Public tendering procedures

Potential of public tendering: EUR 2 trillion

Public tendering procedures offer considerable market potential – even for small and medium-sized companies. According to a study by the contract consultancy centre Bavaria, about 360 billion euro are invested annually in the Federal Republic of Germany in public tenders. Orders worth 2 trillion euro are spent annually in the EU. Many companies have recognised the tremendous potential of public tenders and would like to use it.

Learn more about the potential of public investments in Germany on our construction industry blog

In this article, Building Radar will answer the 5 most important questions about public tendering in Germany and Europe.

1. Open tendering procedures
2. Selective tendering procedures
3. Direct tendering procedures

Types of tendering procedures

For 90% of contract awards, there are three different forms of contracting: the open tendering, the selective tendering and the negotiated tendering.

A distinction must be drawn between the national public tendering procedure and the European public tendering procedure. The method below a fixed threshold is called a national procedure. The method above a set threshold is called the European method.

Threshold

	Upper federal authorities and comparable federal institutions	Other contracting authorities i.S.d. Section 98 GWB
Delivery services	€ 133,000	€ 206,000
Research and development	€ 206,000	€ 206,000
Other services	€ 133,000	€ 206,000
Construction services	€ 5,150,000	€ 5,150,000

German Federal Ministry of Labour and Social Affairs

Different terms and legal bases are used for the national as well as the European tendering procedures. The legal basis for the European-wide award procedure is the VgV (Vergabeverordnung – VgV). For national procurement procedures, the VOL (Vergabe- und Vertragsordnung für Leistungen), as well as the VOL/A and VOL/B (Allgemeine Bestimmungen für die Vergabe von Leistungen), apply.

1. Open tendering procedures

In case of open tendering procedures below the thresholds and open tendering procedures above the thresholds, the awarding office advertises its proposed project on a public platform. The office permits as many contractors as are interested in applying. Any interested party may submit an offer by the time stipulated.

National tendering procedure (below the thresholds) Open tendering procedures

Example: New construction of the kindergarten Sonnenschein; planned costs: below thresholds

For the new construction of the kindergarten, the national award procedure applies because the tendering sum is below the threshold of euro 5,150,000. The call for tenders will take place at awarding platforms in Germany. However, applicants do not necessarily have to come from Germany.

Example: Renovation of a primary and secondary school; planned costs: above thresholds

The renovation of the elementary and secondary school must be published according to the European procedure since the tender sum is above the threshold of euro 5,150,000.

European tendering procedure (above the thresholds) Open tendering procedure

Example: Renovation of a primary and secondary school; planned costs: above thresholds.

The renovation of the elementary and secondary school must be published according to the European procedure since the tender sum is above the threshold of euro 5,150,000.

2. Selective tendering procedures

In the case of the selective tendering procedure, the awarding office advertises the projects and invites contractors to bid for the project. To be considered in the future, please find out more about contact pools of the awarding offices.

Below the thresholds, selective invitations to tenders are only admissible if the requirements of § 3 No. 3 VOB / A or § 3 No. 3 VOL / A are fulfilled. These prerequisites are:

• Limited circle of eligible companies (e.g. experience, technical facilities or skilled workers)
• The unsuccessful outcome of a previous public tender (no order could be assigned due to lack of professional competence, non-existent equipment or deadline inconsistencies)

Above the thresholds, a public participation contest is mandatory. The procedure may only be applied in compliance with § 3 a VOB / A or § 3 a VOL / A. These prerequisites are:

• The performance can just be carried out by a limited group of companies (e.g. experience, technical facilities or skilled workers)
• The processing of the offer requires an exceptionally high effort

National tendering procedure (below the thresholds) Selective tendering procedure

Example: A city has to renovate the castle wall. The estimated costs are below the thresholds. A previous public invitation to tender has not resulted in any procurement.

Application of the restricted invitation to tender with a public participation contest, since the costs are below the thresholds. For the renovation of the castle wall expertise and experience in the renovation of historical masonry is assumed. The applicants to the public tender were unable to prove this, so no contract was awarded. The city is now in a position to submit a proposal for a bid. At least three offers have to be considered.

European tendering procedure (above the thresholds) Selective tendering procedure

Example: A city has to renovate the castle wall. The estimated costs are above the thresholds.

The costs exceed the thresholds, so the contract has to be issued throughout Europe. Because the restoration of the castle wall can only be carried out by a limited number of companies, the selective tendering procedure may apply. However, at least three offers must be obtained.

3. Direct tendering procedures

During the direct awarding procedures companies get a direct request for the submission of an offer. There can be one or several selected companies. There is no public call for the submission of applications.

The direct awarding tendering procedure may be applied under the following conditions:

• only a specific company is eligible to execute the contract (e.g. patent protection, special experience or equipment)
• The execution of the contract is particularly urgent
• Sufficiently comparable offers are not expected
• A new call for tenders would not promise acceptable result (e.g. due to a lack of professional competence or lack of time flexibility)
• The execution of the contract assumes a high level of secrecy
• A small contract cannot be separated from an already given larger contract without disadvantage

In principle, direct award tendering procedures may only apply if the public invitation to tender or the restricted invitation to tender is not appropriate.

National tendering procedure (below the thresholds) Direct awarding tendering procedure

European tendering procedure (above the thresholds) Direct tendering procedure

Example: The kindergarten Sonnenschein furniture has been specially designed and produced by the company Holzwurm. Now the kindergarten has to buy seat furniture.

This one particular company can only fulfill the requirements for the seating furniture. The kindergarten sunshine can order an offer directly from this one carpenter.