The recent amendment to Germany’s Basic Law to establish a Special Fund for Infrastructure and Climate Neutrality marked the start of an investment drive by the German Bundestag to modernise and future-proof Germany’s infrastructure. For many companies – especially in the construction industry – the fund promises significant opportunities as the expected surge in public calls for tenders opens up new prospects in a high-volume market.
The Bundestag voted to amend Article 143h Basic Law in early 2025. Now that the Bundesrat has also given its approval, the amendment paves the way for total investments of EUR 500 billion over twelve years. While EUR 100 billion of the available funds will be allocated to the Climate and Transformation Fund and a further EUR 100 billion to the federal states for infrastructure measures, the Federal Government will retain EUR 300 billion for its own infrastructure projects.
This article highlights the public procurement rules governing the (anticipated) calls for tenders for (construction) contracts associated with the investment push, and outlines key federal investment projects.
For further information on the special fund – in particular on funding requirements – see our article of 15 July 2025 (Dr. Marc Ruttloff, Dr. Lars Kindler, Philipp Rackevei: Draft Bills on the Establishment of a Special Fund (SVIKG-E) and on the Financing of Infrastructure Investments by the Federal States and Municipalities (LuKIFG-E)).
Public procurement rules governing calls for tenders for public contracts
Contracting authorities are not normally permitted to freely award contracts above certain amounts but must instead adhere to public procurement rules, which include antitrust provisions. These rules are aimed at ensuring that public funds are used economically, transparently and without discrimination and also apply to the substantial public funds now to be allocated through the special fund.
Generally speaking, contracting authorities must issue a Europe-wide call for tenders as soon as the estimated net contract value reaches or exceeds stipulated EU thresholds.
For the construction services expected to play a key role in the investment drive, the threshold is a net contract value of EUR 5,538,000. Projects with a lower value usually fall under Part A of the Construction Contract Procedures (Vergabe- und Vertragsordnung für Bauleistungen – Teil A, “VOB/A”) or the Regulation on Sub-Threshold Procurement (Unterschwellenvergabeordnung).
Irrespective of the contract value and the procurement procedure selected by the contracting authority, all award procedures are subject to certain public procurement principles aimed at ensuring public funds are used efficiently and fairly. The key principles include:
- Competition (section 97(1), sentence 1 Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, “GWB”) and section 2(1), sentence 1 VOB/A): The contracting authority must always ensure the greatest possible competition.
- Transparency (section 97(1) GWB and section 2(1), sentence 1 VOB/A): The contracting authority must ensure a sufficient degree of transparency.
- Equal treatment and non-discrimination (section 97(2) GWB and section 2(2), sentence 2 VOB/A): No tenderer may be arbitrarily favoured or disadvantaged.
- Proportionality (section 97(1), sentence 2 GWB and section 2(1), sentence 1 VOB/A): The requirements on companies and tenders must always be proportional to the subject-matter of the contract.
- Cost-effectiveness (section 97(1), sentence 2 GWB and section 2(1), sentence 2 VOB/A): The contract must be awarded to the tender that the contracting authority considers to offer the greatest economic value-added – not necessarily the least expensive.
Companies participating in public calls for tenders should bear these principles in mind at all times, because legal remedies may be available should a contracting authority violate one or more of them or other provisions intended to protect tenderers.
Allocation of special fund for 2025
The Federal Cabinet has now adopted draft bills on the specific allocation of the special fund and submitted an economic plan for 2025 (see Bundestag document 21/500, Annex 2 Economic Plan for the Special Fund for Infrastructure and Climate Neutrality (6093)). The plan sets out how the funds are to be used in the current budget year and gives an initial indication of long-term investment plans. Key points:
- EUR 100 billion will be allocated to the Climate and Transformation Fund pursuant to Article 143h(1), sentence 5 Basic Law
- EUR 100 billion will go to the federal states for their own infrastructure investments
- EUR 300 billion will be available to the Federal Government
The Federal Government plans to spend around EUR 19 billion in 2025, most of which will directly benefit the construction sector. According to the plan, these funds will be used for the following purposes:
- Transport infrastructure, mainly bridge construction and the rail network (around EUR 11.7 billion)
- Hospital infrastructure (EUR 1.5 billion)
- Energy infrastructure (around EUR 855.2 million)
- Research and development (around EUR 472 million)
- Digitalisation (around EUR 4 billion)
- Housing infrastructure (around EUR 327 million)
This means that of the nearly EUR 19 billion to be allocated in 2025, around EUR 13.5 billion – to be invested in transport, hospital and housing infrastructure – will most likely benefit the construction sector.
Transport infrastructure investment
A large part of the planned investments will be in transport infrastructure, directly benefitting construction and engineering companies.
- EUR 2.5 billion is earmarked for the modernisation of motorway bridges.
- Approx. EUR 7.6 billion will be used for construction cost contributions to maintain the federal railway network.
- An additional approx. EUR 1.6 billion will be made available to implement the European Rail Traffic Management System (ERTMS) across the rail infrastructure, alongside major construction work on track and signalling systems.
Hospital infrastructure investment
Investments will also be made in the healthcare sector, with EUR 1.5 billion to go towards improving hospital infrastructure. Although no detailed breakdown has been provided as to how the funds will be divided, it can be assumed that a portion will go towards new construction and modernisation projects – and that construction services will therefore also be required.
Housing infrastructure investment
EUR 327 million will go towards housing infrastructure in 2025:
- approx. EUR 243 million for climate-friendly construction projects,
- approx. EUR 62 million (1) to subsidise families purchasing homes and (2) to fund the “Jung kauft Alt” programme, which supports young families buying and renovating older properties,
- EUR 20.5 million for climate-friendly new buildings in the low price segment, and
- EUR 180,000 for the conversion of commercial space into residential properties.
Investments by the Climate and Transformation Fund and the federal states
The Climate and Transformation Fund will help finance measures in the building sector – e.g. for the environmentally-friendly conversion of existing buildings and the expansion of climate-friendly mobility infrastructure.
The federal states are also expected to significantly ramp up investments. Many federal states have announced that they will likewise be prioritising investments in transport, hospital infrastructure, energy supply and civil protection – each of which shows strong demand for construction services. In addition, the federal states can now borrow up to 0.35 percent of GDP, which is also expected to lead to an increase in investments. Several federal state governments have already announced their intention to use the new financial resources primarily to expand and modernise road and rail infrastructure.
The Federal Government’s long-term investment plans
The economic plan contains commitment appropriations for longer-term investment planning. Around EUR 6.5 billion is earmarked for bridge maintenance through the 2032 budget year, and around EUR 8.7 billion will go towards implementing the ERTMS train control system across the infrastructure. A much higher investment is planned for construction cost contributions for railway line maintenance, specifically around EUR 62.8 billion through the 2029 budget year.
The economic plan also provides for extensive commitment appropriations for investments in housing infrastructure. Around EUR 643.5 million has been allocated for climate-friendly new building projects through the 2035 budget year. An additional EUR 1.1 billion is to go towards subsidising climate-friendly construction projects through the 2035 budget year; around EUR 59.8 million will go towards converting commercial space into residential properties. There are also plans to subsidise families purchasing homes and to support the “Jung kauft Alt” programme for young families buying and renovating older properties.
Potential impact on public procurement law and procurement procedures
The Special Fund for Infrastructure and Climate Neutrality is a state investment package that will shape the German construction sector for years to come. With numerous infrastructure projects to be realised this year alone, contracting authorities are under pressure to act, leading to calls from political and administrative circles for public procurement to be made more flexible, such as by relaxing the rules on subdividing tendered contracts.
Although no specific legislative measures have yet been adopted, it is likely that there will be more frequent resort to existing instruments for expediting procedures, e.g.,
- shortened tender and application deadlines and
- restricted calls for tenders and negotiated procedures with and without competitive tendering.
Companies will therefore need to identify calls for tenders promptly and react quickly, and take special care when preparing tenders for major projects.
Businesses should also be aware that public calls for tenders will become more extensive, technically demanding and time-critical in the coming years, making strategic preparation and early advice crucial to success.
Conclusion
The Special Fund for Infrastructure and Climate Neutrality will lead to a significant increase in public investment in the next few years, especially in sectors with a high demand for construction services. This will open up substantial market opportunities for companies in the construction industry. We can also expect to see an increase in the use of instruments to accelerate public procurement.Companies should therefore monitor calls for tenders at an early stage and make sound legal preparations for complex procurement and contractual procedures.
Forward
