The recently formed coalition government of CDU/CSU and SPD has initiated a fundamental change of course in public procurement that could fundamentally change the entire system. The new approach detailed in the coalition agreement pursues two main strategic goals: a consistent reduction in bureaucratic hurdles and the implementation of a well-thought-out strategic procurement management system that is intended to increase the efficiency of the entire system.

This significant reorganisation can be seen as a direct response to the criticism that has been levelled at public procurement for years. It has often been criticised that the existing processes are overly complex, time-consuming and resource intensive. This complexity represents a considerable burden, particularly for small and medium-sized enterprises (SMEs), and often leads to innovative solutions and economic dynamism being thwarted. The new government seems to have recognised these structural problems and is now looking for pragmatic solutions to fundamentally reform the system.

Higher value limits for direct orders

The centrepiece of the reform is the substantial increase in the value limits for direct orders, which promises a considerable reduction in bureaucracy.

Category	Current federal value limit (Euro)	Planned federal value limit (Euro)
Delivers and Services	15.000	50.000
Start-ups (innovative services, first 4 years)	15.000	100.000

Specifically, the coalition agreement stipulates that the value limit for direct orders for supplies and services at federal level is to be raised from the current EUR 15,000 to a considerable EUR 50,000. This increase represents remarkable progress, especially as the value limit was only recently raised from the original EUR 1,000 to EUR 15,000. The more than three-fold increase now planned underlines the government’s serious intention to radically simplify the award processes for low-volume contracts.

The planned special regulation for start-ups that offer innovative services is particularly noteworthy and innovative. For these young companies, a significantly higher direct order limit of 100,000 euros is to apply in the first four years after their foundation. This targeted measure is a clear commitment by the government to promoting innovation and entrepreneurship and recognises the challenges that start-ups face when participating in public tenders. The higher value limit should simplify public sector market entry and allow offering innovative solutions without excessive bureaucracy.

The increased value limits pursue the overarching goal of facilitating access to public procurement for small and medium-sized enterprises by significantly lowering the administrative hurdles for participating in procurement procedures. Simplified access to contracts below these new thresholds could lead to a variety of new business opportunities for SMEs and stimulate competition in the public procurement market.

However, some experts are concerned that higher direct order limits could also have unintended side effects. There is a risk that established companies that are already known to the contracting authorities and have long-standing relationships could be favoured. Paradoxically, this could make it more difficult for new SMEs to enter the market rather than easier. To avoid these potential disadvantages, SMEs would have to be proactive and present themselves specifically to public contracting authorities in order to benefit from the new opportunities. Although the formal hurdles are lowered, in practice direct orders are often based on existing business relationships and relationships of trust.

Strategic realignment through simplification, acceleration and digitalisation

The reform of public procurement is by no means limited to raising the value limits but includes many interlinked strategic measures that are intended to fundamentally modernise the system.

A central aspect of this reorientation is the explicit return to the fundamental principles of public procurement law: economic efficiency, non-discrimination and effective prevention of corruption. This emphasis on the core principles could be interpreted as an indication of a certain shift in priorities – away from the increasing use of public procurement in recent years as an instrument for implementing more far-reaching social and environmental policy objectives. Although this point remains the subject of lively debate, the explicit mention of a return to these core principles suggests a possible reassessment of the balance between purely economic considerations and socio-environmental objectives in public procurement decisions.

Another key pillar of the strategic realignment is the significantly increased use of framework agreements and centralised purchasing platforms. In future, public authorities at all levels should be able to access existing framework agreements from other public services much more easily, which should avoid duplication of work and create synergy effects. The existing „federal department stores'“ is to be expanded into a comprehensive and efficient digital marketplace that is available not only to the federal government, but also to the federal states and local authorities. This measure aims to strategically bundle orders, exploit economies of scale and thereby optimise strategic procurement management.

The increased use of framework agreements and centralised platforms promises considerable efficiency gains and potentially significantly better conditions through coordinated bulk purchases. However, this could also pose challenges for SMEs that do not have existing framework agreements. There is a risk that smaller suppliers will be excluded from these bundled procurement structures if they are not given early access to the framework agreements.

A particular focus of the reform is the centralisation of federal IT purchasing. This targeted measure pursues several objectives at the same time: it is intended not only to increase efficiency and reduce costs, but also to reduce the problematic dependence on monopoly-like providers, which in the past has often led to unfavourable contract conditions and limited flexibility. In the long term, centralised IT procurement should lead to more strategic management and thus also strengthen Germany as a digital location overall.

Although the centralisation of IT procurement promises considerable advantages, it also brings with it specific challenges. It must be ensured that the individual needs of individual authorities are sufficiently considered despite centralisation. There is also a risk that new dependencies could arise if centralised procurement leads to an excessive concentration on just a few providers.

Significant relief for bidders regarding the obligation to provide evidence

A particularly tangible sign of the serious will to reduce bureaucracy is the planned far-reaching easing of the burden of proof for bidders in procurement procedures. These measures could significantly reduce the administrative burden for participating companies.

In many cases, self-declarations by bidders will be sufficient in future instead of having to request extensive evidence and certificates when submitting a tender, as has been the case to date. The simplification and end-to-end digitalisation of the proof of suitability is to be carried out using verified digital systems or these self-declarations. This measure should significantly reduce the administrative burden for bidders, especially SMEs and start-ups with limited resources, and make it much easier for them to participate in tenders.

The increased acceptance of self-declarations means a paradigm shift towards more trust in the information provided by bidders and away from the comprehensive prior documentation requirements practised to date. This could significantly lower the inhibition threshold for participation in public tenders and thus stimulate competition. At the same time, it will be crucial to implement effective spot checks to verify the accuracy of self-declarations and prevent abuse.

Accelerated procedures through far-reaching changes to the appeal system

Another significant change concerns the appeal procedures in public procurement law, which often lead to considerable delays in the awarding of contracts. The coalition is planning a far-reaching change here: appeals against decisions by the public procurement tribunals to the higher regional courts will no longer have a suspensive effect in future. The aim of this measure is to significantly speed up the processing of contracts and avoid lengthy delays caused by legal disputes.

Although the abolition of the suspensive effect of legal remedies promises to significantly speed up the procurement process, it could also noticeably weaken the bidders‘ legal defence options. There is a risk that contracts will be awarded and possibly even partially implemented before all legal objections have been conclusively clarified. This could lead to complex situations if courts later decide in favour of a bidder, but the contract has already been awarded to another company. The practical implementation of this amendment and its impact on the legal protection of bidders will therefore need to be closely monitored.

Differentiated view of the realignment

It is striking that the coalition agreement does not explicitly emphasise social and environmental aspects as strategic levers in public procurement. The focus appears to be primarily on the economic, non-discriminatory and corruption-free organisation of procurement processes.

This reluctance could indicate a certain turning away from the increasing tendency in recent years to use public procurement as a political instrument to achieve more far-reaching social and environmental objectives. However, this does not necessarily mean that these aspects should be completely neglected in future. Numerous existing regulations and initiatives on sustainable procurement remain in force unchanged, and the European legal framework also continues to provide for the consideration of social and environmental criteria.

The coalition’s cautious wording on these issues could therefore signal a shift in focus rather than a complete change in policy. It is to be expected that the exact balance between economic, social and environmental aspects in the practical organisation of procurement policy will be the subject of further discussion.

The Federal Collective Bargaining Act and the minimum wage

Despite the clear focus on reducing bureaucracy, the coalition is maintaining important social standards in public procurement. This is particularly evident in the plans for the Federal Collective Bargaining Act and the development of the minimum wage.

The introduction of a Federal Act on the Loyalty of Employees remains a declared goal of the coalition. This law is to apply to federal contracts from 50,000 euros, while a higher threshold of 100,000 euros is envisaged for innovative start-ups in the first four years after their foundation. The law aims to strengthen collective labour agreements and ensure that fair wages are paid for public contracts. The continued commitment to the Federal Collective Bargaining Act underlines the political will to continue to use public procurement as an instrument to promote social standards, despite criticism from some business organisations that warn of additional bureaucratic burdens.

Regarding the minimum wage, the coalition agreement indicates that an increase to 15 euros by 2026 is being sought but leaves the final decision to the independent minimum wage commission. This potential increase could have a significant impact on labour costs for companies bidding for public contracts, particularly in sectors with traditionally lower wage levels. This in turn could have an impact on bid prices and ultimately the overall cost of public procurement.

The coalition expressly emphasises its goal of minimising bureaucracy, verification obligations and control measures in connection with the Federal Act on Collective Bargaining for SMEs. It even formulates the ambitious claim that the law should create „no new bureaucracy“. However, business organisations are already expressing concerns about potential bureaucratic burdens that could be associated with proof of collective bargaining coverage.

It remains an open question as to how compliance with collective agreements can be effectively enforced without simultaneously introducing new verification obligations and controls. This reveals a potential tension between the declared aim of reducing bureaucracy on the one hand and the effective enforcement of social standards on the other. It will be a particular challenge to master this balancing act in practical implementation.

Opportunities, challenges and long-term effects of the new procurement strategy

The new strategy for public procurement opens a wide range of opportunities but also brings with it considerable challenges. The significantly increased value limits for direct contracts and the comprehensive reduction of bureaucratic hurdles promise easier access to public contracts, particularly for SMEs and innovative start-ups. The measures for strategic procurement management and the digitalisation of processes promise greater efficiency and cost savings.

At the same time, the change in the weighting of social and ecological criteria and the introduction of the Federal Act on Collective Bargaining raises complex questions, the answers to which will have a significant impact on the practice of public procurement. It is important to find a balance here that takes both economic efficiency and social responsibility into account appropriately.

The actual success of the reforms will largely depend on their concrete implementation in laws and regulations as well as their practical application by public clients and participating companies. It will be crucial that the objectives behind the reforms are also consistently pursued in practice and are not thwarted by contradictory individual measures.

For companies of all sizes, but especially for SMEs and start-ups, it is advisable to keep a close eye on further developments in this area and adapt to the new framework conditions at an early stage. This is the only way they can make the most of the opportunities that arise and minimise potential risks at the same time.

The coalition’s ambitious plans for public procurement represent a significant attempt at reform, the success of which will only become apparent in practical implementation. It remains to be seen which of the planned measures can be implemented and which adjustments will prove necessary over time. What is certain, however, is that public procurement is on the verge of a fundamental change that has the potential to permanently alter the entire system.

ADCONIA – Out of the ordinary.

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