The recently formed coalition government of CDU/CSU and SPD has initiated a significant change of course in public procurement. The new approach, set out in detail in the coalition agreement, centres on two main pillars.

• the reduction of bureaucracy,
• the introduction of strategic procurement management.

This reorientation is a response to long-standing criticism of the excessive complexity and time-consuming processes in public procurement, which represent a considerable burden for small and medium-sized enterprises (SMEs) in particular and potentially inhibit innovation and economic activity.

Higher value limits for direct orders – The key to reducing bureaucracy

A central element of the reform is the significant increase in the value limits for direct orders.

• Increase to 50,000 euros

The value limit for direct orders for supplies and services at federal level is to be raised from the current EUR 15,000 to EUR 50,000. This is a considerable leap, considering that the limit was only recently raised from 1,000 euros to 15,000 euros.

• Special regulation for innovative start-ups

The planned special regulation for start-ups with innovative services is particularly noteworthy. In the first four years after their foundation, an even higher direct order limit of EUR 100,000 is to apply to these companies in order to facilitate their market entry into the public sector.

These measures are intended to simplify the participation of SMEs in public contracts by reducing bureaucratic hurdles. However, experts point out that higher direct order limits could also favour established companies that are already known to the contracting authorities. Paradoxically, this could make it more difficult for new SMEs to enter the market. SMEs would therefore have to be proactive and present themselves to public contracting authorities in order to utilise these new opportunities.

Strategic realignment – simplification, acceleration and digitalisation

The reform is based on strategic pillars.

1. A return to the basic principles of public procurement law

The coalition agreement emphasises a return to the fundamental objectives of public procurement law: economic efficiency, non-discrimination and the prevention of corruption. This could indicate a shift in focus away from using public procurement as an instrument for broader social and environmental policy objectives, although this point is still under discussion.

2. Greater use of framework agreements and centralised purchasing platforms

• Authorities should be able to make greater use of framework agreements from other public services and central purchasing platforms.
• The „federal department stores'“ is to be expanded into a comprehensive digital marketplace for the federal government, federal states and local authorities.
• The aim is to bundle orders and improve strategic procurement management.

These measures could lead to greater efficiency and better prices through bulk purchasing, but also pose challenges for SMEs that do not have existing framework agreements.

3. Centralisation of federal IT purchasing

The government is planning to centralise IT procurement in order to reduce dependence on monopolistic providers and strengthen Germany as a digital location. This could lead to more efficient procurement and potentially better conditions, but also harbours the risk that the specific needs of individual authorities are not sufficiently taken into account.

Easier for bidders – Fewer obligations to provide evidence

The planned easing of the burden of proof for bidders is a clear sign of the reduction in bureaucracy.

• Self-declarations instead of extensive evidence

In many cases, self-declarations should be sufficient, which could significantly reduce the administrative burden for bidders, especially SMEs and start-ups.

• Digitisation of the proof of suitability

The simplification and digitalisation of verification procedures should be carried out by means of tested systems or self-declarations.

 

Accelerated procedures through modified legal remedies

The coalition plans to speed up the awarding of contracts by changing the appeal procedures.

• No suspensive effect

Appeals against decisions of the public procurement tribunals to the higher regional courts should no longer have a suspensive effect.

This measure aims to speed up contract processing, but could also weaken the rights of bidders and lead to contracts being awarded before all legal objections have been clarified.

 

Social and environmentally friendly procurement

Interestingly, the coalition agreement does not explicitly emphasise social and environmental aspects as a lever in public procurement. The focus appears to be on economic, non-discriminatory and corruption-free processes.

This could indicate a certain shift away from using procurement for social and environmental objectives. However, other sources show that sustainability remains an important aspect of public procurement, with existing regulations and initiatives continuing to apply. The Coalition’s cautious wording could signal a shift in emphasis, but it does not necessarily mean that these aspects will be completely neglected.

The Federal Collective Bargaining Act and the minimum wage – social standards at a glance

Despite the focus on reducing bureaucracy, the coalition is maintaining some social standards:

1. Federal law on collective bargaining

• The introduction of a federal law on collective bargaining is still planned.
• It is to apply to federal contracts from 50,000 euros and for innovative start-ups in the first four years from 100,000 euros.
• The aim is to strengthen collective bargaining and ensure fair wages for public contracts.

The continued commitment to the Federal Collective Bargaining Act indicates the political will to use public procurement to promote social standards, despite potential bureaucratic implications and criticism from some business organisations.

2. Minimum wage

The coalition agreement indicates that a minimum wage of 15 euros is achievable by 2026, but leaves the final decision to the independent minimum wage commission. Such an increase could have a significant impact on labour costs for companies participating in public procurement, particularly in sectors with lower wage levels.

3. Minimisation of bureaucratic burdens

The coalition emphasises that the Federal Collective Agreement Loyalty Act is not intended to create any new bureaucracy. However, the question remains as to how collective agreements can be enforced without additional obligations to provide evidence and checks. Business organisations are already expressing concerns about potential bureaucratic burdens in connection with proof of collective bargaining coverage.

Opportunities and challenges of the new procurement strategy

The new strategy for public procurement offers both opportunities and challenges:

• Opportunities

Increased value limits and a reduction in bureaucracy could make it easier for SMEs and start-ups to access public contracts. Strategic procurement management and digitalisation promise greater efficiency.

• Challenges

The change in focus with regard to social and ecological criteria and the introduction of the German Federal Act on Collective Bargaining will have a significant impact, the exact consequences of which are not yet foreseeable.

The actual impact of these reforms will largely depend on their concrete implementation and practical application by public clients and companies. It remains to be seen how the ambitious plans will prove themselves in practice and what adjustments may still be necessary.

For companies, especially SMEs and start-ups, it is advisable to follow developments closely and adapt to the new framework conditions at an early stage in order to make the most of the opportunities that arise.

ADCONIA – Out of the ordinary.

Consulting for procurement, supply and value chain with a focus on cost management, digitalisation, organisational development and sustainability