What does direct award mean?
The direct award (Direktvergabe), also called a direct contract (Direktauftrag), is the simplest form of public procurement. In a direct award, the contracting authority gives a contract directly to a company without carrying out a formal procurement procedure with competition. This procedure type is allowed only below certain value limits, which are set by the respective procurement rules and state procurement laws.
The value limits for direct awards are well below the EU thresholds and vary by federal state, contract type and applicable procurement rules. The UVgO (Sub-Threshold Procurement Rules) provides for direct awards of supply and service contracts up to a contract value of €1,000 excluding VAT, and many federal states have allowed higher value limits. For works contracts, the rules of the VOB/A (Construction Contract Procedures, Part A) apply, which also allow a free award below certain value limits.
The budgetary principles of economy and efficiency also apply to direct awards. The contracting authority must make sure the price paid is reasonable, even if no formal competition takes place. In practice, it is recommended to obtain several quotes or at least carry out a market survey for direct awards too, to be able to prove that the price is reasonable. The direct award must be documented, although the documentation requirements are lower than for formal procedures.
Facts & figures
| Metric | Value |
|---|---|
| Value limit UVgO federal level | up to €1,000 net (Section 14 UVgO) |
| Value limit in many federal states (supplies/services) | up to €3,000 to €25,000 net (state law) |
| Typical value limit for construction work | up to €3,000 to €10,000 net (Section 3a(4) VOB/A) |
| Legal basis for supplies/services | Section 14 UVgO |
| Legal basis for construction work | Section 3a(4) VOB/A Section 1 |
| Maximum, allowed only below the EU threshold | €216,000 (supplies/services) or €5,404,000 (works) |
Relevance for bidders
For bidders, the direct award is an opportunity, especially for small and medium-sized companies that have good contacts with public contracting authorities. Because there is no public competition, how well the contracting authority knows the company is decisive. Companies can increase their chances of direct awards by proactively introducing themselves to public contracting authorities and being listed in relevant industry directories or the AVPQ.
However, direct awards offer only limited contract volumes and can give the impression of a lack of transparency. Bidders should make sure they offer fair prices, because repeatedly hiring the same company without a traceable justification can be problematic under procurement law.
Legal framework
The direct award is governed by Section 14 UVgO and Section 3a VOB/A Section 1. The permitted value limits are set by administrative regulations of the federal government and the federal states and can vary. The budgetary principles of economy and efficiency under the Bundeshaushaltsordnung (BHO, Federal Budget Code) or the respective state budget codes also apply to direct awards. Proper documentation is required even for informal awards.