Bidding consortium

Some contracts are too large for a single company or require services that you cannot all provide yourself. The bidding consortium is the intended route for this. It is expressly permitted, but has two pitfalls: competition law and the question of whether you may still change its composition later.

Permitted in principle

Section 43 of the Public Procurement Regulation (VgV) puts bidding consortia on an equal footing with individual bidders. A bid may not be rejected because it comes jointly from several companies, and the contracting authority may not require a particular legal form while you are still in the procedure. It can only require a particular legal form after the contract award, and even then only if this is necessary for performing the contract.

In practice, contracting authorities regularly require a bidding consortium declaration: the appointment of an authorised representative, a declaration of joint and several liability and a commitment to adopt a suitable legal form if the contract is awarded.

The competition law framework

This is where the real risk lies. A bidding consortium is an agreement between competitors and must therefore be measured against Section 1 of the Act against Restraints of Competition (GWB). It is permitted if the companies involved could not submit a viable bid without the cooperation.

The exact standard is disputed. Two conditions are examined: that none of the companies could perform the contract alone, and that the cooperation is commercially reasonable and makes a competitive bid possible in the first place. The Federal Cartel Office (Bundeskartellamt) treats both conditions as cumulative, while the procurement senates of the Higher Regional Courts tend to treat them as alternatives.

The consequences of an unlawful agreement are serious. Section 124(1) no. 4 GWB permits exclusion where there are merely sufficient indications of an agreement restricting competition, proof is not required. Section 298 of the German Criminal Code (StGB) makes agreements restricting competition in tenders a criminal offence.

Distinction from capacity lending and subcontractors

Three forms of cooperation are regularly confused, although they apply at different points.

With capacity lending, you rely on another company to demonstrate suitability. The restriction in Section 47(1) sentence 3 VgV is important: where professional ability is concerned, that is educational qualifications or relevant professional experience, the lending company must also perform the service itself. So you cannot qualify with someone else's experience and then carry out the work yourself.

In the case of economic capacity lending, the contracting authority may require joint and several liability. It does not arise automatically, it must be stated in the tender documents.

Fix the composition before submitting the bid

If a member drops out or the composition is to change, things get tricky. Case law is inconsistent. The Higher Regional Court (OLG) Düsseldorf applies a strict standard, while the Higher Regional Court Celle assesses changes less formally. The Higher Regional Court Hamburg has ruled that a member switching to the role of subcontractor leads to exclusion (1 Verg 4/13).

In practice, this means: clarify the composition before you submit the bid, and agree internally what happens if a partner drops out. If a change cannot be avoided, approach the contracting authority before the bid deadline, not afterwards.

Liability during performance

Towards the contracting authority, the members of a bidding consortium are generally jointly and severally liable. This means that each member is liable for the whole, regardless of which part it performed. You should therefore agree in writing internally who provides which service, how payments are divided and who is responsible for defects in which trade.

In addition, there is the principal's liability for minimum wages: Section 14 of the Posted Workers Act (AEntG) and Section 13 of the Minimum Wage Act (MiLoG) make the contractor liable for payment of the minimum wage by the subcontractors it engages. In multi-tier chains, you should obtain written confirmation of compliance.