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A concession is a contract which gives a concessionaire (contractor) the right to exploit a particular work or service with or without a payment. For example, in the leisure sector, a local authority might grant a leisure provider the right to run its leisure centres and keep any revenue generated by those centres.
What is changing?
The Concession Regulations bring services concessions within the scope of EU procurement law for the first time. This is a significant move away from the previous position which was that these types of contracts were not regulated at all.
The rules for concession agreements are more relaxed than for other public contracts (i.e. contracts subject to the Public Contracts Regulations 2015), but they are now subject to wide advertising requirements and rules around submission and evaluation of tenders.
The Concession Regulations will apply to all concession contracts (works or services) over the threshold of £4,104,394. The value of a concession contract is taken as the total turnover for the entire period of the concession that will be achieved by the concessionaire (excluding VAT). In the context of a service concession, this is a relatively high threshold being considerably higher than the £164,176 applicable to ordinary service contracts.
Concession contracts over the threshold must be limited in length to five years, unless special conditions mean that a concessionaire would need more time to recoup its investment and make a reasonable profit.
Contracting authorities and utilities will from Monday be required to advertise the opportunity for a concession across the whole of the EU via a “Concession Notice” (similar to a “Contract Notice”) which will be published in the Official Journal of the European Union (“OJEU”). The Concession Notice must set out how potential concessionaires can bid for the opportunity and set out how it will evaluate tenders in a fair and open competition.
The procedure to be used
Unlike the Public Contracts Regulations, the Concession Regulations allow contracting authorities and utilities to design their own procurement process, rather than needing to follow any specific procedure as long as, for most concessions, contracting authorities allow a minimum of 30 days for bidders to submit a tender (or 22 days where the tender process will happen in stages).
Evaluation of tenders
Contracting authorities must set out objective criteria to evaluate bids, linked to the “subject matter” of the concession, which ensure equal treatment of bidders, non-discrimination and transparency.
Publishing the award decision
Contracting authorities and utilities must publish a “Concession Award Notice” in the OJEU within 48 days of the award of the Concession.
Any award of a concession can be challenged through the Courts, as can any stage of the process if there is a breach of the Concession Regulations. This must usually be done within 30 days of a challenger knowing that there are grounds for a challenge but this can be extended to three months in certain circumstances.
For more information
We have been advising many of our clients across the public and private sectors on the impact this is likely to have and how best to comply. If you would like further information, please contact Stephen Round or any member of our procurement team.
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