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Overview of Austrian Public Procurement Law

internationallawoffice.com, 2009
1. Dezember 2009

Relevant Legislation

National regime

For state and public bodies at the central government level, the Federal Public Procurement Law 2006 (Bundesvergabegesetz 2006) implements EU Directives 2004/17/EC and 2004/18/EC (content), as well as Directives 89/665/EEC and 92/13/EEC (review proceedings).
The Public Procurement Law:

· provides for the legal framework for the award of public works, supply and service contracts, and works and service concessions and contests (the ´classic regime´);
· contains regulations coordinating the public procurement procedures of entities operating in the water, energy, transport and postal services sector (the ´sector regime´). Under both regimes, the law covers public tenders above and below the thresholds of EU Regulation 2083/2005; and
· contains procedural provisions relating to the review of the award of public contracts.

The Public Procurement Law also applies to all aspects of content of public tenders awarded by the nine Austrian provinces and the communities and public bodies governed by them. However, review proceedings at regional and local level are exempted from the law and are subject to nine different provincial laws. These provincial laws do not materially differ from the review proceedings provided for by the Public Procurement Law.

Relation to supranational regimes

The Austrian regime implements the relevant EU directives. EU Directive 2007/66/EC, amending Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts, is yet to be implemented into national law (implementation is expected in the first quarter of 2010). Pursuant to Section 19(2) of the Public Procurement Law, contracting parties from countries with which Austria has entered into multilateral or bilateral agreements on public procurement - in particular, the World Trade Organization Government Procurement Agreement - must not be discriminated against when awarding public contracts.

Basic underlying principles

The Public Procurement Law provides for non-discrimination and equal treatment of all candidates and tenderers. These principles imply an obligation of transparency which consists of ensuring, for the benefit of any potential tenderer, a degree of publicity sufficient to ensure the market is open to competition and the impartiality of the procedures to be reviewed. Basically, a contract notice should be published by the contracting entity in order to open the contract award to competition. However, the law also contains specific derogations allowing, under certain conditions, procedures without prior publication of an advertisement. These principles are relevant to the interpretation of the law. Further, the law must be interpreted in the spirit of the relevant EU legislation.

Special rules

There are no special rules in relation to military equipment. The Public Procurement Law does not apply to public works, supply and service contracts that are subject to Article 296 of the EC Treaty and awarded by contracting authorities in the field of defence. There are no other special rules.

Application of Law to Entities and Contracts

Public entities

Under the classic regime, bodies governed by public law are covered by the Public Procurement Law, provided that:

· they were established for the specific purpose of meeting needs in · the general interest and have no industrial or commercial character;
· they have legal personality; and
· are financed for the most part by the state, regional or local authorities or other bodies governed by public law;
· are subject to management supervision by those bodies; or
· have an administrative, management or supervisory board, more than half of whose members are appointed by the state, regional or local authorities or by other bodies governed by public law.

Under the sector regime, bodies governed by public law (as defined above) and public entities are covered by the Public Procurement Law. Such entities are undertakings over which the contracting authorities may exercise a direct or indirect dominant influence by virtue of ownership thereof, financial participation therein or the rules which govern them. A dominant influence is presumed when these authorities, directly or indirectly:

· hold the majority of the undertaking´s subscribed capital;
· control the majority of the votes attached to shares issued by the undertaking; or
· can appoint more than half of the undertaking´s administrative, management or supervisory body.
It is possible to obtain a ruling on qualification as a public body or entity. Where such body or entity directly awards a contract without applying the required tender procedure, economic operators that were not invited to submit an offer can challenge the award and the competent public procurement authorities can declare the direct award null and void.

Private entities

Pursuant to the sector regime, private entities must apply the Public Procurement Law if they operate on the basis of special or exclusive rights granted by an Austrian competent authority and if they operate in the following sectors:

· gas, heating and electricity (pursuant to the European Commission decision of July 7 2008, the production of electricity in Austria is exempted from the applicaiton of Directive 2004/17/EC; therefore, only distribution and transmission system operators fall within the scope of the sector regime);
· water;
· certain transport services (eg, public railway, automated system, tramway, trolley bus, bus or cable services);
· postal services (in October 2008 the Austrian Post applied for an exemption from the application of Directive 2004/17/EC; the European Commission decision is expected in December 2009);
· oil, gas, coal or other solid fuel exploration or extraction;
· port and airport services; or
· any combination thereof.

With respect to the ruling on qualification, the same applies to private entities as it does to public entities.

Types of contract

The types of contract covered include:

· public works, supply and service contracts;
· public works concessions; and
· public service concessions (whereby only the fundamental principles of the Public Procurement Law apply).

Threshold values for determining individual contract coverage

All of the above-mentioned types of contract are covered by the Public Procurement Law, notwithstanding whether the estimated value of the public contract is above or below the thresholds in EU Regulation 1422/2007. However, the thresholds in the Public Procurement Law are relevant to the choice of tender procedure. With respect to public tenders above the thresholds of EU Regulation 1422/2007, more formalized and transparent procedures apply.

Aggregation and anti-avoidance rules

One aggregation and anti-avoidance rule is the general provision that a public tender must not be split to avoid application of the Public Procurement Law or apply a certain tender procedure. Further, the law includes specific rules to calculate the value of the public contract, for example:

· in case of lots;
· with regard to public supply contracts relating to the leasing, hire, rental or hire purchase of products;
· for public supply and service contracts which are regular in nature or which are intended to be renewed within a given period;
· for insurance contracts;
· for banking and financial services contracts; and
· for design contracts.

Special rules for concession contracts

In principle, all types of concession contract above the threshold of €100,000 (until December 31 2010) are subject to the Public Procurement Law. However, depending on the type of concession and qualification as a contract under the classic and sector regimes, different Public Procurement Law rules apply. Compared to other public contracts, concession contracts are not as strictly bound to these rules; in particular, they have greater flexibility with regard to the choice of procedure, provided that such procedure safeguards the application of the rules and principles of the EC Treaty and contains an appropriate level of transparency.


Different procedures

Open procedures are those procedures in which any economic operator may submit a tender.

Restricted procedures with publication of a contract notice (classic regime) or a call for competition (sector regime) are those procedures in which any economic operator may request to participate, with only those economic operators invited by the contracting authority permitted to submit a tender.

Restricted procedures without publication of a contract notice or a call for competition are those procedures in which selected suitable economic operators are invited to submit a tender.

Negotiated procedures with publication of a contract notice or a call for competition are those procedures in which any economic operator may request to participate, with only those economic operators invited by the contracting authority permitted to submit a tender and with the contracting authority negotiating the terms of contract with those tenderers.

Negotiated procedures without publication of a contract notice or a call for competition are those procedures whereby the contracting authority invites certain candidates to submit an offer and then negotiates the terms of contract with the selected tenderers.

Public contracts can be awarded in the form of a framework agreement, which is an agreement between one or more contracting authorities and one or more economic operators with no purchase commitment, the purpose of which is to establish the terms governing contracts to be awarded during a given period - in particular with regard to price and, if appropriate, the quantity envisaged. Framework contracts can be awarded after carrying out an open procedure, a restricted procedure with publication or a negotiated procedure. Contracts based on a framework agreement may be awarded either directly to a party to the agreement based on terms laid down therein or after an invitation to submit bids. The term of a framework agreement is limited to three years.

Dynamic purchasing systems are fully electronic processes for making commonly used purchases whose characteristics, as are generally available to the market, meet the requirements of the contracting authority. The system is open to any economic operator that satisfies the selection criteria and has submitted an indicative tender that complies with the specifications. The dynamic purchasing system is established after open procedures (without award) for a limited duration of four years. To award a contract, the contracting authority must invite all tenderers admitted to the system. The authority will award the contract to the tenderer that submits the best tender on the basis of the award criteria set forth in the tender documents to establish the system.

Competitive dialogue is a procedure in which any economic operator may request to participate, with the contracting authority conducting a dialogue with candidates admitted to that procedure in order to develop one or more suitable alternatives capable of meeting its requirements and on the basis of which the candidates are invited to submit a bid.

An electronic auction under the Public Procurement Law is a repetitive electronic for the presentation of new prices revised downwards or new values concerning certain tenders, enabling them to be ranked using automatic evaluation methods. Such auction is not an independent procedure; rather, it can be applied:

· after open procedures;
· after restricted procedures with publication;
· after certain types of negotiated procedure;
· when awarding framework agreements; and
· in the form of a dynamic purchasing system.

Design contests are those procedures which enable contracting authorities to acquire - mainly in the fields of town and country planning, architecture and engineering, advertisement or date processing - a plan or design selected by a jury after being put out to competition, with or without the award of prizes. Such contests can be open, restricted or invited contests.

Realization contests are contests which lead to a negotiated procedure to award a public service contract after carrying out a design contest.

Under the classic regime, contracting authorities are free to choose open or restricted procedures with the publication of a contract notice. Restricted procedures without publication and negotiated proceedings are admissible under certain circumstances.

Under the sector regime, contracting authorities have a choice between open procedures, restricted procedures with a calling for competition and negotiated proceedings with a calling for competition. Below the thresholds of EU Regulation 2083/2005, all of the above procedures can be chosen under the sector regime. Direct awards are admissible up to €100,000 (unitl December 31 2010).


Technical specifications must afford equal access for tenderers and must not have the effect of creating unjustified obstacles to the opening of public procurement to competition. Notwithstanding mandatory national technical rules, to the extent that they are compatible with EU law, these specifications must be formulated:

· taking into account the following priorities: national standards implementing European standards; European technical approvals;
international standards and other technical reference systems established by European standardization bodies; or where such standards do not exist, national standards, national approvals or national technical standardizations relating to the design, calculation and execution of works and the use of products, with each reference being accompanied by the words ´or equivalent´;
· in terms of performance or functional requirements;
· in terms of performance or functional requirements as mentioned in the second bullet point above with reference to the specifications set forth in the first bullet point above as a means of presuming conformity with such performance or functional requirements; or
· by referring to technical specifications mentioned in the first bullet point above for certain characteristics and by referring to performance and functional requirements for other characteristics.
When a contracting authority refers to the specifications mentioned in the first bullet point above, it cannot reject a bid, an alternative bid or a bid marginally amending the tender on the grounds that the products and services tendered do not comply with the specifications to which it has referred once the tenderer proves in its tender, to the satisfaction of the contracting authority and by any appropriate means, that the solutions which it proposes satisfy, in an equivalent manner, the requirements defined by the technical specifications. In particular, ´appropriate means´ include technical dossiers from the manufacturer or a test report from a recognized body.

When a contracting authority uses the option laid down in the second bullet point above to prescribe in terms of performance and functional requirements, it may not reject a bid, an alternative bid or a bid marginally amending the tender for works, products and services which comply with a national standard implementing a European standard, a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardization body if these specifications address the performance or functional requirements which it has laid down. In its bid, alternative bid or bid marginally amending the tender, the tenderer must prove, to the satisfaction of the contracting authority and by any appropriate means, that the works, services and products in compliance with the standard meet the performance or functional requirements of the contracting authority.

Unless justified by the subject matter of the contract, technical specifications shall not refer to a specific make or source, a particular process, particular trademarks, patents or types or a specific origin or production with the effect of favouring certain products and eliminating others. Such reference shall be permitted only on an exceptional basis and must be accompanied by the words ´or equivalent´.

Excluding tenderers

Tenderers must be excluded in the following cases:

· where the personal situation of the candidate and tenderer so necessitates - for example, in case of:
conviction for participation in a criminal organization, corruption, fraud or money laundering; insolvency; conviction for grave professional misconduct; or breach of obligations with respect to the payment of social security contributions and taxes;
· where the tenderer was involved in drafting the tender documents;
· where the tenderer is unsuitable due to a lack of sufficient economic and financial standing or professional and technical knowledge;
· where bids have been made with speculative prices (abnormally low tenders) or with no prices (in which the tenderer declares only to be less expensive than the lowest bid);
· where there is a lack of a required bid bond;
· where bids are submitted late;
· where bids do not accord with the tender documents - for example, bids for only parts of the contract, alternative bids and bids marginally amending the tender in case they were not allowed by the contacting authority or do not comply with the minimum requirements set forth in the tender documents;
· where bids contain mistakes or are incomplete and the tenderer refuses to amend the bid according to the contracting authority´s instructions;
· where the tenderer has participated in a bidding cartel;
· where bids are made with certain calculation errors;
· where bids are made by tenderers that were not invited to participate in the tender proceedings (in proceedings with restrictions regarding the number of participants); and
· where bids are made by tenderers from other EU member states that have not applied for recognition of their professional suitability before the award of the contract.

The decision to exclude tenderers lies with the contracting authority. A tenderer that is excluded can appeal against such decision and initiate review proceedings.

Shortlisting tenderers
Negotiated procedures can take place in successive stages in order to reduce the number of tenderers by applying the awarding criteria. The contracting authority must inform tenderers without delay of its decision no longer to consider their bids for the award. In the final phase of a negotiated procedure with more than one tenderer a sufficient number of tenderers must remain to uphold true competition.

Awarding the contract
The award will be based on either the most economically advantageous bid or the bid with the lowest price. In general, an award to the bidder with the lowest price is admissible only provided that the quality standards have been exactly defined in the tender documents and therefore that the quality of the bids will not differ. The criteria for an award given to the most economically advantageous bid must be weighted in the tender documents. These weightings can be expressed by providing a range with an appropriate maximum spread. Where, in the contracting authority´s opinion, weighting is not possible for demonstrable reasons, the contracting authority must indicate in the contracting notice or the tender documents the criteria in descending order of importance. In case the tender documents do not determine the basis of the award, the contract will be awarded to the bid with the lowest price. When awarding contracts below the thresholds in EU Regulation 1422/2002, under the classic regime and in the sectors in general, the contracting authority can choose between the two bases for the award.

Joint procurements
For joint procurements, framework agreements, dynamic purchasing systems and central purchasing bodies are available. One central purchasing body in Austria at the central governmental level is the Austrian Federal Purchasing Agency, which purchases, for example, electricity, gas, heating, telecommunications services, fuel, transport services, IT services and cars for the state.

Rules on alternative bids
The Public Procurement Law differentiates between alternative bids and bids marginally amending the tender. The latter can be described as bids that are not real alternatives to the tendered contract, but rather only amend the tender documents in a non-substantive manner. Therefore, those bids are also admissible where the basis for the award is the lowest price. However, alternative bids are limited to tenders where the basis for the award is the most economically advantageous tender.

Contracting authorities must indicate in the tender documents whether alternative bids are authorized; alternative bids cannot be authorized in the absence of such indication. The contracting authority must provide minimum requirements for such bids. In procedures for awarding public supply or service contracts, contracting authorities that have authorized alternative bids may not reject such a bid on the sole ground that if successful, it would lead to either a service contract rather than a public supply contract or a supply contract rather than a public service contract.

Marginal bids amending the tender are admissible even if the tender documents do not authorize them.

Exclusions and Exemptions

Principal exclusions and exemptions
With respect to exemptions, the Public Procurement Law follows Articles 10 and following of Directive 2004/18/EC (exemptions for the classic regime) and Articles 19 and following of Directive 2004/17/EC (exemptions for the sector regime). Hence, the Public Procurement Law does not apply to:

· secret contracts and contracts requiring special security measures;
· defence procurement;
· contracts awarded pursuant to international rules;
· service contracts awarded on the basis of exclusive rights;
· in-house contracts and further specific exclusions (eg, acquisition or rental of land or existing buildings and land);
certain broadcasting contracts; or
· certain financial services employment contracts.

Application of the exemptions must be determined by the contracting authorities and is subject to the review of the public procurement review authorities, which can annul contracts directly awarded in breach of the Public Procurement Law.

Application of law to in-house arrangements
The Public Procurement Law exempts ´in-house arrangements´, as defined by the European Court of Justice, from its scope of application.

However, awards of the undertaking to which the in-house contract is awarded are subject to the Public Procurement Law. Such undertaking must award contracts pursuant to the rules and procedures set forth in the law. There are no specific rules (exemptions) for the award of contacts within groups and between public bodies. Hence, in principle, the Public Procurement Law applies to such contracts.

Remedies and Enforcement

Provision for remedies and enforcement
Most decisions of a contracting authority (in particular, regarding the tender documents, exclusion of a candidate or tenderer, the decision to award a contract and revocation of the tender) are subject to review and annulment by the public procurement review authorities if such decision is in breach of the Public Procurement Law and the contract has not yet been validly awarded.

All candidates and tenderers have standing to appeal against a decision of the contracting authority that could potentially adversely affect them, and in particular, if they could suffer damages from the contested decision.

Other parties to the review proceedings, apart from the candidate or tenderer that initiates the review proceedings, may be negatively affected by the judgment filed by the applicant. For example, if a tenderer files for annulment of the award, the tenderer with the lowest price or the most economically advantageous bid is also a party to the review proceedings.

The review authorities have the power to annul contracting authority decisions (eg, the decision to award a contract to a certain tenderer). The contracting authority must then follow the ruling of the authority and make a new decision (eg, award the contract to someone other than the selected tenderer and amend the tender documents accordingly). To safeguard the effectiveness of the review proceedings, the authority can grant interim relief and suspend the tender procedure or certain decisions (eg, the decision to award a contract) until it has issued its judgment.

After the award of a contract, bidders can request a declaratory judgment from the review authorities that the tender proceedings infringed the Public Procurement Law and/or EU law. Such judgment is a prerequisite in order to claim damages from the contracting authority before the civil courts.

Seeking remedies in other proceedings outside the legislation
Infringement of the Public Procurement Law and other national public procurement laws entitles disregarded candidates to claim forbearance, abatement and damages under the Unfair Competition Act. Further, such economic operators can claim damages under civil law.

Bodies before which remedies and enforcement are sought
For all public contracts awarded by the state and public bodies or undertakings at central governmental level, remedies and enforcement must be sought before the Federal Public Procurement Authority. The nine different public procurement tribunals of the Austrian provinces which review decisions of the contracting authorities for all other public contracts are as follows:

· Vergabekontrollsenat Wien (Public Procurement Complaint Board, City of Vienna);
· Unabhängiger Verwaltungssenat Niederösterreich (Administrative Tribunal, Province of Lower Austria);
· Unabhängiger Verwaltungssenat Burgenland (Administrative Tribunal, Province of Burgenland);
· Unabhängiger Verwaltungssenat Oberösterreich (Administrative Tribunal, Province of Upper Austria);
· Unabhängiger Verwaltungssenat Kärnten (Administrative Tribunal, Province of Karnten);
· Unabhängiger Verwaltungssenat Steiermark (Administrative Tribunal, Province of Steiermark);
· Vergabekontrollsenat Salzburg (Public Procurement Complaint Board, Province of Salzburg);
· Unabhängiger Verwaltungssenat Tirol (Administrative Tribunal, Province of Tirol); and
· Unabhängiger Verwaltungssenat Vorarlberg (Administrative Tribunal, Province of Vorarlberg).

Legal and practical timing issues

In general, the timeframes for review proceedings are as follows:

· 14 days from the date of the contracting authority´s decision;
· seven days in fast-track tender procedures and tender documents; and
· seven days before the deadline for submitting offers or applications for participation expires.
Decisions that are not contested within the above timeframes become legal binding. For example, if a candidate does not appeal against tender documents that infringe the principle of equal treatment and the contracting authority decides to award the contract to another tenderer, in its complaint against the decision to award the contract the tenderer cannot apply for annulment of that decision based on the argument that the tender documents were in breach of the Public Procurement Law. This argument is not valid because tender documents become legally binding if they are not contested within the timeframe provided in the law.

Timescale for remedy or enforcement application
Interim relief must be granted within one week. Regarding an application of a candidate or tenderer, the public procurement authorities must decide to annul a contracting authority´s decision within between six weeks and two months. There are no time limits for the public procurement authorities to render a declaratory judgment.

Culture of enforcement
Appeals against decisions of contracting authorities are filed quite frequently and the public procurement authorities annul such decisions on a regular basis. In most cases such judgments are effective.

The most prominent recent cases are as follows.

Project Vienna Central Station-City

In this March 2008 case the Federal Public Procurement Authority qualified ÖBB-Immobilienmanagement Gesellschaft GmbH, the real estate management company of the Austrian Federal Railway Company, as a body governed by public law, since it:

· was established for the specific purpose of meeting needs in the general interest and had no industrial or commercial character;
· had legal personality; and
· was controlled by the state.

This decision was an important ruling because the qualification of such real estate management companies as public bodies has been disputed - in particular, whether they have commercial character and act on the market. It is now clear that they are governed by and must award their contracts pursuant to the procedures set forth in the Public Procurement Law.

Gas-steam power plant Mellach

VERBUND-Austrian Thermal Power GmbH & Co KG initiated a tender procedure for a general contractor for the planning and construction of a gas-steam power plant. The contract was subject to the sector regime of the Public Procurement Law. The estimated value of the contract was €500 million. VERBUND decided to award the contract in negotiated procedures with a call for competition. To speed up the schedule, VERBUND changed the ongoing procedure and introduced a preferred bidder selection, which was not announced in the contract notice. In September 2007 a bidder appealed against the preferred bidder decision, alleging secret agreements for fraudulent causes between the contracting authority and the selected preferred bidder. The Federal Public Procurement Authority initiated investigations under administrative assistance of the Federal Criminal Investigation Department. Further, four other bidders appealed against the preferred bidder decision on the same grounds. In the end, four applications were dismissed and one was withdrawn. Four complaints are pending with the Constitutional Court and three with the Administrative Court. This was the first case in Austria where the Federal Public Procurement Authority had to cooperate with criminal investigation authorities.

Brenner-Base Tunnel

This decision is of interest because it deals with the scope of application of the Public Procurement Law. Brenner-Base Tunnel Societas Europea awarded a public works contract in an open procedure. The shareholders of Brenner-Base Tunnel, which has its corporate seat in Innsbruck, Austria, are Italy (50%), Austria (25%) and the Province of Tyrol (25%). In addition to the bi-national character of the company, the tendered test drillings were to take place on Italian territory. Nonetheless, the Federal Public Procurement Authority accepted the application and initiated review proceedings to safeguard the efficiency of remedies in tender procedures.

Changes During and After a Procedure

There is no explicit regime governing changes to contract specifications. Post-signature changes to public contracts are governed by the provisions of the awarded contract and additionally by the general principles of civil law - in particular, the General Civil Code. However, all material amendments, to be defined as ´novations´, and changes other than those relating to collateral clauses trigger the requirement for a new tender of the contract.

Dealing with these issues

To avoid a new tender, public contracts often provide for adjustment clauses or options to extend the term of the contract or the scope of the supply and services. If such clauses were part of the original tender, they are in line with the Public Procurement Law.

Privatizations and public private partnerships

There are no special rules relating to privatizations or public-private partnerships.


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