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Procurement Reform: No More Concessions For Services Concessions

Procurement Reform: No More Concessions For Services Concessions

2016 is set to bring a raft of procurement reform to Scotland. By 18 April this year, we will see the implementation of the three procurement Directives which came into force in April 2014: the Public Sector Directive; the Utilities Directive and the Concession Directive.

In December 2015, the Public Contracts (Scotland) Regulations 2015 were published. This month, the spotlight is shining on concession contracts – with the publication of regulations which extend and clarify the rules on the award of concessions – particularly services concessions.

A “services concession contract” involves the payment for the service either in whole or partly consisting of the right to exploit the services – ie. the service provider is, at least partly, remunerated by members of the public. Another key feature of a services concession is the transfer of the operating risk to the service provider – such as supply and demand risk and the impact on the service of changing market conditions. The grant of a services concession is not currently subject to the detailed regime which applies to services contracts; nor to the particular provisions applying to works concessions. There is, of course, a requirement to follow the more general principles of equal treatment, non-discrimination, and transparency set by EU procurement law if that concession would likely be of interest to providers from outside the UK; which at the very least, implies some form of exposure to the market and a degree of advertising sufficient to enable genuine competition. 

This is, however, set to change. Following the adoption of Directive 2014/23 on the award of concession contracts (the “Concession Directive”), the rules on the award of services concessions are to be extended and clarified. The Concession Contracts (Scotland) Regulations 2016 (the “Concession Regulations”), which implement the Concessions Directive, were laid before the Scottish Parliament on 2 February 2016. 

Here are some of the key features:

  • They apply to services and works concessions with a value in excess of (as at 1 January 2016) £4,104,394; 
  • They require the concession to be advertised in the Official Journal of the European Union (“OJEU”) and publication of an award notice in the OJEU once a concessionaire has been appointed;
  • They limit the duration of a concession contract to a maximum period of five years. If a longer period is (for whatever reason) required, it must not exceed the time reasonably required to recoup the concessionaire’s investment in operating the services, together with a return on invested capital;
  • They do not prescribe the competitive process that must be followed – there is no reference to the open, restricted or other procedure - but there are certain procedural rules to be observed, including: compliance with the EU Treaty principles of transparency, equal treatment and non-discrimination; observance of minimum time-limits on receipt of requests to participate and the submission of tenders; and the application of objective award criteria - which must be linked to the subject matter of the contract and ensure that a tender is “assessed in conditions of effective competition so as to identify an overall economic advantage”;
  • The Concession Regulations take their lead from Regulation 72 of the Public Contracts (Scotland) Regulations 2015, by clarifying the extent to which a concession contract can be legitimately modified during its term without the need for the modified contract to be procured afresh; and
  • Finally, the Concession Regulations bring concessions within the scope of the now familiar remedies regime, including the need to issue standstill letters to all candidates and observe a standstill period (of 10 or 15 days, depending on the method used to issue the standstill letters) before contract award and the right to enforce duties owed to economic operators under the Concession Regulations through the courts.

The Concession Regulations will come into force on 18 April 2016, save for certain rules on electronic communications which will follow on in 2017 and 2018.