Price-Based Public Tenders Discourage Innovation as Major Legal Reforms Approach in Germany

A recent study by the ZEW – Leibniz Centre for European Economic Research reveals that public procurement tenders in Germany focusing solely on the lowest price significantly discourage participation from young, innovative companies. Analyzing data from 4,260 young German firms, researcher Bastian Krieger emphasized that over 60% of public tenders in Germany prioritize price alone, which tends to favor established companies and safer, less innovative products. Krieger advocates for criteria-based tender procedures that incorporate quality and innovation alongside price to better attract innovative bidders.

The study highlights the potential of functional tenders that specify desired outcomes rather than precise products, thereby fostering creative solutions in public contracting. It also notes that simply applying performance standards without rewarding exceeding performances limits innovation.

As these challenges persist, Germany is preparing for the most significant reforms in procurement law in over a decade. Public procurement accounts for nearly EUR 500 billion annually—about 15% of the country’s GDP—and this volume is expected to double in the near future. New legislation like the Bundeswehrplanungs- und Beschaffungsbeschleunigungsgesetz, the Bundestariftreuegesetz, and the Vergabebeschleunigungsgesetz will reshape the procurement landscape nationally, alongside expected revisions to EU procurement rules.

A Masterclass scheduled for May 6 will bring together leading experts, including procurement law specialists Dr. Carsten Bringmann and Salomo Ortega Sawal, as well as AI specialist Felicitas von Rauch from Forgent AI, to discuss these reforms. Companies will be guided on navigating regulatory changes, strategies for defense procurements, and how domain-specific AI can streamline processes, potentially reducing bureaucratic burdens by up to 90%. The session is open to all businesses aiming to convert upcoming legal reforms into economic success.

These developments underscore the urgent need for Germany’s public procurement processes to better integrate innovation and quality criteria, ensuring that young and innovative companies can compete effectively as legal frameworks evolve.