Non-Performance in Public Procurement 2026
Non-performance in public procurement: breach of contractual obligations by the contractor after award and its consequences for the public contracting authority.
Definition: In the procurement-law context, non-performance refers to the complete or partial failure of the contractor to provide the contractually owed performance after award and contract conclusion, and to the rights and obligations arising from that failure for both contracting authority and contractor.
Last updated: January 2026 · Legal basis: §§ 280, 281, 323 BGB, §§ 918 ff. ABGB, VOB/B, VOL/B
What is non-performance in public procurement?
In public procurement, non-performance refers to the situation in which, after conclusion of the contract, a contractor fails to deliver the contractually owed supplies, works or services — either in full, in part, or on time. Non-performance arises in the contract-performance phase and is governed by general contract law (BGB, ABGB) and the relevant tendering conditions (VOB/B, VOL/B).
Legal consequences of non-performance
On non-performance, the public contracting authority has, depending on the nature and severity of the breach, various rights:
- Reminder and time limit: setting a reasonable additional period for performance (§ 281 BGB)
- Rescission of the contract: after expiry of the additional period without effect (§ 323 BGB)
- Damages in lieu of performance: compensation for loss caused by the non-performance
- Contractual penalty: where a penalty for delay or non-performance has been agreed
- Termination: for continuing obligations, on important grounds
Procurement-law dimension of non-performance
Non-performance of a public contract may have procurement-law consequences for future award procedures: serious bad performance or non-performance may become relevant as a ground for exclusion under § 124(1) no. 7 GWB, where the contracting authority can demonstrate material non-performance of earlier contracts. Contracting authorities should therefore document cases of serious non-performance and, where appropriate, register them in the public-procurement register.
Non-performance and securities
To safeguard against non-performance, public contracting authorities often require performance securities (guarantees, retention amounts) that can be called in the event of non-performance. The amount of the security is usually set out in the contract or the procurement documents.
FAQ
Can a contracting authority claim damages immediately if the contractor fails to perform? As a rule, an additional period for performance must first be set. Only after expiry of that period without effect may damages in lieu of performance be claimed.
How is non-performance distinguished from defective performance? Non-performance means the complete absence of performance; defective performance means the delivery of performance that does not meet the agreed quality.
What is the impact of documented non-performance on future procurement procedures? Serious non-performance may be relied upon as a discretionary ground for exclusion under § 124 GWB, provided the contracting authority justifies it in a proportionate manner.
Last updated: January 2026 All information without guarantee. For legally binding advice, please consult a law firm specialising in public procurement.
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