Federal Budget Code (BHO) in Public Procurement Law 2026

Definition: The Bundeshaushaltsordnung (BHO) is the central budget code of the German Federation and contains, in Section 55, the basic obligation to conduct public tenders, which acts as a budgetary supplement to procurement law when federal funds are used.

Last updated: January 2026 · Legal basis: BHO as amended on 19 August 1969 (BGBl. I p. 1284), as subsequently amended; Section 55 BHO, VgV, UVgO

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What is the Federal Budget Code?

The Bundeshaushaltsordnung (BHO) is the fundamental statute governing the budget and financial management of the German Federation and, together with the Basic Law (Articles 110–115 GG), forms the constitutional framework for the use of public federal funds. It governs the preparation, execution and audit of the federal budget and contains fundamental principles such as economic efficiency and thrift (Section 7 BHO), the principle of overall coverage and the annuality principle.

For public procurement, Section 55 BHO is of particular importance: it obliges federal authorities, in principle, to precede the conclusion of contracts with a public tender, unless the nature of the transaction or special circumstances justify an exception.

Section 55 BHO – the obligation to tender

Section 55 BHO is the budget-law cornerstone of the procurement obligation for federal authorities and applies in parallel with the procurement-law provisions of the GWB and the VgV.

Section 55(1) BHO stipulates: "The conclusion of contracts for supplies and services must be preceded by a public tender, unless the nature of the transaction or special circumstances justify an exception."

This obligation also applies below the EU thresholds and is specified for supplies and services by the Sub-threshold Procurement Regulation (UVgO) and for construction works by VOB/A. The BHO thus acts as a budgetary framework that has effect independently of procurement law.

Principle of economic efficiency (Section 7 BHO)

The principle of economic efficiency enshrined in Section 7 BHO obliges all federal authorities to seek the most favourable cost-benefit ratio when spending money. It includes both the principle of thrift (no unnecessary spending) and the principle of economic efficiency in the narrower sense (maximum performance with given resources). In the procurement context, this means that the contracting authority must not necessarily select the cheapest, but the most economically advantageous tender – a principle that corresponds to the "best bidder principle" in procurement-law terminology.

Relationship to GWB and VgV

The BHO and the procurement-law framework of the GWB are complementary to one another: while the GWB governs the competitive-law framework for the award of contracts and grants individual legal protection in the event of infringements, the BHO safeguards the budget-law legality of the use of funds.

Differences in practice:

• The BHO applies to all federal spending, regardless of the contract value
• The GWB and its regulations (VgV, SektVO, KonzVgV) only apply above the EU thresholds
• Breaches of the BHO can lead to objections by the Federal Audit Office
• Breaches of the GWB give rise to subjective bidder rights and entitlements to review

Federal Audit Office and budgetary oversight

Compliance with the BHO, including its procurement provisions, is reviewed by the Federal Audit Office (Bundesrechnungshof). It may raise objections and make recommendations to the audited bodies but has no immediate sanctioning powers vis-à-vis the authorities.

FAQ

Does the BHO also apply to the federal states and municipalities? No. The BHO only applies to the federal government. The federal states have their own state budget codes (Landeshaushaltsordnungen), which largely correspond to the BHO in content. Municipalities are subject to the respective municipal codes.

What happens in the event of a breach of Section 55 BHO? Breaches of Section 55 BHO primarily render the spending impermissible under budgetary law and can lead to censures by the Federal Audit Office. Individual bidder rights are primarily protected via the GWB, not via the BHO.

Are there exceptions to the tendering obligation under Section 55 BHO? Yes. Section 55 BHO permits exceptions where the nature of the transaction (e.g. contracts requiring confidentiality) or special circumstances (e.g. urgency, sole source) make a tender impossible or inexpedient. Exceptions are to be interpreted narrowly and must be documented.

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