New Steering Model (NSM) in Public Procurement 2026

New Steering Model (NSM): administrative-reform instrument affecting public procurement. Output orientation, budgeting and tendering.

Definition: The New Steering Model (Neues Steuerungsmodell, NSM) is an administrative-reform concept introduced in the 1990s that modernises public administration through business-management elements such as output orientation, decentralised resource responsibility and budgeting, and in doing so also affects procurement organisation and the public-procurement function.

Last updated: January 2026 · Legal basis: BHO, GWB, Federal Budget Principles Act (HGrG)

What is the New Steering Model (NSM)?

The New Steering Model (NSM) is a concept of public-administration modernisation developed in Germany in the 1990s by the Joint Local-Authority Centre for Administrative Management (KGSt) and rolled out across numerous municipalities nationwide. It draws on business-management steering principles and seeks to replace the traditional input-oriented cameralistics with output-oriented steering that fosters economic efficiency, effectiveness and quality in public administration.

The NSM lost some of its original reform momentum in the 2000s but continues to influence many administrations through introduced elements such as product budgets, cost-and-performance accounting and budgeting.

Core elements of the NSM and their relevance to procurement

The NSM contains several steering elements that have direct effects on the organisation and conduct of public procurement.

Decentralised resource responsibility

Under the NSM, budgets and resource responsibility are devolved to the operational level (specialist departments, agencies). This also affects procurement budgets: instead of a central purchasing body, specialist departments are often responsible for their own procurement. This can conflict with procurement-law requirements, as decentralised purchasing raises the risk of unlawful contract splitting (circumvention of thresholds).

Output orientation and the principle of efficiency

The NSM philosophy of output orientation is compatible with the procurement-law principle of economy and efficiency (§ 7 BHO): both require that the resources deployed achieve the best possible outcome. Specifications that define outputs rather than inputs (functional specification) accord with the NSM approach.

Contract management and budgeting

The NSM promotes steering through performance agreements and contracts between political bodies and administration. In procurement, this leads to the introduction of framework agreements and call-off contracts that enable more flexible purchasing.

Benchmarking and performance comparison

The NSM uses benchmarking tools to compare the performance of different administrative units. In procurement, procedure costs, lead times and purchase prices are compared in order to identify optimisation potential.

Effect on procurement law

The NSM has had a structural effect on procurement practice in Germany, particularly by strengthening central purchasing bodies in response to the weaknesses of decentralised purchasing structures.

Experience with the NSM has shown that purely decentralised purchasing structures can lead to fragmented awards, increased administrative effort and procurement-law risks. In response, many municipalities have set up central purchasing bodies or formed buying cooperatives that exploit economies of scale and pool procurement expertise.

FAQ

Is the NSM still relevant today? The NSM as a unified reform concept has receded into the background, but its elements (product budgets, budgeting, cost-and-performance accounting) remain effective in many administrations.

How does the NSM influence procurement practice? Decentralised resource responsibility under the NSM can lead to fragmentation of procurement. From a procurement-law perspective, the inadmissible splitting of contracts to fall below value thresholds (§ 3 VgV) is particularly critical.

What is the difference between NSM and New Public Management? The NSM is the German variant of the international concept of New Public Management (NPM). Both are based on business-management steering principles for public administration.

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