In response to inconsistencies and uncertainties at European level regarding the procurement of concession contracts, the new directive on concessions aims to clarify and standardise requirements and produce a more level playing field. The latest draft has just been published.
A concession contract is a contract under which a contracting authority or a utility outsources works or services to a contractor or provider, who then has the right to commercially exploit those works or services in order to recoup its investment and make a return. The key feature is that the contractor/provider bears the operating risk of the arrangement and so has no guarantee of recouping its investment or operating costs.
Common examples of concessions might include: running catering establishments in publicly owned sports and leisure facilities, provision of car parking facilities and services; or the operation of toll roads. Under the existing public procurement directive and UK Regulations, a “light touch” procurement regime already applies for certain public works concessions. Services concessions fall outside the scope of the existing legislation but, if there is a cross border interest in the arrangement, will still be caught under the EU Treaty and so subject to the general obligations of transparency (including a duty to advertise), equal treatment and non-discrimination.
But the new directive will extend, clarify and bring greater certainty to the award of contract concessions. Some of its key features are it:
- Applies to both contracting authorities and utilities.
- Applies to both works and services concessions with values in excess of EUR 5 million (for services concessions valued at between EUR 2.5 million and EUR 5 million, there will be a more limited obligation to publish an award notice).
- Requires a concession to be advertised in the Official Journal of the European Union (OJEU) and an award notice published in the OJEU once a concessionaire has been appointed.
- Limits the duration of a concession contract to a maximum of five years, unless a longer period is required, which must be no longer than the time required to recoup the concessionaire’s investment and make a return.
- Does not prescribe the procurement processes that must be followed (eg, open, restricted, etc) but does include certain procedural rules and “guarantees”, which must be observed. These include:
o As would be expected, compliance with the EU Treaty principles of transparency, equal treatment and non-discrimination.
o Minimum time-frames between issue of OJEU and requests to participate and, for procedures including more than one stage, between issue of invitations to tender and submission of tenders.
o Rules concerning award criteria - which must be linked to the subject matter of the contract and identify the tender that offers the best “overall economic advantage”. - Defines the extent to which a concession contract can be modified without triggering the requirement for a new competition (these mirror those applicable in the new public procurement directive and which derive from existing case law – in particular Pressetext).
- Is brought within the scope of the Remedies Directive, including the requirements to issue standstill letters and observe a standstill period before contract award and the right to challenge where the provisions of the new Directive have been breached.
There are various exclusions and exceptions where the new regime will not apply; for example (and non-exhaustively) these include concessions for:
- The acquisition or rent of land
- Financial services in connection with shares/securities
- Certain public electronic communication networks
- Lottery services where granted on the basis of an exclusive right to provide these
- Certain concessions in relation to public transport (including the grant of an operating licence for air transport services)
Similarly, and consistent with the provisions in the new public procurement directive, “in house” awards are excluded as are awards where contracting authorities “co-operate” to jointly carrying out a public service task that they each have an obligation to perform. In the cases of utilities, concessions awarded to “affiliated undertakings” and joint ventures are also excluded.
A more limited regime, simply requiring the publication of a prior information notice and award notice, will apply to certain health, social, educational and other services specified in the directive.