A Guide to Public Tenders for SMEs

Guide to EU Public Procurement Law

EU public procurement law governs all public procurement processes within the EU. Understanding and navigating these regulations is one of the biggest challenges for companies looking to bid for public tenders. With a total market volume of several hundred billion euros annually, public procurement offers enormous opportunities. However, many companies are discouraged by the apparent price pressure in tenders and the dominance of large corporations in the public procurement market. As a result, they are unfamiliar with the regulations, procedures, and terminology of EU public procurement law. Yet, public tenders can be a valuable means for small and medium-sized enterprises (SMEs) to secure contracts.

During economically challenging times with declining orders public, or truly in general, tenders provide an ideal opportunity to make use of existing resources profitably and ensure stability. Several factors make public tenders a viable foundation for many businesses. Public institutions are often required to award contracts to SMEs when possible or give preference to them in the procurement process. Some public tenders fail—not due to price pressure—but simply because there are no technically suitable applicants. Price is not the only decisive criterion; professional competence and specific requirements of the contracting authority also play a crucial role. Therefore, public tenders are particularly attractive for companies that specialize in specific areas and possess outstanding expertise.

Our platform, IT tenders, enables you to identify the most suitable tenders among thousands of opportunities based on your expertise. It consolidates hundreds of pages of procurement information into a single, clear overview, provides insights into your chances of success, and saves hundreds of hours of work. However, you still need to decide whether submitting a bid is worthwhile based on the framework conditions, procurement type, and criteria. This article explains the fundamental principles of EU public procurement law, introduces key terms and processes, and compares different procurement procedures. The goal is to equip you with the necessary knowledge to successfully bid for public contracts.

Fundamentals of EU Public Procurement Law

EU public procurement law regulates the awarding of public contracts by contracting authorities such as ministries, municipalities, or public enterprises. Its objective is to ensure transparent and fair competition, create equal opportunities, and guarantee the efficient use of public funds. Several fundamental principles and regulations must be observed as the foundation of all procurement procedures.

Legal Basis

The primary legal framework for EU public procurement law is Directive 2014/24/EU. This directive has been transposed into national law by EU member states, such as Germany's Gesetz gegen Wettbewerbsbeschränkungen (GWB, Act Against Restraints of Competition) and Vergabeverordnung (VgV, Procurement Regulation). These regulations apply to public contracts exceeding certain thresholds and cover numerous rules regarding procedures, criteria, and processes.

Key Principles of EU Public Procurement Law

  1. Transparency: All steps of the procurement process must be documented and accessible to bidders. This includes the publication of tenders and the communication of decisions.

  2. Non-discrimination: Bidders must not be disadvantaged based on their location or other irrelevant factors.

  3. Competition: Inviting multiple bidders promotes fair competition, leading to better offers.

  4. Proportionality: Requirements and criteria must be appropriate and must not impose unnecessary barriers.

  5. Environmental and social responsibility: Increasingly, sustainability and social criteria are being integrated into procurement decisions.

Practical Implementation of the Principles

Transparency in the Process

Every procurement procedure that exceeds the EU threshold value (https://www.vhw.de/nachricht/neue-eu-schwellenwerte-2024-bis-2025-veroeffentlicht/) must be published in the Official Journal of the European Union (TED – Tenders Electronic Daily). These publications clearly define requirements, deadlines, and criteria to ensure equal participation for all interested companies.

Lots and Their Importance

A key aspect of EU public procurement law is the possibility of dividing contracts into lots. Contracting authorities are encouraged to split larger projects into multiple lots to enable the participation of smaller companies.

Examples of lot division:

  • Geographic: Different regions are tendered as separate lots.
  • Functional: Different services, such as planning and execution of a construction project, are separated.
  • Technical: Example: supply of IT hardware and software development.

Whether a bidder can apply for more than one or all lots (so-called bid limitation) is at the discretion of the contracting authority. However, the type and details of bid limitations must be specified in the procurement documents before the start of the tender. Similarly, award limitations—whether a bidder can win only one, several, or all lots—must be defined in advance and published with the tender.

Award Criteria

The selection of bidders is based on objective and verifiable criteria, which can be divided into two main categories:

  • Eligibility criteria (A criteria):
    • Proof of financial stability
    • References from previous, similar projects
  • Award criteria (B criteria):
    • Lowest price or most economically advantageous offer.
    • Qualitative factors such as professional competence, sustainability, delivery times, lifecycle costs, or service quality.
    • Optional services and alternative bids that go beyond the contract contents specified in the tender may be considered in the awarding process. However, alternative bids must be permitted within the procedure.

The weighting of the criteria is determined in advance and communicated in the procurement documents. Eligibility criteria define the minimum requirements for being considered suitable for the tender. Award criteria define the factors used to select the lot winner from the list of qualified applicants. 

References, Revenue Figures, and Other A-Criteria

In almost all tenders, references, employee numbers, minimum revenue, or similar requirements are set as A-criteria to ensure the bidder's delivery capability. Given that many new and smaller companies, such as start-ups, often cannot provide the required references, these criteria are increasingly being adjusted, particularly in tenders aimed at SMEs. In addition to financial capacity and company size, technical capability, training certificates, environmental management measures, or similar aspects may also serve as A-criteria. The requirement that no more than half of a company's capacity should be allocated to a single contract can also be waived in such cases.

Expanded Requirements and Developments: Focus on SMEs

In recent years, EU public procurement law has evolved to better integrate environmental and social aspects and explicitly protect the European SME sector. Contracting authorities are, for example, permitted to favor environmentally friendly technologies, reward suppliers with demonstrably fair working conditions, and are encouraged to award contracts to SMEs.

There is an increasing emphasis on supporting small and medium-sized enterprises (SMEs). The division of contracts into lots and the adjustment of requirements are intended to ensure that smaller businesses also have realistic opportunities to secure public contracts. Additionally, tenders can be specifically marked as SME-friendly and preferentially awarded to them.

Procurement Procedures in Detail

EU public procurement law offers a variety of procedures that can be used depending on the type, scope, and complexity of the contract. Each of these procedures has specific advantages and disadvantages that are crucial for bidders.

The following section presents the most important procurement procedures, examines their specific characteristics in detail, and provides practical guidance for applicants.

  1. Open Procedure

The open procedure is the most commonly used procurement method and is characterized by high transparency. It allows all interested companies to submit a bid without a prior selection process.

  • Process: 
    • The contracting authority publishes the tender, including all requirements and deadlines.
    • Companies submit their bids within the specified deadline.
    • After the deadline, the contracting authority reviews all bids and awards the contract based on the predefined award criteria.

  • Advantages: 

    • Maximum equal opportunity through open participation.
    • Highest transparency for all parties involved.
    • Wide selection of offers, increasing the chances of obtaining a good price-performance ratio.

  • Disadvantages: 

    • No negotiation rounds, meaning adjustments after bid submission are not possible.
    • High administrative burden for the contracting authority due to the large number of potential offers.

  • Best suited for:

    • Companies with clear, competitive offers and standardized services.

  • Challenges and Tips:

    • Pricing strategy: Price is often a key criterion. Calculate competitively without compromising quality.
    • Tip: Ensure that your documentation is professional and clear. Highlight your experience and place particular emphasis on references.

  1. Restricted Procedure

The restricted procedure combines a pre-selection process with limited participation. Only companies that meet the eligibility criteria are invited to submit a bid.

  • Process: 

    • The contracting authority requests companies to prove their eligibility.
    • After the pre-selection, suitable companies are invited to submit a bid.
    • The bids are evaluated, and the contract is awarded.

  • Advantages: 

    • More efficient evaluation by limiting the number of participants.
    • Focus on experienced bidders who meet the project requirements.

  • Disadvantages: 

    • Reduced competition, as not all interested companies can participate.
    • Focus on experienced bidders who meet the project requirements.

  • Best suited for: 

    • Companies with specific expertise or references that can demonstrate above-average performance and extensive know-how.

  • Challenges and Tips: 

    • Eligibility proof: Pay close attention to presenting your qualifications and references clearly.
    • Pre-selection: Only apply if you fully meet the eligibility criteria.
    • Tip: Highlight your unique selling points, such as technological innovations or specialized market knowledge.

  1. Negotiated Procedure

The negotiated procedure allows for individual solutions to be developed through negotiation rounds after the submission of initial bids. This provides greater flexibility for both contracting authorities and bidders. The procedure can take place with or without a pre-selection process, similar to the open or restricted procedure.

  • Process: 

    • After a possible pre-selection, the selected companies submit their initial bids.
    • In negotiation rounds, the bids are refined and optimized.
    • The contract is awarded upon completion of the negotiations.

  • Advantages: 

    • Flexibility in defining requirements and refining offers.
    • Better adaptation to complex projects through iterative negotiation processes.

  • Disadvantages: 

    • High effort for both parties.
    • Strict documentation requirements, which can extend the process.

  • Best suited for: 

    • Companies that can offer customized solutions and have strong negotiation skills

  • Challenges and Tips: 

    • Flexibility: Be prepared for multiple negotiation rounds and necessary adjustments.
    • Presentation: Clearly and professionally showcase your strengths and proposed solutions.
    • Tip: Develop various bid options and prepare for detailed questions from the contracting authority.

  1. Competitive Dialogue

The competitive dialogue is specifically designed for complex projects where the exact solution is not yet defined at the beginning of the tender process.

  • Process: 

    • Companies apply to participate in the dialogue.
    • The contracting authority holds discussions with selected companies to define requirements and potential solutions.
    • After completing the dialogue, participants submit their final bids.

  • Advantages: 

    • Maximum flexibility in developing solutions.
    • Close collaboration between the contracting authority and bidders.

  • Disadvantages: 

    • Very time-consuming and resource-intensive.
    • High organizational and documentation requirements.

  • Best suited for: 

    • Companies with innovative approaches and a willingness to engage in close collaboration.

  • Challenges and Tips: 

    • Communication: Be prepared to share and adapt your ideas openly.
    • Creativity: Develop unique solution proposals.
    • Tip: Invest time in a detailed needs analysis and thorough preparation.

  1. Innovation Partnership

The innovation partnership is a procedure specifically designed for the development of new and innovative solutions. It is used when the public contracting authority requires a product or service that is not yet available on the market or is not yet sufficiently developed technologically.

  • Process: 

    • Companies apply to become part of the innovation partnership.
    • The contracting authority and the selected partner collaborate to research and develop a solution.
    • After development, the solution is delivered to the contracting authority. The partner is usually also responsible for subsequent implementation.

  • Advantages: 

    • Early access to public contracts: Partners may have the opportunity to participate in follow-up projects.
    • Often large, multi-year projects, providing long-term financial stability.

  • Disadvantages: 

    • High investments and risks.
    • Long development periods, requiring long-term financial planning.
    • Complex contractual conditions.

  • Best suited for: 

    • Companies with advanced technologies or research capabilities.
    • Companies with high expertise in the required field, experience in research, or specialization in research and development (R&D).

  • Challenges and Tips: 

    • Willingness to collaborate: Be prepared to share ideas openly with the contracting authority and adapt flexibly to changes.
    • Innovative capability: Develop solutions that are not only technically feasible but also future-oriented.
    • Long-term planning: Ensure that your financial and personnel capacity is sufficient to sustain the long-term development process.
    • Tip: Prepare your application thoroughly by developing a detailed concept for the step-by-step realization of the solution. Demonstrate to the contracting authority that you have the necessary capacity and innovative strength to successfully implement the project and provide a clear timeline with key milestones.

Tender Deadlines

Different submission deadlines apply to open and restricted procedures.

For open procedures, the deadlines are:

  • 35 days
  • 30 days, if electronic submission is possible
  • 15 days, if the tender is of high urgency or was pre-announced

For restricted procedures, the deadlines under the same conditions are:

  • 30 days
  • 25 days
  • 10 days

The above procurement procedures apply to tenders above the EU threshold. However, public institutions, authorities, and companies are required to issue tenders starting in the mid-four-figure range. These below-threshold tenders (Unterschwellenvergabe) account for over 90% of all public tenders. They often involve supply contracts and smaller service contracts.

Below-threshold procurement procedures are similar to those above the EU threshold, so they are only briefly mentioned here:

  • Public tender: Analogous to the open procedure. All interested parties can submit a bid before the deadline, and the most suitable offer is selected based on the award criteria and their weighting.
  • Restricted tender: Similar to the restricted procedure. A selection process determines which bidders are invited to submit an offer. A restricted tender can also be conducted without a selection process, but this requires additional conditions, such as high urgency or a previously failed public or restricted tender with selection process.
  • Negotiated procurement: Analogous to the negotiated procedure above the threshold, with or without a selection process.

Below-threshold procedures are subject to various procurement regulations and may differ in specific details. The legal basis is the Unterschwellenvergabeordnung (UVgO), which exists in a federal version for national-level procurement and in regional versions for state and municipal procurement. Due to its similarity to EU-level procedures, knowledge of EU procurement processes can also be applied to national and regional tenders.

Practical Tips for Bidders

  1. Analyse the tender: Carefully check all requirements, deadlines, and criteria. Errors or incomplete documents can lead to disqualification.
  2. Preparation: Collect evidence and references in advance. Ensure that your company meets the eligibility criteria.
  3. Tailoring your bid: Highlight your strengths and provide a detailed explanation of how your offer meets the specific requirements.
  4. Communication: Use the Q&A session to clarify uncertainties and secure your strategy, but also to assess your technical competence for the project or the suitability of your solution.
  5. Precise calculation: Avoid unrealistically low prices that could call your credibility into question. Calculate in a way that keeps your offer economically viable and consider the weighting of the award criteria with regard to price weighting.

EU public procurement law offers companies, especially SMEs, immense opportunities but also presents challenges. Those who understand the basics of the procedures, analyze the award criteria, and recognize the specifics of each process have all the tools at their disposal to access this vast market.