According to estimates by the OECD, every year the German federal government, Länder and municipalities procure services amounting to at least EUR 500 billion or 15 % of GDP. This means that the public sector is one of the most important market participants. The government needs to spend the funds that are available to it both resourcefully and efficiently. At the same time, the government must ensure that it fulfils its responsibilities, such as the provision of public services. It also has a special role to play with regard to acting as a model consumer and investor.

In recent years, countries around the globe have increasingly used public procurement more strategically, by leveraging its economic impact and its unique role as the interface between public service delivery, citizens and business. Governments aim to achieve broader policy objectives by using procurement’s vast economic potential. While they have to ensure that every cent of public money is efficiently spent, governments also seek to maximise impact on the economy, achieve broader policy objectives and address societal challenges.

As the biggest economy in Europe, Germany boasts one of the largest public procurement markets in the region. Public procurement represents an estimated 15% of German GDP, an immense sum of EUR 500 billion per year. Public procurement has a considerable impact on all areas of well-being. Public procurement is crucial for delivering public services, whether in health, education, infrastructure or public safety. More indirectly, the goods, works and services Germany purchases via public procurement affect the environment, jobs and many other areas.

This chapter describes the significant role public procurement plays in the economic system and in citizen well-being, linking it to the policy challenges Germany is facing. Public procurement can be crucial in affecting all dimensions of well-being, including the economic, environmental, social and human aspects. Some countries have been able to attain first results in measuring possible impact of public procurement on these different dimensions of well-being by tracking how procurement can support overarching policy goals. Germany could maximise the impact of public procurement and help secure citizen well-being by designing and relying on a rigorous impact measurement framework.

Germany’s 2016 public procurement reform provided profound changes to the procurement system and affected all levels of government. This chapter analyses the legal framework and governance structure of the German public procurement system. It does so while also drawing attention to procurement at the state and municipal levels, which account together for almost 80% of procurement activity in Germany. The chapter identifies areas in which the reform has harmonised regulations, and identifies potential avenues for further streamlining Germany’s layered procurement system.

The centralisation of procurement operations through the aggregation of needs, framework agreements or centralised oversight of procurement performance among other techniques, can produce numerous benefits for countries. This chapter assesses the centralisation strategies that Germany has developed at the federal level, and compares them to international initiatives. The chapter then offers recommendations to maximise the benefits reaped through centralisation. These recommendations align with the German government’s renewed interest in optimising centralised procurement processes. The recommendations also support the conclusions of a parallel spending review on the coverage of centralised procurement instruments at the federal level in Germany.

As part of the broader digitalisation of government activity, electronic procurement (e-procurement) is changing the way the public and private sectors interact. The benefits of this transition include increased efficiency in the execution of tenders, reduced cost of tendering for suppliers and improvements in the collection and use of data. Recent EU directives have imposed deadlines for the implementation of e-procurement in EU member states, yet low maturity in electronic tendering presents timeframe challenges for both contracting authorities and suppliers. This chapter identifies barriers to implementing e-procurement at different levels of German government. Notably, it discusses the complexity of the technological environment, the need to improve visibility of procurement information and enhance systematic data collection. Finally, the chapter offers avenues for expanding and systematising e-procurement usage by embedding efforts into change management plans, building on stakeholder engagement and linking e-procurement to the wider digitalisation agenda in Germany.

Different approaches to acquiring goods and services can lead to public funds being used to achieve complementary policy objectives. Strategic procurement takes into account these complementary policy objectives. Strategic procurement can deliver varied policy goals in addition to the immediate objectives of achieving value for money and maximising efficiency in delivering public services. In recent years, the German government has placed importance on strategic procurement, developing several national strategies and work plans to support it. This chapter discusses the approaches Germany has taken to mainstream the use of strategic procurement. Germany’s specialised competence centres have been successful in supporting contracting authorities and suppliers, for example. In addition, several policies have created a framework for strategic procurement in the country. To maximise impact, however, additional measures may be necessary to diffuse a systematic approach to strategic procurement – especially at the sub-central level.

This chapter analyses how Germany manages human resource capital in its public procurement system. German civil servants benefit from solid education and training. However, the current approach to civil service in Germany is to train and employ a workforce of generalists, while expected challenges in the coming years will require increasingly specialised public procurers. To realise the fullest impact of public procurement, Germany could take a strategic approach to establishing public procurement as a profession. Developing systematic training for public procurers could allow for further specialisation and enable procurers to meet the challenges of increasingly complex strategic procurement processes.