They definitely can dictate requirements, however that means that you're now making your staff play document format police.

I'm not saying it's impossible, just that it's an additional headache. If I were working in that office, I'd die a little inside each time I have to go back to a consultant/contractor/community member and say "can you please resubmit this, the formatting is broken when I open it in Libre Office"

Yes, again, they have the authority to do this, and it is technically feasible, but it's going to be a bad user experience for a long time until everyone is properly "retrained". Especially if you're working with partners outside of Germany who have their own document standards.

I'm not saying this is a bad move, just that I understand why they might be inclined to jump back and forth.