Grants and Subsidies in Procurement Law 2026

Grants and subsidies: public funding that can trigger procurement-law obligations where it is used to procure goods, works or services.

Definition: Grants and subsidies (Zuwendungen) are non-repayable financial contributions from public bodies to third parties (grant recipients) for the fulfilment of specific purposes, which can trigger procurement-law obligations where the grant funds are used to procure supplies, works or services.

Last updated: January 2026 · Legal basis: BHO § 44, LHO, BVergG 2018, GWB § 99(4)

What are grants and subsidies?

Grants and subsidies are public funding instruments provided by state or quasi-state bodies to private or public recipients for specific purposes, without a direct counter-performance being expected. They differ from public contracts in that the state is not the recipient of a performance, but the provider of funds.

Typical forms of grants include subsidies, support payments, contributions and subsidised loans – for example for research projects, infrastructure measures, cultural projects or economic development initiatives.

Relevance under procurement law

The procurement-law crux for grants and subsidies lies in the question of whether and to what extent grant recipients are subject to procurement law when using the funds for procurement.

Two constellations must be distinguished:

1. The grant recipient is itself a public contracting authority: In this case, it is subject to procurement law by virtue of its status as a public contracting authority. The grant does not change this.

2. The grant recipient is a private third party: Here, an obligation to apply procurement law may arise from the grant conditions. Many public funding bodies stipulate in their grant decisions or funding guidelines that recipients must apply procurement law above certain contract values. This obligation, however, is based on the grant relationship, not on procurement law itself.

Special case: EU-funded grants

EU-co-financed measures are subject to additional requirements: recipients of EU Structural Funds (ERDF, ESF+) or other EU funding programmes are obliged to comply with EU procurement rules, even if they are not public contracting authorities.

Breaches of procurement rules can lead to financial corrections, i.e. the (partial) recovery of the funding. European procurement case law has developed strict standards in this area.

Difference: grant vs. public contract

A public contract exists where the state procures a performance and pays remuneration for it. A grant exists where the state provides funds for a third-party purpose. The distinction is complex in individual cases – particularly where grant recipients provide performances for the state and at the same time receive funding.

Grant law in Austria and Germany

In Germany, §§ 44 ff. BHO and the General Ancillary Provisions for Grants (ANBest-P, ANBest-I) govern the procurement obligations of grant recipients. Above certain thresholds (as a rule EUR 100,000 for works and EUR 25,000 for other performances), tendering is mandatory.

In Austria, the respective federal and state funding guidelines contain corresponding procurement requirements.

FAQ

Must a private undertaking that receives funding apply procurement law? It depends on the grant conditions. Many funding guidelines provide for procurement obligations above certain thresholds.

What happens in the event of a procurement breach within the funded scope? For EU-funded projects, financial corrections (recoveries) may be imposed. For national funding, funding reductions or repayments may be agreed.

Are grants and subsidies themselves subject to procurement law? No. The award of grants by the state to third parties is not a public contract and is therefore not subject to procurement law.

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