THE VERDINGUNGSORDNUNG FÜR BAULEISTUNGEN

The Verdingungsordnung für Bauleistungen (VOB) is a central document which has ruled the tender of construction processes in Germany since now 70 years. (Daub 1976) It consists of three sections. Section A (VOB/A) regulates tender procedures. Section B (VOB/B) consists of detailed technical norms of work packages and quality of materials to use. Section C (VOB/C) regulates contract conditions. As far as VOB/B and VOB/C are concerned private clients have two possibilities to make construction contracts. Either they can do it on the basis of Bürgerliches Gesetzbuch (BGB). Between the parties there then exists a normal contract, according to civil law, between seller and buyer and both parties must agree how the object to be delivered is to be described. Or they can make the VOB/B and VOB/C part of the contract, which offer a precise description of construction works. The difference between these two forms for the rights and duties of the parties is mainly a question of warranties, which is five years after completion according to BGB, two years after completion according to VOB. But many private clients prefer contracts which make in particular VOB/B a part of it, because the performance of construction works according to its norms, which are closely linked to the Deutsche Industrie Norm (DIN), guarantees a precise description of the level of performance which can be expected and also high quality standards of the work completed. VOB/A is of interest only for the public client and for construction firms, tendering for public construction orders. The VOB itself is not a law, but all public clients (governments, local authorities but also the Bundespost and the Bundesbahn and other public enterprises) are obliged by order of the government to tender using VOB/A (and of course parts B and C as well), which means, to use open tender procedures and to obey the rules, prescribed by VOB/A. So the VOB/A gets a legal quality. Private clients whose construction projects are funded by public authorities to an extent of 50 per cent and more are subject to the same rule. The history of public tender regulation in Germany can be pursued back if not to the Romans, then seriously to at least the end of the 17th century (cf. Daub 1976). At that time big construction works were let by open-air auction, a form apparently learned from the Netherlands. A clients agent quoted the maximum price for the total construction or for parts of it, so that Generalentrepreneurs - to construction trades-people it was forbidden by the rules of their craft guilds to take part in these auctions - could tender by shouting how much they would like to undersell firstly the client’s quotation and then their competitors. But this procedure often seemed to have made it difficult for bidders to reflect upon their offers carefully and sufficiently, so that it resulted in poor standards of final performance, which often did not meet clients’ needs in terms of quality and sometimes even of quantity. It is argued, that it was in particular this evidence of a correlation of cheap bids and bad quality and the experience that the public interest was not purely met by giving construction orders to the firm which offers the lowest price, that has been dominated later versions of tender regulation and finally the VOB/A (Daub 1976 p 73). So from the 19th century on it became obligatory, that the procedure was based on written bids, which had to be presented in a closed envelope and could not be opened before a fixed date, after which the presentation of other bids was no longer admitted. The VOB/A, proposed by the Parliament of the Deutsches Reich in the early 20s and developed by a commission of government and construction industry experts, was first published in 1925 and since then has been regularly adapted. It prescribes that construction orders must be given to expert, effective, and trustworthy entrepreneurs, and that competition should be the rule (§2, 1). Open tender normally has to take place (§3, 2). To give small and medium enterprises a fair chance, bigger construction works, if even possible, should be divided and tendered in lots (losweise or gewerkeweise Vergabe) (§4, 2), which must be separated and tendered by trades (§4, 3). Bidders could be asked to indicate their expertise, performance, and trustworthiness as well as their economic and financial capacity of work (§8, 3). Bidders, against whom legal proceedings because of bankruptcy have been taken, whose trustworthiness is otherwise doubtful, or who have not paid taxes, social charges or dues to the Berufsgenossenschaft (the official work accidents insurance), can be excluded from tenders (§8, 5). An additional law is currently in preparation to exclude bidders for a certain time (probably two years) from public tenders, who have employed workers not officially registered by the tax and social insurance bodies (Schwarzarbeiter). For the tender a specification of every single task required (the Leistungsverzeichnis) has to be worked out, which has to be understandable and answerable by every potential bidder (§9). This Leistungsverzeichnis can determine that contractors in the bid have to name tasks, which should later be subcontracted (§10, 3). It can also determine that special offers of variations to the work demanded in the Leistungsverzeichnis are required or on the contrary are excluded (§10, 4). Fines for missing completion dates or premiums to speed up the construction process are only permitted as part of the Leistungsverzeichnis to avoid or gain disadvantages or advantages, if they are to be classified as "important" (§12). Bids must be submitted in a closed envelope and must not be opened before a certain date (the so-called submission-date), when all are opened at once. At that event only bidders are allowed to be present and only the total amount of each bid should be announced (§22, 1-3). Then all bids were technically and economically and in cost terms examined by the public client (§23, 2). A bidder can be asked to explain his bid and the way how he intends to perform the work (§24, 1). If he fails to do so, he can be excluded (§24, 2). But negotiation after tender is strictly forbidden (§24, 3). Bidders are bound to their bid for a certain time (§19). Bids which do not conform to the Leistungsverzeichnis, bidders, who have formed a forbidden pre-tender agreement, and bids offering an inadequately high or low price have to be excluded (§25, 1-3). To examine and determine in particular the latter is the duty of the public client, particularly of the in-house professionals he employs. Into the final selection round only bids should be taken, which, under consideration of rational site organisation and economic behaviour, offer an incontestable performance including all warranties. Among these the order has to be given to that bid, which after consideration of all technical, economical, and also aesthetic and functional aspects, is the most acceptable. "The lowest price only is not crucial" (§25, 3., 3). So the VOB obviously can be seen as an instrument of a particular industrial policy in construction. The requirement of tender by lots (that means in parts of a project small enough to be performed by smaller firms as well) on the one hand favours small and medium sized firms and gives them a real chance to win a contract. The requirement of tender by trades (that means that a lot, be it a small or a big one, must not include works from different trades) hinders general contracting. On the other hand tender by lots requires that the client employs - in-house or by contract - the capacity to prepare very detailed tender documents and to control first a more complex tender process and later on a more complex design and production process with many specialist actors. So clients are both encouraged and obliged to build up (or to buy in) a certain capability. In particular the experienced client is strengthened versus the contractor, whereas the casual client is forced to employ a professional agent doing the tasks for and on behalf of him. In addition, the casual client is obliged by law to employ a professional expert to perform the design and present it to the public authorities to obtain the building permission. Among other facts this is the basis of the central role of the Architekt in the German construction system, which will be discussed later on. To the experienced client, who can employ in-house-professionals, the tender by lots gives the possibility of a better, because more detailed, cost and process control than the cooperation with a Generalunternehmer. This is empirically confirmed by experienced clients, who with nearly no exception said, that they prefer tender by lots instead of contracting a Generalunternehmer. Third point of what was called an industrial policy option is the very strong emphasis laid by the VOB on quality, solidity, and cost-benefit-analysis instead of pure cost saving. That follows as shown a long tradition in public procurement in Germany and also a widespread belief in the German (not only construction) industry, that nothing is as expensive as a cheap performance. Although the VOB/A prescribes the tender by trade as the general form, tenders can ask for a Generalunternehmer. In public procurement this has sometimes occurred recently, when public authorities have tried to reduce cost and abolished their planning departments. They then often use the form of tender on performance specification. This means, that the client does not work out a Leistungsverzeichnis, but only prescribes the purposes and functions the construction shall have ("one school"). In the tender process bidders then have to offer the complete design, planning, and construction. This form, although sometimes covered under the term of Generalunternehmer, for better distinction should be named Generalübernehmer. But terms like this often were formed according to particular situations and therefore lack of clear definition and general meaning. So a Generalübernehmer can also be employed on the basis of an architectural design, which was done before tender. It then has to adapt this design to the detailed needs of the client, to the financial possibilities or to the requirements of the construction process on site.