Draft Concession Contracts Regulations 2016

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The Cabinet Office has issued draft regulations intended to implement the new Concessions Directive in England and Wales. We look at the draft regulations and the changes they will bring when they come into force from April 2016.

The new Concessions Directive will introduce a new regime for the regulation of service and works concession contracts. It will be implemented in England and Wales from April 2016 by the Concession Contracts Regulations 2016 (CCR 2016) and will apply to service/works concessions in the following circumstances:

  • Where a contracting authority or a utility (the “concession granter”) lets a public works or public services contract.
  • The value of that contract is over EUR 5,186,000.
  • The consideration given to the contractor is that the contractor is permitted to exploit the works or services that are the subject of the contract (together with payment if desired).
  • The award of the contract transfers the operating risk to the concessionaire and involves real exposure to the vagaries of the market (this will be assumed where the concessionaire has no guarantee that it will recoup its investment).

Maximum term and value threshold

The maximum term for a concession contract is five years, unless a longer term is justified in order to allow the concessionaire to recoup its investment and realise a return. Draft Regulation 8 contains guidance on how to value the concession for the purposes of assessing whether it exceeds the threshold of EUR 5,186,000 and, as in the regime for public contracts generally, there is a prohibition on artificial division of the requirement so as to avoid application of the rules.

Excluded contracts

Various types of concession contract are excluded from the regime:

  • Concessions awarded on the basis of an “exclusive right”
  • Certain air transport or public passenger transport services
  • Concessions awarded pursuant to international rules
  • Certain defence and security concession contracts
  • Concessions awarded by a utility or joint venture of utilities to an “affiliated undertaking” (provided certain conditions are met)
  • Certain concessions in the field of water or electronic communications
  • Concessions awarded by a utility where the activity is already directly exposed to competition
  • Where a service would be excluded from the scope of the Public Contracts Regulations 2015 (“PCR 2015”), it is also excluded from the scope of the draft CCR 2016. For example, pure land transactions, certain types of legal services, loan agreements, certain broadcasting related services, and certain civil defence services.

In addition, the draft CCR 2016 includes the provisions found in the PCR 2015 on in-house contracts and joint co-operation, thus codifying and clarifying the Teckal and Hamburg tests; if one of these tests is met, the CCR 2016 will not apply to the arrangement.

The new regime for in-scope concessions?

If the regime applies, what does this mean?

  • There is a general duty to treat bidders equally and in a non-discriminatory way, and to ensure transparency.
  • You must publish a Concession Notice and a Concession Award Notice in the OJEU, in the prescribed form.
  • However, if the service concerned is a “Light Touch Regime” service listed at Schedule 3 (ie, Health, Social and other Services) then the concession granter is only required to publish a prior information notice, rather than a full Concession Notice, and to publish a Concession Award Notice following award. It must also send award decision letters and hold a standstill period, as the standard remedies regime will apply.
  • You must offer full electronic access to the “concession documents” from the date of the OJEU. This definition mirrors that of “procurement documents” and it is reasonable to assume that the guidance here will take a similar approach (see our article above on electronic publication).
  • The technical and functional requirements of the works/service must be set out in the specification.
  • There is no prescribed procurement process, but certain procedural guarantees must be met:
    • Award criteria must be published in descending order of importance and the contract evaluation made in accordance with them. The award criteria must ensure that tenders are assessed in competitive conditions and identify an overall economic advantage for the concession granter.
    • Mandatory and discretionary exclusion criteria must be applied.
    • There are certain minimum time limits for the receipt of applications/tenders.
    • The full Remedies regime applies, so the concession granter must send out compliant award decision notices and observe a standstill period.
    • In terms of operating the contract, the PCR 2015 rules on modifications will apply to the concession contract, as will the deemed right of the concession granter to terminate the concession contract in the circumstances set out at draft Regulation 44.
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