The German economy, which has been in crisis for several years, needs significant investment—and it needs it as soon as possible. The private sector alone cannot manage this. The government must step in. Even before the new Bundestag convened, a loan-financed special budget of 500 billion euros for infrastructure and climate protection was therefore approved on March 18, 2025. 100 billion is earmarked directly for the states and municipalities, with another 100 billion allocated for climate protection and the related economic transition. At the same time, the so-called debt brake in the Basic Law was relaxed to allow for higher defense spending. According to the government’s draft federal budget for 2026, which was approved by the Federal Cabinet on July 30, the defense budget is set to rise to a total of approximately 82.7 billion euros next year. Together with the planned expenditures of approximately 24.5 billion euros from the special fund, the Bundeswehr will thus have well over 100 billion euros at its disposal as early as 2026. These funds will be invested primarily in the form of public contracts. To accelerate and simplify the related procurement processes, a series of administrative regulations and draft laws have now been introduced. Here’s what that means in concrete terms:
Higher value thresholds below the EU thresholds
Public contracts that, given their volume, may also be of interest to companies from other EU member states are subject to European public procurement law, which is shaped by EU directives. Contracts that exceed the thresholds defined by the EU must therefore be awarded in accordance with legal regulations that are largely beyond the control of national legislators. The situation is different for contracts that do not reach these thresholds. In such cases, there is considerable discretion at the federal and state levels. Generally speaking, the higher the contract value, the more complex the procurement procedures that must be followed tend to be.
Under national procurement law, a distinction is made between the virtually unregulated direct award, the minimally regulated negotiated award, the significantly more formal restricted tender, and the open tender, which is subject to extensive detailed requirements. Naturally, the more formalized and bureaucratic the applicable regulations are, the longer procurement procedures take. By significantly raising the thresholds applicable to the respective types of procedures, an effective acceleration has now been achieved at the state and local levels, with immediate effect across all levels of government. The situation can be illustrated by the Bavarian Act on Economic and Public Procurement Law (BayWiVG) of January 1, 2025. According to this Act, the following value thresholds apply to state and municipal contracting authorities:
- Direct award for the procurement of goods, services, and professional services up to and including a value threshold of 100,000 euros
- Negotiated award and restricted bidding without competitive participation generally apply to contracts for goods, services, and professional services with a value below the EU threshold
- Direct award for construction services up to and including a value threshold of 250,000 euros
- Discretionary award and restricted tendering without a competitive bidding process for construction services up to and including 1,000,000 euros
Similar regulations—albeit with somewhat different thresholds in some cases—are now also in place in most other federal states. Where this has not yet been implemented, measures are imminent. These adjustments enable public contracting authorities at the state and municipal levels to use significantly simplified and faster procedures for contracts below the EU thresholds.
Dr. Jörg Klingmann
Dr. Jörg Klingmann is a partner at the law firm Schlatter. law in Heidelberg. His practice focuses on construction and real estate law, as well as public procurement law. His client base consists primarily of well-known companies, public-law entities, and international research institutions. He has extensive experience in drafting contracts and providing legal advice for large-scale construction projects.
Do you have any questions? Attorney Dr. Jörg Klingmann will be happy to assist you:
Public Procurement Acceleration Act
At the federal level, extensive legislative initiatives have been launched in the area of public procurement law above the EU thresholds; these initiatives are intended to have positive effects on the national economy within the scope of the Federal Republic’s discretion in implementing the relevant EU directives. The draft bill published by the Federal Ministry for Economic Affairs on July 24, 2025, for a law to accelerate the awarding of public contracts— or the Public Procurement Acceleration Act for short, provides for several amendments to the Act Against Restraints of Competition (GWB), including greater flexibility regarding the principle of lot division for certain large-scale projects and the abolition of the suspensive effect of immediate appeals in review proceedings.
Other significant changes include raising the value thresholds for direct awards to 50,000 euros through a corresponding amendment to the Federal Budget Code. There will also be simplifications regarding proof of suitability and service specifications. Finally, new regulations will significantly facilitate contract awards among public contracting authorities and the integration of strategic procurement goals such as climate-friendliness.
However, anyone familiar with procurement practices in Germany knows that the practical effects of the proposed changes will remain quite limited. This applies in particular to the timeframes for open procedures and procedures with competitive participation. While the proposed new regulations do lead to some simplifications in terms of content, However, all essential—and above all, time-consuming—formal procedural steps remain unchanged in terms of processes and deadlines. The macroeconomic impact of eliminating the suspensive effect for immediate appeals against decisions by the public procurement tribunals remains marginal, given the small number of relevant appeal proceedings compared to the total number of public contracts. Furthermore, the possibility of effective interim legal protection remains intact under fundamental rights. Furthermore, this means that the public sector will operate at a significantly slower pace in general procurement above the EU thresholds than is possible for private contracting authorities not bound by public procurement law.
Speeding Up Bundeswehr Procurement
On July 23, 2025, the federal government also approved the draft bill for another law aimed at accelerating Bundeswehr procurement procedures. This move comes in response to the changed security situation following Russia’s war of aggression against Ukraine and the shifting transatlantic rhetoric regarding NATO and mutual defense obligations. The draft is supplemented by administrative regulations already in force governing the awarding of public contracts to meet the Bundeswehr’s needs. These provisions facilitate the awarding of public supply, service, and construction contracts for Bundeswehr procurements by raising the contract value thresholds. Direct awards may be made for service and supply contracts up to a contract value of currently 443,000 euros. For construction services, direct awards to meet the Bundeswehr’s needs are permitted for contracts with a value of up to one million euros. The requirement to award contracts in lots is suspended until the end of 2030. At the same time, review procedures in the defense sector will also be expedited. The Federal Public Procurement Tribunal will have sole jurisdiction over all procurement procedures within its scope of application, which is intended to ensure a uniform interpretation of the law.
Finally, the draft bill allows for far-reaching restrictions on companies from third countries. Contracting authorities may at any time limit participation in procurement procedures to applicants or bidders established in an EU member state. Economic operators from third countries also lose their right to file appeals in review proceedings.
Hydrogen Acceleration Act (WaBG)
A “Draft Act to Accelerate the Availability of Hydrogen and to Amend Other Legal Framework Conditions for the Hydrogen Rollout, as well as to Amend Other Energy Law Provisions” is also currently under consideration.
The draft bill aims to accelerate the development of hydrogen infrastructure in Germany. To this end, public procurement regulations will also be modified to optimize processes and reduce processing times. The most important provisions of the bill relating to public procurement law are those designed to accelerate procurement and review procedures by allowing decisions to be made based on the written record and without an oral hearing. For the consolidation of different services that deviates from the principle of dividing contracts into lots—such as awarding contracts to general contractors—it is sufficient that this be “justified” by economic, technical, or time-related reasons. Exceptions are permitted to the principle that serious violations of public procurement law result in the nullity of the concluded contracts. Furthermore, there are also restrictions here on the options for legal redress to avoid excessively lengthy proceedings and the resulting delay in awarding the contract.
Collective Bargaining Compliance Act
On August 6, 2025, the Federal Cabinet finally approved the “Draft Act to Strengthen Collective Bargaining Autonomy by Ensuring Compliance with Collective Bargaining Agreements in the Award of Federal Public Contracts,” which had been jointly submitted by Federal Minister of Labor Bärbel Bas (SPD) and Federal Minister of Economics Katherina Reiche (CDU).
According to the bill, companies in Germany will in the future be required to pay wages at collective bargaining rates when executing public contracts valued at 50,000 euros or more—even if they are not bound by collective bargaining agreements. This is intended to eliminate the competitive disadvantages faced by companies bound by collective bargaining agreements when competing for federal public contracts and concessions. In addition, companies wishing to bid on such contracts will be required to comply with other minimum working conditions stipulated in collective bargaining agreements for the respective industry—such as maximum working hours and breaks. According to the federal government, the bill is to be debated in the Bundestag shortly and passed by the end of 2025. However, these regulations clearly do not lead to simplification or acceleration.
