knowledge 6 June 2017 |

Concessions Directive – Final Piece of EU Procurement Reform Package Slots into Place in Ireland

On 23 May 2017, notice of the making of the European Union (Award of Concession Contracts) Regulations 2017 was published¹ These implement the Concessions Directive² in Ireland.

The Concessions Directive sets out for a regime for public procurement which sits apart from the main regime governing public contracts. It applies to both works and services concession contracts above a value of €5.225m. Concession contracts differ from typical public contracts because the concessionaire’s remuneration comes, wholly or partially, from exploiting the subject matter of the contract, not direct payment by the awarding authority. Crucially, operating risk must be transferred to the concessionaire, involving “real exposure to the vagaries of the market”. The Concessions Directive takes account of the market realities of these types of contracts, setting out an alternative, more flexible, system of procurement for public bodies and regulated utilities.

In Ireland, the most analogous form of contract is the public-private partnership (PPP) contract used in areas such as the development of infrastructure. Up to now, such contracts have been procured using the standard public contracts procurement regime. However, depending on the payment structure adopted for the PPP, this may now change.

The new Irish regulations implementing the Concessions Directive deal with such issues as:

• Principles of equal treatment, non-discrimination and transparency in dealings with economic operators;
• Methods for calculating the estimated value of concession contracts (turnover-based);
• Exclusions from the regulations e.g. in the fields of water and public passenger transport;
• The limited permitted duration of concession contracts. This is a first for the area;
• How to award concessions which potentially fall under several different procurement regimes.

With regards to the procedure for award of contracts, awarding authorities are free to structure the procedure as they see fit, provided they comply with anything specifically dealt with in the Regulations. This approach mandates compliance with “procedural guarantees” to ensure equal treatment and transparency, while leaving flexibility around these issues for the awarding authority. Following this general approach, the Regulations deal with issues such as the format, content and publication of concession notices and concession award notices. Requirements are specified in relation to the electronic availability of concession documents.  Rules are set out on the time limits for receipt of applications and tenders for a concession contract, and the supply of information to candidates and tenderers. There are provisions on the selection/exclusion of tenderers, the format of specifications, and permitted award criteria.

As with the main procurement regime, the Regulations also address the combating of corruption and the prevention of conflicts of interest, with positive obligations imposed on awarding authorities. Subject to certain exceptions, economic operators may be excluded from participation in a concession contract award procedure where they have been involved in corruption or other criminal activity, as well as other exclusionary criteria such as payment of social services/taxes, provision of misleading information, attempting to unduly influence the award process, and so forth.

The Regulations contain some provisions governing the performance of concession contracts during their term, addressing issues such as subcontracting and supply chain information (in particular to ensure compliance with environmental, social and labour laws). The Regulations also provide for the modification of concession contracts during their term without a new award procedure if certain criteria are satisfied, tracking the main procurement regime.

There are also rules governing the content of concession contracts so as to permit the termination of a contract by a public body in certain circumstances, for example, if it emerges that the concessionaire should have been excluded from the concession contract award procedure.

Public bodies must report to the Minister on their activities under these regulations at his/her request.

The Regulations take the opportunity to make some corrections to the regulations transposing the main procurement regime (SI Nos 284 and 286 of 2016).

Finally, transitional provisions are set out. The intent here is to allow for the smooth implementation of the new regime. However, the Regulations have been backdated to 18 April 2016, the deadline originally set for the transposition of the Concessions Directive, and will apply to a concession contract award procedure commenced by a public body after that date. It is as yet unclear what difficulties, if any, this will lead to in practice.