22. May 2023
HFK wins landmark court case, invalidating direct award to SAP for state-wide e-procurement system
The Free and Hanseatic City of Hamburg may not directly award an e-procurement software solution to SAP Deutschland SE & Co. KG without a competitive award procedure despite the required SAP integration of the software. SAP, as the uncontested international market leader for Enterprise Resource Planning (ERP) software solutions, had entered into an exclusive cooperation with another e-procurement software company shortly before the City of Hamburg started their procurement procedure. If confirmed by the Higher Regional Court of Hamburg, the software giant's intended technical unique position for e-procurement solutions could have had a lasting impact on this functioning competitive market, which accounts for hundreds of millions of euros in sales.
The contracting authority in Hamburg intended to award an open-end service contract directly to SAP for the provision and maintenance of the state-wide procurement management system. The authority conducted a negotiated procedure without prior publication because it was claimed the requested services and supply could only be supplied by a particular economic operator because the absence of competition for technical reasons.
The authority noted that SAP held a technical unique selling point. With the existing SAP integration of the other company's e-procurement software that they offered at the time of market survey, only they were able to deliver an operationally reliable and user-friendly solution immediately, argued the authority.
Higher Regional Court does acknowledge any technical unique position with SAP and partners
In the first instance, the Hamburg Public Procurement Chamber agreed with the contracting authority and the SAP and allowed intended direct award. However, the Higher Regional Court of Hamburg (case no. 1 Verg 1/23) finally overturned the decision.
The court followed the applicant, Healy Hudson, represented by HFK. Rather, the court was convinced that other software companies of e-procurement systems would also have been able to offer a functioning, secure and user-friendly SAP-integrated system at the scheduled start of the contract in Hamburg. In the process, for example, Healy Hudson was able to present references from other large contracting authorities where their e-procurement software solutions were successfully connected to SAP environments in a very short time.
Effects on the entire e-procurement market if direct award would have been approved
Healy Hudson's special interest in the contract is not only due to the fact that she introduced the first e-procurement system in Germany on the Land and federal level. It is also that this took place with the city of Hamburg in 2003 and that she has since then been the contractor to date.
In fact, the HFK client feared, that the future of the entire market for e-procurement systems for the public sector was at stake. A total of eight competitors are currently active in the German market with a total sales volume of several hundred million euros. Since procurement procedures have to be conducted electronically throughout Europe (since 2018), this is also a growth market.
If the Higher Regional Court had given its blessing to the planned direct award in Hamburg to SAP, it would not only have remained the German and world market leader in the ERP software sector. Furthermore, SAP would have been able to offer all of its customers in the public administration to directly award her – without having to face a Europe-wide, competitive procedure – with the delivery of the e-procurement system that it had exclusively selected. At the same time, however, market access for the other e-procurement market participants in Germany would have been massively threatened.
HFK Rechtsanwälte (Frankfurt) for Healy Hudson GmbH
Dr Jörg Stoye, Dr Johannes M Jäger (both procurement law)
Free and Hanseatic City of Hamburg
In-house (Hamburg): Ministry of Finance and Dataport AöR, which already acted as the central awarding authority
DLA Piper (Cologne) for SAP Deutschland SE & Co. KG
Hanseatic Higher Regional Court Hamburg, Procurement Senate
Ralph Panten, Dr Janko Büßer and Dr Lothar Weyhe
Background: HFK's public procurement law team led by Dr. Jörg Stoye has been working with Healy Hudson for many years in public procurement, state aid and European law. HFK supports their client Healy Hudson in economically important cases before courts and authorities at Land, federal and EU level.