Abandoned construction sites at public contracting authorities. (Photo: © khunaspix/123RF.com)
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September 25, 2018
Cities and municipalities are struggling to find skilled tradespeople for their construction contracts. One of the reasons for this is the overly complicated procurement laws.
Order books are overflowing, and qualified employees are currently hard to come by. Which tradesperson wants to participate in a time-consuming and complicated procurement process? Especially since the public sector is notorious for its late payments.
Cities and municipalities therefore find increasingly difficult craft companies for their contracts. It's not uncommon for tenders to be unsuccessful because no bidder wants to wade through the mountains of forms.
Nevertheless, it can make sense for a company to participate in a tendering procedure: Every year, contracts worth three-digit billion amount awarded by tender, over 95 percent of which take place in the so-called sub-threshold area (see info box "Procurement Law").
"Procurement procedures are all very similar. Once you have participated in a few, you get a certain routine, and then filling out the forms is easier," says Wilhelm Gobbers, owner of a family-run plumbing and heating company in Krefeld. His company regularly participates successfully in tenders. The effort is usually worthwhile. When things did not go so well and his company was unfairly overlooked as the lowest bidder, he had the Chamber of Crafts Düsseldorf with advice and action to the side. Chamber lawyer Michael Bier advised the company owner on his appeal against the client. "Outstanding, prompt, and competent assistance," praised Gobbers. In the end, he was awarded the contract, worth half a million euros.
It's good that craft businesses can rely on the support of the chamber of commerce. However, it would be even better if tendering procedures were n't so complicated . The increasing complexity of public procurement has a particularly deterrent effect on small and medium-sized enterprises, as the German Confederation of Skilled Crafts (ZDH) knows.
According to the German Construction Industry Federation (ZDB), the former North Rhine-Westphalia Public Procurement and Contract Compliance Act (TVgG) is a prime example of a bureaucratic nightmare. "It became clear shortly after its implementation that the regulations were unworkable in practice . The contracting authorities themselves were overwhelmed by the application of the law," the ZDB stated.
Operations management
Operations management
Operations management
The law was amended, and the new version came into force on April 1, 2018. "The reform brings relief for companies and authorities because the TVgG (Collective Bargaining Act) has been completely streamlined and reduced to the necessary regulations," explains Michael Bier, a lawyer at the Düsseldorf Chamber of Commerce. "The requirements regarding environmental protection, working conditions, and the advancement of women have been eliminated, as have the previously required declarations of commitment." The law now focuses exclusively on the minimum wage issue and refers to the federal regulations.
The TVgG (Collective Bargaining Act) only applies to contracts with a value of €25.000 or more . Below this threshold, public authorities in North Rhine-Westphalia can issue restricted tenders, meaning they can only invite a limited number of companies to submit bids. However, the principles of competition, transparency, and equal treatment still apply.
"The procedure of negotiated procurement is often misunderstood . It doesn't mean that the authority is allowed to award a direct contract ," Bier emphasizes. In negotiated procurement – now called "negotiated procedure" in the UVgO (German Procurement Ordinance) – the authority may informally request companies to submit a bid, for example by email or telephone.
As if all this weren't complex enough, procurement regulations also differ from state to state. Construction companies operating throughout Germany are forced to adapt to 16 different state procurement laws . Only Bavaria does not have its own state procurement law. "Exemplary!" says the ZDB (Central Association of the German Construction Industry).
The German Association of Towns and Municipalities (DStB) is also calling for easier public procurement procedures, at least for the duration of the current construction boom, so that municipalities can once again secure skilled tradespeople for their construction sites. The DStB wants free public procurement to be possible on a larger scale than before.
Companies can simplify their participation in tenders by registering in a prequalification database ( PQ-Bau and PQ-VOL ). Their suitability as a bidder is stored there for one year , saving them the trouble of resubmitting their documents for the next tender.
Even though the trades' coffers are currently ringing, no one knows what the economic situation will look like in the future. "Even in good times, you have to maintain contacts and treat each other fairly in the long term," is the strategy of HVAC business owner Gobbers. And one thing is clear: anyone building today will need maintenance in the coming years – including public sector clients.
Anne Kieserling
Procurement law
Public procurement law encompasses all the regulations that public authorities must observe when purchasing goods and services. There is no uniform law governing the award of public contracts; it is based on a multitude of regulations. Whether a service must be tendered Europe-wide depends on whether certain contract thresholds are exceeded: for supplies and services, the threshold is €221.000 or more, and for construction work, the threshold is €5.548.000 or more – whereby the overall value of the tendered project is always decisive, not the individual lot.
The award above the EU thresholds In Germany, these regulations include the Act against Restraints of Competition and the Ordinance on the Award of Public Procurement. Only for construction contracts, the German Construction Contract Procedures (VOB/A) continue to apply. For contracts awarded below the EU thresholds, the Sub-Threshold Procurement Ordinance (UVgO) applies. It has been in force in North Rhine-Westphalia (NRW) since June 9, 2018, in Saarland since March 1, 2018, and in Rhineland-Palatinate, according to the Ministry, it is scheduled to enter into force at the beginning of 2019. The German Construction Contract Procedures (VOB/A) remain authoritative for construction contracts even below the threshold. In North Rhine-Westphalia, the Collective Bargaining and Public Procurement Act (Tariftreue- und Vergabegesetz) and other state regulations also apply.
Electronic procurement: Bis zum 18 October 2018 In the above-threshold area, all contracting authorities and contractors must switch completely to electronic procurement (evergabe-online.de). In the sub-threshold area, the obligation to use e-procurement applies from 1 January 2020, but not for contract values below EUR 25.000 and restricted contracts.
The Chambers of Crafts help their member companies with all questions relating to the award of contracts.
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