Internal Market, Industry, Entrepreneurship and SMEs

Rules on the award of concessions - Partnerships between the public sector and a private company

Rules on the award of concessions - Partnerships between the public sector and a private company
Published on: 18/03/2016

Concessions allow for the mobilisation of private capital and know-how to complement public resources and enable new investment in public infrastructure and services without increasing public debt. They are typically granted for road and rail transport, port and airport services, motorway maintenance and management, waste management, energy and heating services, leisure facilities and car parks.

Concessions are partnerships between the public sector and mostly private companies, where the latter is entrusted with the execution of works or the provision and management of services.

In a concession, a company is mostly remunerated by being permitted to run and exploit a work or service. It is also exposed to a potential loss on its investment. An example of a concession is a private company building and managing a motorway and then being remunerated through tolls. This company also runs a risk in that the revenue generated may not cover its investment.

Concessions covered by Concessions Directive 2014/23/EU

Only works and services concession contracts whose value is equal to or greater than € 5 225 000 fall under Concessions Directive 2014/23/EU. When estimating a concession’s value, the buyer must take into account the concessionaire’s total turnover generated over the duration of the contract.

A number of areas are excluded from the scope of the Concessions Directive. These include:

  •   Concessions for the provision or operation of fixed networks for drinking water, as well as concessions for the disposal or treatment of sewage and hydraulic engineering projects, irrigation or land drainage
  •   Concessions for lottery operating services.

Duration of concessions

A concession contract must be limited in time. For concessions lasting more than 5 years, the duration must not exceed the time in which a concessionaire could reasonably be expected to recuperate their investment.

The maximum duration must be referred to in the concession documents, either as a point subject to negotiation (may be part of the award criteria and fixed through competition) or as a part of the fixed conditions which take into account things like total investment (including copyrights, patents, logistics), the asset’s capacity to generate revenue or user tariffs, and the asset’s operation and maintenance costs.

General principles and procedural guarantees for the awarding of a concessions contract

The public buyer is free to structure the procedure according to national standards or their own preferences, provided that it follows certain basic rules such as:

  1. Publishing a concession notice in the Tenders Electronic Daily (TED) data base, including a description of the concession and the conditions of participating in the concession award procedure (the minimum turnover, availability of a specific kind and quantity of machinery, experience with specific kinds of work or services, etc.)
  2. Informing potential and actual participants to the procedure of the minimum requirements (number of lanes on a motorway, dimensions and shape of tunnels, frequency of the bus transport service, etc.) and the award criteria (fees to be paid by users, the environmental performance of vehicles to be used to provide the service, etc.)
  3. Respecting established requirements and eliminating candidates who do not fulfil them
  4. Excluding candidates who have been convicted of certain crimes, such as fraud and money laundering
  5. Providing all participants with a description of how the procedure will be organised and an indicative timetable.
  6. Using award criteria that ensures the equal treatment of all participants. In other words, criteria should be non-discriminatory, meaning that they cannot aim at or result in favouring local or national products or companies; be linked to the subject matter of the concession; be objective; and be advertised in advance and listed in descending order of importance.
  7. The public buyer may negotiate with candidates and tenderers. However, certain elements of the initial call for tender, the concession’s subject matter, the award criteria and the minimum requirements, cannot be changed during the course of the procedure. The public buyer has to ensure that all stages of the procedure are recorded.<

Find out more on the Public procurement reform: Slashing administrative burden, improving access for SMEs, preventing corruption and allowing for social and environmental considerations