What does general contractor mean?
A general contractor (Generalunternehmer, GU) is a company that takes on overall responsibility for delivering the tendered work under a public contract. The general contractor is the contracting authority's sole contractual partner and is liable for complete and proper performance. It can pass parts of the work on to subcontractors, but remains responsible to the contracting authority for their work.
The general contractor model is particularly common in public construction. Here, the general contractor typically carries out all or the main construction work and coordinates the subcontractors involved. This must be distinguished from the general undertaker (Generalübernehmer, GÜ), who awards all work to subcontractors and only handles coordination and supervision, without carrying out any construction work itself.
In procurement law, awarding a contract to a general contractor is not without problems, because it is in tension with the principle of dividing contracts into lots. Under Section 97a GWB (German Act against Restraints of Competition), work must generally be awarded in trade lots and sub-lots to give small and medium-sized companies access. An overall award to a general contractor is allowed only if economic or technical reasons justify it. The contracting authority must document and justify the decision not to divide the contract into lots.
Relevance for bidders
For larger companies, the role of general contractor offers the chance to win extensive contracts and control the entire value chain. However, it also comes with higher risks, because the general contractor bears overall responsibility and must answer for performance problems of its subcontractors. Careful selection of subcontractors and securing them contractually is therefore essential.
For small and medium-sized companies, an award to a general contractor can block direct access to the contracting authority. They are then limited to the role of subcontractor and have no direct contractual claim against the public contracting authority. However, SMEs can also act as equal partners in a bidding consortium to win contracts that exceed their individual capacities.
Legal framework
The principle of dividing contracts into lots is set out in Section 97a GWB and specified in more detail by Section 30 VgV (Public Procurement Ordinance) and Section 5 VOB/A (Construction Contract Procedures, Part A). The contracting authority may make an overall award only if economic or technical reasons require it. The subcontracting relationship is governed by the contractual agreements between the general contractor and the subcontractor, and the VOB/B contains rules on passing work on to others.