Undeclared Work in Procurement Law 2026 – Exclusion and Prevention

Definition: In procurement law, undeclared work (Schwarzarbeit) means the provision of services or works without complying with social-security, tax and trade-law notification obligations, and can constitute a mandatory or discretionary ground for exclusion from a procurement procedure.

Last updated: January 2026 · Legal basis: SchwarzArbG (Germany); §§ 123 et seq. GWB; § 68 BVergG 2018; Directive 2014/24/EU Art. 57

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Undeclared work in procurement law

Undeclared work is not only a criminal and regulatory offence but also a procurement-law issue that can lead to the exclusion of bidders. Public contracting authorities are obliged to award contracts only to law-abiding companies; awarding contracts to undertakings that engage in or facilitate undeclared work contradicts the principle of legal compliance and the public interest in fair competition.

Legal basis

Germany

The Act to Combat Undeclared Work and Illegal Employment (SchwarzArbG) defines undeclared work as the provision or acceptance of services in breach of notification obligations under SGB III or IV, tax obligations or the requirements of trade and crafts law.

In procurement law, legal compliance is enforced through the following provisions:

• § 123 GWB: mandatory exclusion following criminal convictions (including tax evasion, social-security fraud)
• § 124 GWB: discretionary exclusion for breaches of labour, social or tax law
• Länder collective-bargaining-compliance laws: obligation to pay minimum and collectively agreed wages

Austria

In Austria, § 68 BVergG 2018 and the Länder collective-bargaining-compliance and anti-wage-dumping laws require contracting authorities to check bidders' compliance with labour and social-law rules. The Anti-Wage and Social Dumping Act (LSD-BG) supplements the procurement-law requirements.

Preventive tools

Contracting authorities use various tools to prevent undeclared work during contract performance:

• Requiring bidders to submit current clearance certificates (tax office, social security, trade-cooperative)
• Including contractual clauses requiring compliance with the Minimum Wage Act and collective agreements
• Reserving inspection rights on site
• Pass-through obligations to subcontractors (anti-undeclared-work clauses in subcontracts)
• Use of the public contracting authorities' database (AVAD in Germany)

Self-cleaning

A bidder excluded for undeclared work can rehabilitate itself through self-cleaning. It must demonstrate that it has remediated the damage, dismissed responsible staff, established compliance structures and cooperated with the authorities (§ 125 GWB; § 83 BVergG 2018).

Related terms

• Collective-bargaining compliance
• Mandatory grounds for exclusion
• Self-cleaning
• Subcontractor

FAQ

As a contracting authority, do I have to actively look for undeclared work? You must carry out reasonable suitability checks and request the relevant certificates. There is no general duty of investigation, but where there are specific grounds for suspicion deeper checks are appropriate.

What applies to subcontractors? Contracting authorities must ensure that subcontractors also meet the statutory requirements. Corresponding pass-through obligations should be anchored in the main contract.

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