European Scrutiny Committee Contents

5 Award of concession contracts



COM(11) 897

Draft Directive on the award of concession contracts

Legal baseArticles 53(1), 62 and 114 TFEU; co-decision; QMV
DepartmentCabinet Office
Basis of considerationMinister's letter of 3 December 2012
Previous Committee ReportsHC 428-lii (2010-12), chapter 4 (29 February 2012) and HC 86-xxi (2012-13), chapter 4 (28 November 2012)
Discussion in CouncilDecember 2012
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; but security waiver granted under paragraph 3(b) of the Scrutiny Reserve Resolution


5.1 According to the Commission, concessions are similar to contracts for works or services, except that the consideration (benefit) received by the economic operator comprises the right to exploit the concession (or that right together with payment). However, although there have since the early 1990s been EU directives[37] governing contracts awarded by public bodies and certain utilities,[38] as well as the remedies[39] available to aggrieved parties for breaches of these rules, there have to date been minimal specific rules governing the award of "concessions". The Commission considers that this gives rise uncertainty and to serious distortions of the internal market, and it therefore put forward in December 2011, in parallel with its proposals to modernise procurement by public authorities[40] and utilities,[41] this draft Directive, which would extend and expand the EU rules governing the award of works and services concession contracts by both public authorities and utilities.

5.2 The contents of the proposal were set out at some length in our Report of 29 February 2012, when we pointed out that, although the proposal was in certain respects simpler than those put forward for public and utilities procurement, the aim in each case was to align procurement with Europe 2020 strategic goals, and the proposals in many ways covered similar ground. We also noted that the Government had said that it knew of no compelling reason why there needed to be a directive separate from those on public and utilities procurement, and considered that this could lead to divergences and anomalies, a concern which it said it had repeatedly voiced in Brussels. However, it recognised that the negotiations were likely to run in parallel, or overlap, and supported the principle that rules governing procurement should be coordinated in EU legislation. It therefore welcomed the simplification and increased flexibilities proposed, and would seek to ensure that this remains or is enhanced, subject to a number of specific areas, where it expected to push for improvements.

5.3 The Government also said that the proposal was nevertheless likely to have a relatively small impact in the UK as the number of works and service concession contracts awarded was relatively small, and procurers tended to follow a competitive procedure already, but that there might be benefits for UK suppliers if European concessions markets were subject to openly-advertised, properly-structured procurement.

5.4 Whilst we commented on the considerable similarities between this proposal and the parallel proposals on public procurement and that by public utilities, we noted that this proposal did not contain any explicit reference to the establishment of a national oversight body, and hence did not in itself give rise to the sort of concerns over subsidiarity and human rights, which we had drawn to the attention of the House in our Reports on those other proposals (or to the need for a Reasoned Opinion). However, as negotiations on all three proposals were likely to proceed in parallel, and the Government intended to provide further information as these unfolded, we said that we would hold the document under scrutiny.

5.5 As we have more recently observed in our Report of 28 November 2012, we received a letter of 15 November 2012 from the Minister for Political and Constitutional Reform (Miss Chloe Smith), in which she said that, although discussions so far had concentrated on the other measures, the Presidency had recently picked up the pace on this proposal. In line with wishes of many Member States, the text had been substantially simplified and streamlined, with most of the proposed rules governing electronic communication having been removed; the specific rules governing the procurement process and negotiations, and the criteria for the award of concessions, having been simplified; and concession-awarders given considerable discretion. She concluded by asking if we could either clear the document, or, failing that, grant a waiver under paragraph 3(b) of the Scrutiny Reserve Resolution, in order to enable the Government to support the revised text in the Council.

5.6 We said that, in considering the Minister's request, we were conscious that in the case of the proposal on public procurement, we had said at our meeting on 21 November that whilst we felt it would be right to hold the document under scrutiny in view of the number of outstanding issues, we were prepared to grant a scrutiny waiver, and in view of the similarities between that proposal and the one on public entities, we were granting a similar waiver in that instance as well. However, we said that we were not yet persuaded that such a waiver would be justified in the case of this document. In particular, we recalled that the Government had seen no compelling reason why there needed to be a separate directive on concession contracts, and had repeatedly voiced concern in Brussels that separate negotiations and directives could lead to anomalies. It was not clear to us whether the Government had abandoned that view, and, if so, what had led it to do so, and we also said that we would like some more explicit indication of whether (and how) other more detailed concerns set out in our Report of 29 February 2012 had been met. We therefore said that in view of these uncertainties, we proposed to hold the document under scrutiny, without granting a waiver, pending further information.

Minister's letter of 3 December 2012

5.7 We have now received from the Minister a letter of 3 December 2012, in which she says that the Government's original concerns that a separate directive would lead to unwanted divergence and anomalies between the concessions proposals and the other proposals have been allayed in practice, as the Presidency, supported by Member States including the UK, specifically structured the negotiations to enable consistency between the directives where relevant, and ensure that any differences were intended and agreed, and not an accident of diverging processes. She also says that during the negotiations, the concessions directive has been significantly simplified, and where divergence between the directives is appropriate, it is generally simpler than the public procurement directive. Thus, the rules governing the concession award process and the permissible award criteria have been significantly streamlined, giving grantors significant discretion as to how to organise the process, and allowing negotiations with suppliers as a generally-applicable option. Also, the rules governing technical specifications have been simplified, and it has been clarified that permissions and licences to offer services, but which stop short of a contractual obligation, are not covered by the directive. The Minister says that she is therefore content that a separate directive for concessions has not in fact created problems in practice, or led to a less favourable outcome than would have been the case had the rules been included in the same directives as those for public procurement and utilities.

5.8 The Minister also refers to the other specific points mentioned in the earlier Explanatory Memorandum, which she says have been pursued by the UK in the negotiations, to an acceptable outcome. Thus:

  • the issue regarding a possible requirement to shorten a concession depending on actual profitability has been addressed, as the Directive now requires no justification for any duration up to five years, and explicitly recognises that some concessions which require large investments may need to be very long term, and that the assessment of expected costs and returns on investment will apply when the concession is awarded;
  • there is now no requirement for the use of electronic digital signatures, and all means of communication must be generally available and not restrict suppliers' access;
  • there is a derogation from the requirement to offer unrestricted electronic access to concession documents where duly justified;
  • the requirement to carry out all procedures electronically within five years has been dropped.


5.9 We are grateful to the Minister for this further information, in the light of which we are now prepared to grant a waiver under paragraph 3 (b) of the Scrutiny Reserve Resolution. However, as with the corresponding proposals on general public procurement and that by entities, we are holding the document under scrutiny, and would like to be informed of the outcome of the negotiations.

37   Currently, Directive 2004/17/EC (which coordinates the procurement procedures of entities in the water, energy, transport and postal services sectors which have been granted special or exclusive rights) and Directive 2004/18/EC (which coordinates procedures for award of public works contracts, public supply contracts and public service contracts). Back

38   Those bodies operating in the energy, water, transport, and postal sectors, where these sectors are not fully subject to competition and the operators may have exclusive rights. Back

39   Under Directives 89/665/EC and 92/13/EC, as amended by Directive 2007/66/EC. Back

40   (33586) 18966/11: see HC 428-lii (2010-12), chapter 3 (29 February 2012) and HC 86-xx (2012-13), chapter 4 (21 November 2012). Back

41   (33585) 18964/11: see HC 428-lii (2010-12), chapter 2 (29 February 2012) and HC 86-xxi (2012-13), chapter x (28 November 2012). Back

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Prepared 13 December 2012