What is a Subcontractor?
A subcontractor (Nachunternehmer or Unterauftragnehmer) is a company engaged by the main contractor (the bidder awarded the public contract) to perform specific portions of the contract. Unlike a bidding consortium where multiple companies jointly submit a bid and share direct contractual responsibility toward the contracting authority, a subcontractor has no direct contractual relationship with the contracting authority. The main contractor remains fully responsible for the overall contract performance, including the work performed by its subcontractors.
German procurement law has progressively increased transparency requirements regarding subcontractors. Contracting authorities may require bidders to disclose in their bids which portions of the contract they intend to subcontract and to identify the proposed subcontractors by name. For above-threshold procurement under the VgV, the contracting authority can require the disclosure of subcontractors at the bid stage and may verify that proposed subcontractors do not fall under any exclusion grounds.
The use of subcontractors is generally permitted in public procurement, and contracting authorities may not prohibit subcontracting entirely. However, they may restrict the share of the contract that can be subcontracted if this is justified by the nature of the services. Particularly for core services that require specific qualifications or where the contracting authority has a legitimate interest in the main contractor performing the work directly, limitations on subcontracting may be imposed.
Why It Matters for Bidders
For bidders, subcontractors provide flexibility to access specialized skills, expand capacity, or cover geographic areas that the bidder cannot serve directly. However, using subcontractors adds management complexity and requires careful coordination to ensure quality, compliance, and timely delivery. Bidders should select subcontractors carefully, verify their qualifications and reliability, and establish clear contractual terms.
Bidders must also be aware that subcontractor declarations made during the procurement process are binding. If a bidder names specific subcontractors in their bid, replacing them after contract award typically requires the contracting authority's approval. Proposing a subcontractor that is later found to be subject to exclusion grounds can jeopardize the entire bid.
Legal Framework
Subcontracting in public procurement is governed by Section 36 VgV for above-threshold procurement and analogous provisions in the UVgO. The contracting authority's right to require subcontractor disclosure is established in Section 36 (1) VgV. Section 47 VgV addresses the borrowing of qualifications through subcontractors. EU Directive 2014/24/EU Article 71 sets out the European framework for subcontracting, including provisions for direct payment to subcontractors.