exclusive rights" granted by a competent authority, or if they are under the controlling influence of public authorities or of state controlled private entities.
Private entities receiving funds from public authorities or from state controlled private entities for civil engineering projects, for building hospitals, sports, leisure or recreational facilities, school, university or administrative buildings, or for related services and design contests are also covered if the funds are used to finance more than 50% of these projects.
In addition, except for utilities under the SektVO, private entities who have concluded a works contract with public authorities or state controlled private entities, with respect to contracts awarded to third parties (works concession), are also covered.
2.3 Which types of contracts are covered?
German public procurement law covers public contracts which are defined as contracts for pecuniary interest concluded between contracting entities and undertakings for the procurement of services whose subject matter is supplies, works or services, works concessions and design contests intended to lead to service contracts.
2.4 Are there financial thresholds for determining individual contract coverage?
As outlined above (see in particular question 1.1), it is decisive to assess whether the public contract reaches or exceeds the applicable EU threshold in order to identify which of the various public procurement rules apply. The EU thresholds are referred to in the VgV, the SektVO and the VSVgV and they are net of VAT. Currently, they are as follows:
- Public work contracts: 5,186,000 Euros.
- Public supply/service contracts: 207,000 Euros.
- Public supply/service contracts of the highest or higher federal authorities: 134,000 Euros.
- Public supply/service contracts in the sectors of transport, water and energy (utilities) and in the fields of defence and security: 414,000 Euros.
As the EU thresholds for the application of the EU Procurement Directives are revised every two years, the next change is expected on 1 January 2016.
2.5 Are there aggregation and/or anti-avoidance rules?
German public procurement law provides for a multitude of rules which aim to prevent the avoidance of the EU-wide public procurement. For example, it is prohibited to estimate or split the value of the contract with intent to avoid the applicability of German public procurement law above the EU thresholds (§ 3 para. 2 VgV, § 2 para. 2 SektVO, § 3 para. 2 VSVgV). Another example is the ineffectiveness of a contract if the contracting entity has violated its information and standstill obligation or if it has awarded a public contract directly to an undertaking without inviting other undertakings to participate in the award procedure and this violation has been established in review proceedings within certain time limits (§ 101b GWB).
2.6 Are there special rules for concession contracts and, if so, how are such contracts defined?
German public procurement law covers works concessions except for utilities (see question 2.2). A works concession is defined as a contract for the execution of a works contract, whereby consideration for the building work consists, instead of remuneration, in the limited right to use the installation, if appropriate, plus the payment of a fee (§ 99 para. 6 GWB). § 22 VOB/A-EG stipulates specific rules for the award of works concessions above the EU thresholds but in most parts they are regulated like national works concessions, i.e. below the EU thresholds.
In accordance with prevailing EU Procurement Directives, there is no coverage and no definition of service concessions in German public procurement law. However, service concessions are subject to the general principles of the EU Treaties, i.e. transparency, non-discrimination and competition if they have Internal Market relevance.
2.7 Are there special rules for the conclusion of framework agreements?
With regard to public supply and services, framework agreements above the EU thresholds are defined in § 4 VOL/A-EG as contracts between one or more contracting entities and one or more undertakings, the purpose of which is to establish the terms governing the contracts to be awarded during a given period, in particular with regard to the price. The envisaged contract volume must be defined as accurately as possible in the public notice but it does not have to be conclusively determined. The contracting entities are not allowed to conclude several framework agreements for the same contractual performance. The maximum term of the framework agreement is four years, unless the subject-matter of the agreement or other special circumstances justify an exception. If a framework agreement is to be concluded with only one undertaking, the specific contracts have to be awarded under the terms and conditions of the framework agreement. Before awarding the specific contracts, the contracting entities may consult with the undertaking in writing and request it to complete its tender if required. If a framework agreement is to be concluded with several undertakings, at least three must participate, provided a sufficient number of undertakings meet the selection criteria and a sufficient number of admissible tenders meet the award criteria. If all terms and conditions are stipulated in the framework agreement, the individual orders can be awarded without calling for competition again. In cases where not all terms and conditions have been stipulated in the framework agreement, a so called mini-competition (Miniwettbewerb) has to be conducted prior to the award of the individual orders.
With regard to public supply and services in the fields of defence and security, there is a similar definition of framework agreements in § 4 para. 2 VSVgV. The rules for the conclusion of a framework agreement are similar to the abovementioned. However, there are some differences, e.g. the maximum term is seven years.
With regard to utilities, there is a similar definition of framework agreements in § 9 SektVO. However, the rules for the conclusion of a framework agreement under the SektVO are far less strict than under the VOL/A. For example, for framework agreements of utilities there is no maximum term.
The question of whether framework agreements can be concluded for public works under the VOB/A and for professional services under the VOF is disputed among commentators and public procurements tribunals.
2.8 Are there special rules on the division of contracts into lots?
The division of contracts into lots is regarded as one main instrument in order to shelter the interests of small and medium-sized undertakings (see question 9.2). § 97 para. 3 GWB stipulates that public contracts have to be subdivided into partial lots by quantity (partial lots) or by special items of the contract (trade-specific lots). Several partial or trade-specific lots may be awarded collectively for economic or technical reasons. If an undertaking, which is not a public contracting entity, is entrusted with the realisation or execution of a public contract, it shall be obliged by the contracting entity, so far as it subcontracts to third parties, to divide contracts into lots accordingly.
Originally published by The International Comparative Legal Guide to: Public Procurement 2015, 7th Edition by Global Legal Group Ltd, London.
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