Principle of Economy in Procurement Law 2026

The principle of economy requires public contracting authorities to use public funds prudently and efficiently and to achieve the best price-quality ratio.

Definition: The principle of economy obliges public contracting authorities, when awarding public contracts, to optimise the relationship between public funds expended and benefit obtained, and to award the contract to the tender with the best price-quality ratio (the most economically advantageous tender).

Last updated: January 2026 · Legal basis: § 97(1) GWB; § 20 BHG 2013 (Austria); Art. 67 Directive 2014/24/EU; § 2 BHO (Germany)

What is the principle of economy?

The principle of economy is one of the fundamental principles of public budgetary and procurement law and binds public contracting authorities in every purchasing decision. It requires that public funds must not be wasted and that goods and services may only be procured at appropriate prices and conditions. In procurement law, this principle is manifested in particular through the most-economically-advantageous-tender principle: the contract is to be awarded to the tender with the best price-quality ratio, not necessarily to the cheapest.

Relationship to the principle of thrift

Economy is not the same as mere cost-saving: economy means the optimal ratio of input (costs) to output (quality, benefit), whereas thrift merely aims at minimising expenditure.

The principle of economy therefore permits and requires qualitative aspects, life-cycle costs and sustainability goals to be included in the purchasing decision. A cheaper tender can be uneconomical if poor quality causes higher follow-up costs.

Life-cycle costs as a measure of economy

A modern understanding of the principle of economy includes life-cycle costing (LCC): the contracting authority takes into account not only the purchase price but all costs arising over the useful life.

This includes:

Acquisition and installation costs
Operating and energy costs
Maintenance and servicing costs
Disposal costs at the end of useful life
External costs (e.g. CO₂ emission costs)

Art. 68 of Directive 2014/24/EU and § 59 VgV expressly govern the possibility of using life-cycle costs as an award criterion.

Economy and the MEAT principle

The most-economically-advantageous-tender (MEAT) principle is the procurement-law operationalisation of the principle of economy: the contract goes to the most economically advantageous tender, determined on the basis of predefined award criteria such as price, quality, delivery time and sustainability. In contrast to the lowest-price principle, which focuses solely on price, the MEAT principle enables a holistic assessment of economy.

Oversight by audit institutions

Compliance with the principle of economy is reviewed by audit institutions (Austria: Rechnungshof; Germany: the Federal Court of Audit and the regional audit offices). Audit institutions have repeatedly criticised procurement procedures in which contracting authorities awarded contracts without an adequate economic assessment or accepted inflated prices. Audit reports are not directly legally binding but can have political and disciplinary consequences.

Relationship to other procurement principles

The principle of economy stands in tension with other procurement principles such as transparency and equal treatment: the most economical solution is not always immediately obvious, and the pursuit of economy must not lead to procedural principles being disregarded.

Economy does not, in particular, justify:

Discriminatory selection requirements
Non-transparent evaluation criteria
Direct awards without competition (except in statutorily regulated exceptional cases)

FAQ

May a contracting authority reject a cheaper tender because it prefers the quality of a more expensive one? Yes, but only if quality was specified in advance as an award criterion with corresponding weighting. A subsequent rejection without a predefined standard would be contrary to procurement law.

When is a direct award compatible with the principle of economy? Direct awards are admissible only in the statutorily provided exceptional cases (e.g. below national thresholds, urgent procurement). Even here, the principle of economy requires that prices be compared and that inflated prices not be accepted.

Is the tender with the lowest price always the most economical? No. In pure price competitions (lowest-price principle), yes. In MEAT procedures, price is only one criterion among several; the most economically advantageous tender is the one with the best overall combination of price and quality.

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