German Federal Contract Award Act to Revamp Government Procurement
Berlin, January 9, 2025 – The German Federal Government has approved a new law aimed at reforming the award of public contracts. The “Federal Contract Award Act” (Tariftreuegesetz) seeks to ensure that companies bidding for government contracts adhere to collectively agreed labor standards, including fair wages and working conditions.
The law is a response to concerns that public procurement has been used to drive down labor costs, leading to unfair competition and the erosion of workers’ rights. By mandating that contractors follow collectively agreed labor standards, the government intends to protect workers and ensure that public funds are not used to undermine fair labor practices.
The law will apply to all public contracts with a value of €50,000 or more. Companies bidding for contracts will be required to declare that they adhere to collectively agreed labor standards and provide evidence of such compliance. Failure to comply could result in exclusion from the bidding process or even termination of existing contracts.
The law also establishes a new “Compliance Officer for Tariftreue” who will be responsible for monitoring compliance and investigating potential violations. The Compliance Officer will have the authority to conduct inspections and impose fines on non-compliant companies.
The Federal Contract Award Act is expected to come into force on January 1, 2026. It is part of a broader effort by the German government to promote fair and sustainable procurement practices. The government believes that the new law will create a level playing field for businesses, protect workers, and ensure that public funds are used responsibly.
Key Provisions of the Federal Contract Award Act:
- Requires companies bidding for public contracts of €50,000 or more to adhere to collectively agreed labor standards.
- Mandates that contractors provide evidence of compliance with labor standards.
- Establishes a new “Compliance Officer for Tariftreue” to monitor compliance and investigate violations.
- Allows for exclusion from bidding or termination of contracts for non-compliance.
- Comes into force on January 1, 2026.
The law has been met with mixed reactions from the business community. Some businesses support the new regulations, arguing that they will level the playing field and ensure fair competition. Others have expressed concerns that the law will impose an additional administrative burden and could limit their ability to bid for public contracts.
Overall, the Federal Contract Award Act is a significant step towards ensuring fair and sustainable procurement practices in Germany. By mandating that contractors adhere to collectively agreed labor standards, the government aims to protect workers’ rights, encourage fair competition, and ensure that public funds are used responsibly.
Tariftreuegesetz will Aufträge des Bundes neu regeln
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