Functional Tender in Procurement Law 2026
Functional tender: specifying the outcome rather than the method in the specifications. Difference from prescriptive tenders and use in procurement law.
Definition: A functional tender is a form of specification in procurement law in which the contracting authority does not prescribe in detail how a service is to be delivered, but instead describes the function, performance or outcome to be achieved and leaves the contractor scope to choose the method.
Last updated: January 2026 · Legal basis: § 31(2) VgV, § 7 VOB/A, § 97 BVergG 2018, Art. 42 Directive 2014/24/EU
What is a functional tender?
The functional tender is the counterpart to the prescriptive (detailed) tender: instead of describing the "what and how", the contracting authority sets out only the "what". The bidder has the freedom – and the obligation – to develop the "how" themselves. This opens up scope for innovation and allows the market to find the most efficient solution.
The functional specification is expressly recognised in § 31(2) no. 2 VgV (Germany) as an alternative to a prescriptive specification. Austria has an analogous provision in § 97 BVergG 2018. At EU level, Art. 42(3) Directive 2014/24/EU permits the description of performance characteristics and functional requirements.
Areas of application
The functional tender is particularly suited to complex services where the contracting authority knows the desired outcome but not the best method of achieving it.
Typical use cases:
- Technological procurement: IT systems, software, AI applications – the contracting authority describes functional requirements, not the technical implementation
- Energy refurbishments: Specifying the energy savings to be achieved instead of the technologies to be used
- Construction projects (design-and-build): The contracting authority sets out the user requirements and the contractor designs and builds
- Services: Description of service outcomes (e.g. cleanliness standards) instead of the cleaning methods to be used
- Innovation partnerships: The development process is open and the objective (an innovative solution) is described
Benefits and risks
The functional tender encourages innovation and competition, but also entails risks during tender evaluation.
| Benefits | Risks |
|---|---|
| Promotes innovation | Difficulty comparing tenders |
| Leverages market expertise | Higher evaluation burden for contracting authority |
| Flexibility for bidders | Higher risk for the contracting authority (unproven solutions) |
| Efficiency potential | Susceptibility to disputes on acceptance |
Distinction from a design-and-build tender
"Functional tender" and "design-and-build tender" (Funktionsausschreibung) are often used synonymously in German and Austrian law, but can have different emphases.
In Austrian law, the term "Funktionsausschreibung" (§ 98 BVergG 2018) is used specifically for works contracts in which the contractor delivers all design and construction services. The "functional tender" (or: functional specification) is the more general term, covering all types of contracts.
Procurement law requirements
Even with a functional tender, the specifications must be sufficiently determinate and equally understandable to all bidders.
The contracting authority must formulate the functional requirements precisely enough so that:
- All bidders have the same basis for their tender
- Tenders are comparable with one another
- The award criteria can be applied properly
Related terms
- Design-and-build tender
- Functional specifications
- Prescriptive specifications
- Specifications
- Alternative tender
FAQ
When should a contracting authority opt for a functional tender? When it knows the desired outcome or function but cannot or does not wish to determine how that outcome should be achieved. It is particularly suitable for innovative procurement and complex technology projects.
Can the contracting authority combine functional and prescriptive requirements? Yes. Hybrid specifications, which describe some parts functionally and others prescriptively, are permissible under procurement law and common in practice.
How are tenders evaluated in a functional tender? Evaluation is based on award criteria specified in advance and aligned with the functional requirements. Qualitative criteria (e.g. concept quality, innovation) often play a greater role than in prescriptive tenders.
Last updated: January 2026 All information is provided without warranty. For legally binding advice, please consult a law firm specialising in procurement law.
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