Currently, the percentage of Official Development Assistance (ODA) funds awarded to German companies lies merely at 11 percent (Source: OECD). In comparison, the EU average stands at 34 percent, while the figures for the USA and Japan reach even 86 percent and 78 percent respectively.

The coalition agreement states: 'Our objective is that awards for state-funded projects in financial cooperation predominantly go to companies from Germany and the EU.' This results in a target benchmark of at least 50 percent that needs to be achieved.

A comprehensive data foundation is imperative for solid evaluation and targeted steering. Unlike other – including multinational – development banks, KfW has so far not published aggregated information on contract awards. This gap urgently needs to be closed. Reporting should systematically capture not only primary contracts but also subcontracts and enterprise interconnections.

3.1 Addressing structural challenges

The processes within development cooperation are often protracted: From governmental consultations to tendering and implementation, several years frequently pass (top-down). This contradicts the significantly faster market-driven bottom-up decision-making and implementation processes of many companies. Companies, for instance, consider the lengthy award processes for bilateral cooperation funds through KfW as impractical.

Therefore, German companies should be structurally integrated early on – ideally before governmental consultations. This way, focus sectors can be defined with every partner country that are not only developmentally meaningful but also align with German economic potential. German businesses are broadly positioned, enabling value- and interest-based financial cooperation to fundamentally complement each other.

A clear prioritisation could help address a structural issue: For many companies, it is economically unfeasible to enter a new, risk-laden market environment for a single project – for instance, in the scope of 10 million euros. In light of rising geopolitical tensions and associated project risks coupled with stagnant margins, many companies carefully consider their participation. Depending on the country and context, it should therefore be examined which sectors and countries, in which German companies are strongly represented and have interest in projects, can be prioritised. The goal must be to systematically leverage the intersection of developmental goals and economic potential.

The number of German prime contractors acting as main contractors has steadily declined in recent years. Award procedures should therefore be structured to appeal not only to major prime contractors but also to mid-sized entities.

3.2 Utilising flexibility in awards

To increase the proportion of German companies in ODA-funded projects, existing legal flexibility in awarding procedures should be used more consistently. Additionally, a political and technical discussion is needed about which sectors and configurations could allow additional manoeuvring room.

Existing scopes:

ESG Criteria: Financial cooperation (FZ) is based on procurement regulations of the partner countries (partner country procurement). Within this framework, existing FZ procurement rules already provide extensive possibilities to incorporate technical requirements and environmental, social, and sustainability standards into the award decision, pursuing fair competition that does not rely solely on price. Yet, in practice, price is frequently valued as the decisive criterion for awarding contracts. This leaves German companies, which often fulfil exceptionally high environmental and social standards, are at a disadvantage. Stronger weighting of ESG criteria would not only promote achieving sustainability goals in partner countries but also enhance the competitiveness of German companies.

• Geographic proximity as an award criterion: In projects concerning critical infrastructure, the spatial proximity of a company – for instance, in the Western Balkans or Eastern Partnership countries – can represent a legitimate award criterion, particularly regarding supply security and regional integration.
• EU cooperations: Within EU-funded projects, it can be an allowable and sensible criterion that appointed companies are familiar with the acquis communautaire of the EU to ensure effective project implementation.
• No German overcompliance concerning OECD recommendations for tied aid: Particularly strict procurement rules must, according to OECD, only be applied to the least developed and highly indebted countries. The current German practice applies this across all ODA awards. This overcompliance should cease.

3.3 Improving accessibility and visibility

Further, improved visibility of tenders is essential. The existing GTAI platform alone is insufficient for comprehensive communication. Professional associations and the worldwide AHK network can serve as crucial multipliers and specifically direct German companies to suitable tenders. These stakeholders should be more strongly incorporated into the process.

Accessibility of award procedures must also be improved. Barriers to submitting offers should be kept as low as possible. Award procedures should be simplified significantly and designed so that companies without previous experience with German development cooperation instruments have realistic chances of participation. Likewise, preparatory services – such as feasibility studies – must remain financially tenable to ensure small and medium-sized enterprises (SMEs) are not excluded.

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