Company Size in Public Procurement 2026 – SMEs and Public Contracts

Definition: Company size in public procurement law refers to the classification of undertakings by headcount and turnover, particularly relevant for the promotion of small and medium-sized enterprises (SMEs) and for setting proportionate suitability requirements.

Last updated: January 2026 · Legal status: § 97 (4) GWB, Recommendation 2003/361/EC, § 29 VgV

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Relevance of company size in public procurement

Company size plays an important role in public procurement law, as the law expressly seeks to promote the participation of small and medium-sized enterprises (SMEs) in public contracts. § 97 (4) GWB obliges contracting authorities to award contracts divided into part-lots (Teillose) and separated by type or specialism (Fachlose), so far as this is economically and technically sensible. The aim is to make it easier for SMEs to access public contracts where they would often be unable to offer the entire scope of services in a single award.

EU definition of SMEs

The European Commission set out a binding SME definition in Recommendation 2003/361/EC, which also serves as a reference in procurement law:

Type of undertaking	Headcount	Annual turnover or balance sheet total
Micro-enterprise	< 10	≤ €2 m
Small enterprise	< 50	≤ €10 m
Medium-sized enterprise	< 250	≤ €50 m (turnover) / ≤ €43 m (balance sheet)
Large enterprise	≥ 250	> €50 m

Proportionality of suitability requirements

Contracting authorities must always set suitability requirements proportionately — excessive turnover or reference requirements that de facto exclude SMEs are impermissible. Pursuant to § 122 GWB and Art. 58 of Directive 2014/24/EU, minimum annual turnover requirements may, as a rule, not exceed twice the estimated contract value. Procurement tribunals and courts have repeatedly censured disproportionate suitability requirements.

Division into lots as a support instrument

The most important tool for promoting diversity of company size in public procurement is the division into lots. By splitting large contracts into manageable part-lots, SMEs as specialists for particular service areas are also able to tender. Where contracting authorities wish to forgo a division into lots, they must justify this in the procurement file (§ 97 (4) sentence 3 GWB).

FAQ

Must contracting authorities favour SMEs? No, direct favouritism towards SMEs is incompatible with the principle of equal treatment. Contracting authorities must, however, facilitate SME participation, particularly through division into lots and proportionate suitability requirements.

Can an SME supplement its capacity through bidding consortia or subcontractors? Yes, bidding consortia and reliance on third-party capacities (§ 47 VgV) allow SMEs to combine or to use the capacities of other undertakings for the suitability assessment.

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