Construction and major projects: Why construction firms need to structure requirements earlier
How construction firms systematically analyse technical specifications, evidence, subcontractor services and risks in public and private major projects, from VOB/A and EU thresholds to prequalification, general-contractor liability, GAEB and BIM.
Introduction
The Elbphilharmonie was meant to cost the City of Hamburg EUR 77 million and be completed in 2010. It opened in January 2017, with the city's final share amounting to roughly EUR 789 million. Berlin Brandenburg Airport was due to open in 2011 and cost around EUR 2 billion; it entered service in 2020, at the last publicly reported cost of about EUR 7.3 billion. Stuttgart 21 was budgeted at EUR 4.088 billion in its 2009 financing agreement; Deutsche Bahn now cites more than EUR 11.4 billion.
These three projects are the best-known symbols of a pattern, but they are not outliers. A widely cited Hertie School study led by Genia Kostka examined 170 major German projects: the 119 already completed projects were, on average, 73% over budget. Planned costs of EUR 141 billion became roughly EUR 200 billion in reality, an overrun of approximately EUR 59 billion. The causes rarely lie on the construction site. They arise years earlier, in how fully and unambiguously requirements are described before the first excavator starts work.
For construction companies bidding on public and private major projects, the consequence is clear: those who only structure technical specifications, evidence, subcontractor services and risks on the construction site have started too late. The following covers market conditions, procurement law (VOB, VgV, EU thresholds), the specification of works under Section 7 VOB/A, suitability evidence, subcontractor liability, standards, and digitalisation with GAEB and BIM.
The Construction Market in Figures
Construction is one of the largest investment sectors of all and is currently in a phase of real weakness. The German construction industry's statistical overview reports construction-industry revenue of EUR 162.6 billion for 2023, a nominal increase of 1.4% but a real decline of 5.2%, the third consecutive real decline. For 2024, the Federal Statistical Office reported incoming orders in the main construction industry of EUR 103.5 billion. The divergence is striking: civil engineering grew by 3.4% in real terms to EUR 56.3 billion, driven by major orders for motorways, bridges, tunnels and grid expansion, while building construction fell by 5.0% in real terms to EUR 47.2 billion.
The overarching measure is construction volume, which also includes refurbishment, modernisation and planning. According to the DIW construction volume calculation it stood at EUR 565.3 billion in 2023, with EUR 79.0 billion (14.0%) attributable to public construction. The more narrowly defined macroeconomic measure of construction investment was EUR 487 billion in 2023, with a public share of 12.1%. Those addressing public construction are therefore operating in a market of more than EUR 80 billion per year, consistently tendered under public procurement law.
The weakness is not a German phenomenon alone. According to the ifo Institute construction volume in the EUROCONSTRUCT area contracted by 2.7% in real terms in 2024, by a combined total of around 4% across 2023 and 2024. For 2025 and 2026, researchers expect a slow recovery (+1.3% and +1.8%, respectively). Eurostat data confirm the picture: in 2024, construction output declined by an annual average of 0.9% in the euro area and 1.3% in the EU. In a tighter market, each project won matters more, and each miscalculated project matters all the more.
The Core Problem: Requirements Mature Too Late
The German federal government commissioned a systematic examination of the causes of failed major projects. The Reform Commission for Major Construction Projects appointed by the then Federal Ministry of Transport submitted its final report in 2015. Its guiding principle was: “Plan first, then build.” The underlying finding: in practice, costs and schedules are often fixed as binding before planning has matured. Contracts are awarded to the lowest bidder on the basis of incomplete specifications of works, resulting in quality losses, disputes and costly variations.
This observation aligns with international research. Bent Flyvbjerg, who has shaped the field of megaproject research, summarises his analysis of hundreds of projects in an “iron law”: nine out of ten major projects exceed their budget.
Over budget, over time, over and over again.
– Bent Flyvbjerg, The Oxford Handbook of Megaproject Management (2017)Source: Flyvbjerg, The Iron Law of Megaprojects
How differently overruns vary by project type is shown by the analysis of the Hertie study. The average of 73% is a project-based mean; in aggregate, planned costs of EUR 141 billion compare with actual costs of around EUR 200 billion. Public-sector buildings are closer to the average, while IT and energy projects exceed it considerably.
Average cost overrun by project type. Source: Hertie School / Genia Kostka (2015).
The common denominator rarely lies in workmanship failures. It is a requirements baseline that was not yet robust at the time of award. For a bidding construction company, this means two things: an incomplete specification of works is a risk that must be recognised and priced, and its own tender analysis determines whether the price will ultimately hold.
The Procurement Architecture: VOB, VgV and the Cascade Principle
Public construction contracts are not awarded through free negotiation, but through a multi-level regulatory framework. Central to this is the VOB, the German Procurement and Contract Procedures for Construction Works, which consists of three parts:
- VOB/A governs procurement, in other words how the public contracting authority tenders and awards a contract.
- VOB/B governs the contract terms for performance, from acceptance and notices of hindrance to the notorious variations under Section 2.
- VOB/C contains the General Technical Contract Conditions (ATV), published as DIN standards, from general DIN 18299 to trade-specific standards DIN 18300 (earthworks) through DIN 18459 (demolition and dismantling works).
EU and federal law sit above the VOB. The cascade principle describes the hierarchy: EU directives, followed by the GWB (Act against Restraints of Competition, Part 4), followed by the VgV (Procurement Regulation), which in turn refers to VOB/A for construction works. Higher-ranking law overrides lower-ranking law, like a waterfall.
Which procedure applies depends on the contract value. Above the EU threshold, a Europe-wide tender must be carried out under the GWB and VgV (for construction: Section 2 of VOB/A, “EU”); below it, national rules apply (Section 1 VOB/A or the UVgO). Thresholds are adjusted every two years. Since 1 January 2026, the threshold for construction contracts is EUR 5,404,000 net (previously EUR 5,538,000 for 2024/2025), while supplies and services are subject to thresholds of EUR 140,000 to EUR 216,000 depending on the contracting authority. For major projects, the above-threshold regime is the norm, with Europe-wide publication and a correspondingly broad field of bidders.
Section 7 VOB/A: The Clear and Exhaustive Specification of Works
The specification of works is the most important part of every construction tender. Section 7 VOB/A sets out a principle that is formative for the entire industry:
The work must be described clearly and exhaustively enough that all companies must understand the description in the same sense and can calculate their prices reliably and without extensive preparatory work.
– Section 7 (1) no. 1 VOB/ASource: Section 7 VOB/A, vergabevorschriften.de
VOB recognises two ways of describing this work. In a specification of works with a bill of quantities (Section 7b) the contracting authority breaks the work down into individually described and calculable items, the classic detailed tender. In a specification of works with a functional programme (Section 7c), the functional specification, the contracting authority specifies only the objective and leaves the solution to the bidder, for example in turnkey procurement. Both variants demand the same clarity, but shift the structuring work to the bidder to different degrees.
What happens when the description does not meet this standard has been clarified in case law. Under a principle stemming from a 2013 Federal Court of Justice judgment (VII ZR 227/11) ambiguities in the specification of works are borne by the public contracting authority. The bidder is not obliged to challenge every ambiguity before submitting its bid. This is the economic mechanism behind many variations: every imprecise item is a later claim that the construction company can assert and that the contracting authority bears.
The parliamentary committee of inquiry of the Hamburg Parliament presented its Elbphilharmonie report in 2014 (printed paper 20/11500). Its finding: the tender went out despite incomplete planning; the triangular relationship between the city, construction company and architects created unclear responsibilities; and the general contractor deliberately submitted bids calculated too low, followed by aggressive variation management that exploited gaps in the contract and the specification of works. The city's share rose from EUR 77 million to approximately EUR 789 million. This is Section 7 VOB/A in its negative form.
Evidence and Suitability: Who May Bid at All
Before a bid is considered on its merits, the bidder must demonstrate its suitability. The GWB requires under Section 122, that contracts be awarded only to “competent and capable (suitable) undertakings”. Suitability is limited to three areas: authorisation and permission to pursue a professional activity, economic and financial standing, and technical and professional ability. This three-part structure reflects Article 58 of EU Procurement Directive 2014/24/EU; for construction works, it is specified by Section 6a EU VOB/A.
To prevent companies from having to submit the same evidence afresh in every tender, prequalification is available. The Association for the Prequalification of Construction Companies maintains the official register (PQ-VOB), in which companies demonstrate their suitability in advance once a year and prove it by means of a registration number. The association quantifies the benefit as follows: the annual cost of prequalification is approximately three times the effort of a single evidence procedure, so it pays for itself with only a few tenders per year.
Above the EU threshold, the individual evidence is initially replaced by the European Single Procurement Document (ESPD), a standardised preliminary proof of suitability. It is based on Article 59 of Directive 2014/24/EU, Implementing Regulation (EU) 2016/7 and Section 50 VgV. The actual supporting documents are submitted only on request, usually by the bidder expected to be awarded the contract. Those bidding with subcontractors or relying on another entity's capacity must also declare their suitability, a point that regularly becomes a bottleneck in the rush of the bid phase.
Subcontractors: The Delivery Chain as a Risk
Hardly any major project is built by a single company. The statistics on subcontracting activity show how heavily the sector relies on downstream contracting: among large companies (500 or more employees), the subcontracting share was 43% in 2021 and 41% in 2022; in building construction, the propensity to subcontract was strongest in 2022 at 45%. As in industrial supply chains in other sectors, every subcontractor multiplies the number of requirements and evidence that must be coordinated.
Legally, this chain involves considerable risk for the principal contractor. Those using the capacity of other companies, for example for a required reference, are operating under the law on reliance on another entity's capacity (Section 47 VgV), and construction is additionally subject to Section 6d EU VOB/A: professional ability of another company may be relied upon only if that company actually performs the work concerned.
This is compounded by general contractor liability. Under Section 14 AEntG an undertaking is liable for its subcontractors' payment of the minimum wage “like a guarantor who has waived the defence of prior recourse”, in other words like a directly liable guarantor. In parallel, Section 28e (3a) SGB IV imposes liability for the social security contributions of commissioned construction companies. Awarding work to subcontractors is therefore not merely a coordination task. It entails a direct liability risk that begins with selection and documentation during the bid phase.
Standards and Technical Specifications: Eurocodes, VOB/C and HOAI
Every bill-of-quantities item refers to technical standards, usually several. Structural design follows the Eurocodes, ten European standards from EN 1990 (basis of structural design) through EN 1992 (concrete) and EN 1993 (steel structures) to EN 1999 (aluminium), which apply across the EU and are implemented nationally with their own annexes (in Germany as DIN EN 199x). Technical execution is governed by the ATV standards of VOB/C, and the fee structure for planning by the HOAI with its nine service phases, from basic evaluation (phase 1) to property supervision (phase 9).
The number of these standards is large. Of the more than 30,000 DIN standards around 3,900 are relevant to construction. A single residential building can touch several hundred of them. For the bid manager, this means the same task as in every standards-intensive sector: every technical specification must be identified, assigned to the correct standard and version, and checked for feasibility before a reliable price can be formed.
Digitalisation: GAEB, AVA and the BIM Requirement
Construction has long ceased to exchange tender data only as PDFs. The Joint Committee for Electronic Construction (GAEB), based at the Federal Office for Building and Regional Planning, maintains the GAEB data exchange (GAEB DA XML, currently version 3.3), an open format for lossless exchange of bills of quantities between planners, AVA software and bidders. It covers the entire process in clearly separated phases from the bill of quantities (X81) via the invitation to tender (X83) and bid submission (X84) to award (X86). GAEB therefore provides the structured data foundation on which automation depends, much like exchange formats for requirements data in other industries.
These data are processed in AVA software (tendering, awarding, billing), which maps HOAI service phases 6 to 8. The next step is Building Information Modeling (BIM). With the Digital Planning and Construction Roadmap the Federal Ministry of Transport stipulated in 2015 that BIM performance level 1 would apply from 2020 to new projects within its remit, namely transport infrastructure. The BIM Master Plan for Federal Trunk Roads makes BIM the standard process in federal trunk road construction from 2026.
The open BIM data format IFC (Industry Foundation Classes) has been an international standard since 2024: IFC 4.3 was adopted as ISO 16739-1:2024 and has also been available as DIN EN ISO 16739-1 since September 2024. For construction companies, this means that model data can be exchanged across tool boundaries, comparable to what GAEB does for bills of quantities. The data basis for continuous, machine-readable requirements management is therefore increasingly in place.
A look at the parties involved shows that structuring is not becoming easier. According to an industry report the number of companies involved in a construction project rose by around 30% between 2021 and 2023. More participants mean more interfaces and more evidence that must be kept consistent, precisely where document-based processes reach their limits (see also our article “From Spreadsheet to Platform”).
What Early, Systematic Requirements Analysis Looks Like
All of this leads to a concrete workflow for the bid phase. Rather than treating the bill of quantities as a costing sheet to be filled with prices at the end, analysis becomes its own structured process covering four dimensions: technical specifications, evidence, subcontractor services and risks.
The bill of quantities is imported, ideally as GAEB DA XML rather than a PDF, and broken down into individual items. Quantities, units and item structure are carried over, and bidder gaps and optional items are flagged.
Each item is assigned to its technical specifications and standards: VOB/C ATVs, Eurocodes and relevant DIN versions. Ambiguities and contradictions are documented and recorded as bidder questions or variation potential.
The required suitability evidence is reconciled, both for the company itself and for all subcontractors. Prequalification, ESPD and project-specific evidence are assembled early, not only on the submission date.
Partial services are assigned to subcontractors, with regard to reliance on another entity's capacity and liability under AEntG and SGB IV. Every item is assessed for risk; unclear specifications of works are consciously priced rather than overlooked.
Only on this robust basis is the price produced. Every costing item is traceable back to the requirement and the evidence, making later variations and disputes comprehensible and manageable.
In principle, this structuring can be represented in any spreadsheet, provided the discipline is applied consistently. With hundreds of items, dozens of standards and several subcontractors, however, the document-based approach reaches the same limits as in other tender-intensive sectors: lack of traceability, inconsistent assessments and no reuse of previous analyses. Specialised platforms such as Tendric address precisely this point: tender requirements are captured in a structured way, classified, assigned to the responsible functions and linked to evidence, so that the four dimensions remain consistent throughout the bid.
Maturity can be understood in stages, as in other industries:
- Excel and Word, without traceability between item, evidence and costing
- AVA software with GAEB exchange for structured processing of bills of quantities
- Integrated platform that links and makes traceable technical specifications, evidence, subcontractors and risks
- AI support for item analysis, standards recognition and assessment suggestions based on a searchable knowledge base (more in the article AI in the Bid Process)
As in the rail industry, where the path from requirements specification to functional specification follows the same steps, the same applies in construction: without structured data, AI support has no foundation. Those at level 1 should create the structure first, before automating.
Conclusion
The construction market is large but under real pressure. In Germany alone, public construction has an annual volume of around EUR 80 billion. The expensive failures of the past, from the Elbphilharmonie and BER to Stuttgart 21, follow the same pattern: requirements are structured too late and too incompletely. The Reform Commission derived the principle “Plan first, then build” from this in 2015.
For construction companies, the lever lies on the bidding side. Section 7 VOB/A requires a clear and exhaustive specification of works; where it is not clear and exhaustive, risks and variations arise that can be managed only if the tender is analysed systematically before the price is submitted. Structuring technical specifications, suitability evidence, subcontractor services and risks early is not a bureaucratic extra burden. It is the difference between a bid that holds and one that is expensively renegotiated on the construction site.
The tools for this are maturing. GAEB provides the data foundation, BIM and IFC are becoming standard, and platforms such as Tendric bring the structured requirements analysis already familiar in other industries to construction tenders. Those who build this structure early win contracts and retain control over what they ultimately cost.
- Cost overruns in major projects are systematic: 119 completed German major projects were on average 73% over budget (Hertie School); the causes arise in the requirements phase, not on the construction site.
- The Reform Commission for Major Construction Projects (2015) derived the principle “Plan first, then build” from this: incomplete specifications of works lead to variations and disputes.
- Section 7 VOB/A requires a clear and exhaustive specification of works. According to the Federal Court of Justice (VII ZR 227/11), ambiguities are borne by the public contracting authority, the legal basis for many variations.
- Suitability (Section 122 GWB), prequalification (PQ-VOB) and the ESPD must be checked early, including for subcontractors, whose share in building construction is around 45%.
- General contractor liability under Section 14 AEntG and Section 28e SGB IV makes subcontractor services a direct liability risk that begins with selection and documentation during the bid phase.
- GAEB DA XML, AVA software and the BIM requirement (2015 roadmap, Federal Trunk Roads Master Plan from 2026, IFC as ISO 16739-1) provide the data basis for structured, traceable requirements analysis.
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