Concession Contracts Regulations 2016
UK regulations governing concession contracts where the supplier bears demand risk rather than receiving a fixed contract price.
Definition
The Concession Contracts Regulations 2016 govern concession contracts: contracts where the supplier receives revenue rights (typically from end-user fees or operating revenue) rather than a fixed contract price from the buyer. Concession contracts are common in transport (toll roads, airport terminals), leisure (council-owned facilities operated by concessionaires), and waste management (where the operator generates revenue from gate fees). The regulations transposed EU Directive 2014/23 and are partially superseded by the Procurement Act 2023 for new procurements from February 2025.
How it works in practice
Concession contracts shift demand risk to the supplier: if usage volumes fall, supplier revenue falls. This makes the procurement evaluation different from a service contract: bidders must demonstrate demand assumptions are credible, that they can absorb downside risk, and that the revenue model is financially viable over the concession term (often 15-25 years for major infrastructure). The 2016 regulations follow the broader PCR 2015 shape: contract notice and award notice publication on Find a Tender for above-threshold concessions, defined procurement procedures, statutory standstill, exclusion grounds. The threshold for above-threshold concessions is higher than the equivalent goods/services threshold (currently around £5.6 million for works concessions). Concession contracts often involve substantial up-front capital investment by the supplier (building a toll road, renovating a leisure centre) recovered through operating revenue; this concentrates financial risk and typically requires consortium bidding with specialist construction, operating, and financing partners. Under PA 2023 concessions are absorbed into the broader transparency and conduct regime; the 2016 regulations continue to apply to pre-existing concession contracts through their term.
Common questions
What distinguishes a concession contract from a service contract?
In a service contract the supplier receives a fixed contract price from the buyer for delivering the service. In a concession contract the supplier receives revenue rights (typically end-user fees or operating revenue) and bears the demand risk. If usage volumes fall, supplier revenue falls. The risk allocation drives different bid economics and contract design.
What is the threshold for above-threshold concession contracts?
Around £5.6 million for works concessions (figures revised periodically; check current Cabinet Office threshold notice). Higher than the goods/services threshold to reflect the typical scale of concession contracts. Below-threshold concessions follow lighter procurement procedures.
Do the 2016 Regulations apply alongside PA 2023?
For procurements commenced before 24 February 2025 yes. New procurements from that date onwards follow PA 2023, which absorbs concession contracts into the broader regime with some specific carve-outs for concession-specific features. The 2016 Regulations continue to govern pre-existing contracts through their term.