Risk Allocation in Procurement Law 2026 – Principles and Limits

Risk allocation in procurement law governs which party bears which risks of a public contract. Principles, contract drafting and concession awards.

Definition: Risk allocation in procurement law describes the contractual and statutory assignment of economic and legal risks of a public contract to the contracting authority and contractor, in particular regarding price, quantity, performance and demand risks.

Last updated: January 2026 · Legal basis: Art. 2 para. 1 No. 1 Directive 2014/23/EU; VOB/B; ÖNORM B 2110; BVergG 2018

What Does Risk Allocation Mean in Procurement Law?

Risk allocation is a central element of contract drafting in public procurement and decisively determines who bears the economic outcome of the contractual relationship. As a general principle in public procurement law: the contractor assumes the performance risk (they are liable for proper provision of the service owed), while the order risk (whether the service is needed at all) generally remains with the contracting authority. This basic allocation can be modified contractually, but excessive risk shifts onto the contractor are problematic under procurement law because they impair bidder competition.

Risk Allocation by Contract Type

Unit Price Contract

In the unit price contract, the contracting authority bears the quantity risk, the contractor the price risk. The remuneration results from the unit price multiplied by the quantity actually rendered. If the quantity changes significantly, the right to price adjustment applies (§ 2 para. 3 VOB/B, ÖNORM B 2110 Sec. 7.5).

Lump-Sum Price Contract

In the lump-sum price contract, the contractor assumes both the quantity and price risk. They undertake to provide the service for a fixed total price, regardless of the actual expenditure. Unforeseeable increases in services can lead to additional claims only within narrow limits.

Concession Contracts

Concession procurement law defines risk allocation particularly strictly: a concession exists only if the operating risk is substantially transferred to the concessionaire (Art. 2 para. 1 No. 1 Directive 2014/23/EU). Operating risk means that the concessionaire is exposed to the risk of not recovering their investments under normal operating conditions because demand or use by third parties is not guaranteed. If this risk transfer is absent, the contract is an ordinary service contract and not a concession.

Limits of Contractual Risk Shifting

Clauses that shift the economic risk of a public contract almost entirely to the contractor may violate the transparency requirement, the principle of equivalence or general terms law. Procurement review bodies and courts have clarified in numerous decisions that risk shifts must be calculable and capable of being reflected in the bid price. Unforeseeable risks (force majeure, unknown ground conditions) must at least be partly assigned to the contracting authority, since they would otherwise lead to inflated bid prices or to insolvencies during execution.

Price Adjustment Clauses as an Instrument of Risk Allocation

Price adjustment clauses – in particular the material price adjustment clause – allocate the price increase risk between the contracting authority and contractor. They are a recognised instrument for appropriately dividing the risk of volatile market prices in longer-term contracts and protecting bidders from incalculable price risks.

Related Terms

FAQ

What is the operating risk in a concession? The operating risk comprises the demand risk (whether enough users will use the service) and the supply risk (availability of the service). It must be transferred to the concessionaire for a concession to exist.

Can a contracting authority transfer the quantity risk to the bidder in a unit price contract? Only to a very limited extent. A complete shift of the quantity risk to the contractor in unit price contracts is problematic under procurement law and may render corresponding clauses invalid.

Which risks does the contracting authority always bear? The order risk (decision whether and to what extent the service is called off) as well as the risk of planning errors in descriptions of services prepared by the contracting authority generally remain with the contracting authority.

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