Collective Agreement and Procurement Act 2026 – Significance in Public Procurement

Definition: Collective agreement and procurement acts are state-level regulations in Germany that oblige public contracting authorities to award contracts only to companies that commit to complying with minimum or collective wages and further social standards.

Last updated: January 2026 · Legal status: Procurement laws of the German federal states, § 128 GWB, Minimum Wage Act (MiLoG)

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What is a Collective Agreement and Procurement Act?

Collective agreement and procurement acts link public procurement with social-policy objectives by tying contract award to compliance with wage and working conditions. The basic idea: any company wishing to receive public contracts must pay its employees at least the collectively agreed or statutorily set minimum wages. This is intended to prevent wage dumping and to ensure fair competition.

In Germany, numerous federal states have enacted their own collective agreement and procurement acts, since competence below the EU thresholds largely rests with the state legislatures. These laws bear different names depending on the federal state, such as Collective Agreement Compliance Act (TTG), Procurement and Collective Agreement Act (VTTG), or State Procurement Act.

Legal basis and framework

The constitutional and EU-law admissibility of collective agreement compliance rules was disputed for a long time but is now recognised in principle. The Court of Justice of the European Union (CJEU), in its Rüffert ruling (C-346/06, 2008), initially set narrow limits: collective agreement clauses referring to non-universally-binding collective agreements may infringe the freedom to provide services. The revision of the Posting of Workers Directive (96/71/EC, amended by Directive 2018/957/EU) has since opened up more room for social requirements.

At federal level, § 128 (1) GWB allows social concerns to be taken into account in contract performance. In addition, the Minimum Wage Act (MiLoG) prescribes a statutory minimum wage for all employees working in Germany, which also serves as a floor for public contracts.

Content and requirements

Collective agreement and procurement acts typically contain several levels of obligation for contractors and their subcontractors. These include:

• Minimum wage obligation: Payment of the statutory minimum wage (nationwide) or a higher state or sectoral minimum wage
• Collective agreement compliance in the narrower sense: Obligation to pay the applicable collective wages, in some cases also where collective agreements are not universally binding
• Subcontractor obligation: Passing the obligations on to subcontractors
• Declaration obligations: Submission of a collective agreement compliance declaration as part of the procurement procedure
• Monitoring and sanctions: Inspection rights of the contracting authority, contractual penalties for breaches

Differences in state law

The specific requirements vary considerably between the federal states, leading to a complex legal framework for companies operating nationwide. While some states merely refer to the statutory minimum wage, others require compliance with sector-specific collective agreements even where these have not been declared universally binding. Some states have abolished or significantly curtailed their collective agreement compliance acts.

FAQ

Does the Collective Agreement Compliance Act also apply to foreign companies? Yes, insofar as a company deploys staff for contract performance in Germany, the German wage requirements apply under the Posted Workers regime.

What happens in the event of breaches of the collective agreement compliance obligation? Breaches may result in contractual penalties and lead to exclusion from future procurement procedures. In serious cases, extraordinary termination of the contract is possible.

Does the collective agreement compliance obligation also apply to subcontractors? As a rule, yes – the laws provide that contractors must pass on the obligations in full to their subcontractors.

Must bidders submit a collective agreement compliance declaration as part of their bid? Yes, most collective agreement compliance acts require a corresponding declaration as part of the bid or application.

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Last updated: January 2026 All information without guarantee. For legally binding advice, please consult a law firm specialising in procurement law.