Ireland has finally implemented Directive 2014/23 (Directive) into Irish law with the European Union (Award of Concession Contracts) Regulations 2017 (Regulations).
The Regulations apply retrospectively to concession contract award procedures commenced after 18 April 2016, the date the Directive should have been implemented in Ireland.
Who needs to comply with the Regulations?
The Regulations apply to works and services concession contracts awarded by contracting authorities and utilities. Utilities are defined as entities which pursue one of the activities listed in Schedule 2 of the Regulations (gas or heat, electricity, transport services, ports and airports, postal services and extraction of oil, gas, coal or other solid fuels) and which are either a contracting authority (or a public undertaking over which a contracting authority can exercise a dominant influence) or another entity which operates on the basis of special or exclusive rights granted for the exercise of one of the activities in Schedule 2.
What is a concession contract?
A concession contract is one where a contracting authority or utility entrusts one or more economic operators (the concessionaire(s)) with the execution of works or provision of services and where the consideration consists either solely or partly in the right to exploit the works/services.
The key element is that there must be a transfer of risk to the concessionaire in the exploitation of the works or services. An example is the grant of a concession to run a café in a hospital or to construct a bridge where the concessionaire recoups some or all of its investment through the imposition of toll charges.
Are all concession contracts covered by the Regulations?
No, the Regulations only apply to concession contracts with a value equal to or greater than €5,225,000. It is important to note that what counts is not the value of the concession contract to the contracting authority but the total overall turnover of the concession for the duration of the contract.
In addition, certain types of contracts are excluded from the scope of the Regulations, including contracts awarded on the basis of an exclusive right, contracts for licensed air transport services and public passenger services, certain legal and financial services, for the acquisition or rental of land, broadcasting and contracts for electronic communications, water and activities directly exposed to competition.
In addition, certain contracts awarded to an affiliated undertaking by a utility or a joint venture between utilities and between entities within the public sector are excluded from the scope of the Regulations.
What are the main rules for the award of concession contracts?
The Regulations introduce many new obligations for concession contracts which in the past have either not been procured at all or only on an informal basis. The following obligations are particularly noteworthy:
- As is the case with other public contracts, contracting authorities and utilities must comply with the principles of equal treatment, non-discrimination, transparency and proportionality when awarding concession contracts
- Concession contracts must be awarded on the basis of objective award criteria which must comply with the above principles and be set out in descending order of importance
- Contracting authorities and utilities must publish a concession notice and a concession award notice. As with other public contracts, there are some limited exceptions to the obligation to publish a concession notice (e.g. where there have been no suitable applications in relation to a previous procedure or where the works or services can be supplied only by a particular operator)
- The minimum time limit for the receipt of applications must be 30 days (with a reduction of five days for electronic submissions)
- Concession contracts must have a specified duration. Contracts longer than five years must be limited to the duration needed for the concessionaire to recoup its investment together with a return on invested capital
- As is the case for other public contracts, substantial amendments to concession contracts are only allowed in line with the specific provisions of the Regulations
The Regulations have limited application to social and other specific services listed in Annex IV to the Directive. The only obligations arising in relation to these contracts are the need to publish a prior information notice and an award notice.
What do authorities need to be aware of?
Until now, concession contracts have often been awarded without a procurement process or through an informal procedure.
The Regulations mean that concession contracts covered by the Regulations must largely be tendered in accordance with the rules applicable under the Public Sector Directive (2014/24/EU) and the Utilities Directive (2014/25/EU).
This imposes a significant additional burden on contracting authorities and utilities who should familiarise themselves with the new Regulations in order to be aware of their new obligations governing concession contracts.