COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-12-20
Institutions: European Commission
Subjects: administrative contract, administrative transparency, award of contract, invitation to tender, service concession, single market, subcontracting, tendering

EUROPEAN COMMISSION 

Brussels, 20.12.2011 
SEC(2011) 1589 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

PROPOSAL FOR A DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF 
THE COUNCIL 

on the award of concession contracts 

{COM(2011) 897 final} 
{SEC(2011) 1588 final} 

 
 
 
 
  
 
COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

PROPOSAL FOR A DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF 
THE COUNCIL 

on the award of concession contracts 

EXECUTIVE SUMMARY 

OF THE IMPACT ASSESSMENT OF PROPOSAL FOR A DIRECTIVE ON THE AWARD OF 
CONCESSION CONTRACTS 

1. 

PROBLEM DEFINITION 

Concession contracts are commonly used by public authorities to provide for the delivery of 
services  or  construction  of  infrastructure.  Concessions  involve  a  contractual  arrangement 
between the public authority and an economic operator (the concession holder) whereby the 
latter  provides  services  or  carries  out  works  and  is  substantially  remunerated  by  being 
permitted  to  exploit  the  work  or  service.  Concessions  are  a  particularly  attractive  way  of 
carrying out projects of public interest when state or local authorities need to mobilise private 
capital  and  know-how  to  supplement  scarce  public  resources.  They  underpin  a  significant 
share of economic activity in the EU and are especially common in network industries and for 
the delivery of services of general economic interest. Concession holders may, for example, 
build and manage motorways, provide airport services or operate water distribution networks. 

Concessions  involving  private  partners  are  a  particular  form  of  public  private  partnership 
(PPP)1. According to the information available, over 60 % of all PPP contracts can be classed 
as concessions.  As a model where,  in remuneration, the private partner is given the right to 
exploit either the work or the service, with the inherent financial risks, concessions constitute 
a convenient legal framework for carrying out public tasks through PPPs and hence make it 
possible to deliver much needed public works and services, while keeping those assets out of 
the government balance sheet. 

Since  it  involves  the  efficient  allocation  of  public  funds,  procurement  of  concessions  (and 
therefore indirectly of PPPs) is of special concern in the current context of severe budgetary 
constraints  and  economic  difficulties  in  many  EU  Member  States.  The  initiative  on 
concessions  is  to  be  seen  as  one  of  the  measures  that  can  help  to  ensure  more  efficient 
allocation of public money by creating conditions for the competitive award of a contract. 

Currently,  the  award  of  service  concessions  is  subject  only  to  the  Treaty  principles  (equal 
treatment,  non-discrimination,  transparency  and  proportionality)  while  works  concessions 
(with  the  exception  of  the  ‘utilities’  sector)  are  also  partially  covered  by  some  secondary 

1 

For  the  purpose  of  statistical  treatment,  concessions  are  defined  as  projects  where  the  majority  of  revenue  is 
generated by third-party users, whereas in PPPs the majority of revenue comes from public authorities. 

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legislation.  By  contrast,  public  procurement  contracts  are  subject  to  detailed  secondary 
legislation (covering ‘classic’ and ‘utilities’ sectors)2. 

The  lack  of  clarity  of  the  EU  rules  governing  concessions  is  the  main  driver  of  problems 
identified with regard to the present situation: legal uncertainty (1.1), entry barriers (1.2.) and 
lack of appropriate judicial guarantees for the bidders (1.3.). 

1.1. 

Lack of legal certainty generating economic inefficiencies 

Legal  uncertainty  affects  both  the  definition  of  concession  and  the  legal  regime  applicable. 
The  current  definition  makes  it  difficult  to  distinguish  between  concessions  and  public 
contracts (and also between works concessions and service concessions). Although the Court 
has explained that the essential feature of a concession is the risk inherent in the exploitation 
of a work or a service which the concession holder has to bear, fundamental components of 
the definition, such as the level and type of risk, are still undefined. Furthermore, the precise 
content  of  the  obligations  of  transparency  and  non-discrimination  arising  from  the  Treaty 
remains unclear. National legal frameworks do not provide a solution to the problem either as, 
for the same reasons, their compliance with the EU rules cannot be easily ensured. 

The  present  situation  of  uncertainty  at  several  levels  gives  rise  to  major  economic 
inefficiencies  and  is  detrimental  to  contracting  authorities  and  entities,  economic  operators 
and  users  of  the  services.  Indeed,  for  contracting  authorities  and  entities,  the  lack  of  legal 
certainty increases the risk of cancellation or early termination of illegally awarded contracts 
and ultimately discourages them from using concessions in cases where this type of contract 
may be a good solution. Economic operators may also be less inclined to engage in projects 
which  may  turn  out  to  have  been  tendered  in  violation  of  EU  law.  Limited  interest  in 
concessions  may  equally  have  a  negative  effect  on  the  uptake  of  PPPs  and,  consequently, 
jeopardise improvements in efficiency and innovation in the delivery of services vital to EU 
citizens. 

1.2. 

Entry barriers 

In addition to legal uncertainty, the current situation is marked by the presence of barriers to 
market entry. 

Member States' legal systems differ significantly as to the scope of application of the rules on 
the award of  concessions, the level of publication and transparency standards, the choice of 
procedures,  or  of  selection  and  award  criteria,  and  technical  specifications.  This  situation 
contributes  to  the  fragmentation  of  national  frameworks,  further  aggravated  by  the  often 
unlawful  practices  of  contracting  authorities  and  entities,  such  as  the  direct  award  of 
concession contracts or the use of criteria which are not objective. 

As a result, economic operators are faced with an unlevel playing field, often leading to lost 
market  opportunities.  Many  respondents  to  the  public  consultations  confirmed  that  the  this 
situation gives rise to costs related to legal advice and to the need for in-depth knowledge of 
specific local conditions and creates obstacles to the entry of non-domestic EU operators into 
these  markets.  In  addition  to  the  harm  to  competitors  located  in  other  Member  States, 
contracting entities and consumers also stand to lose, as they do not get the value for money 
they might have expected.  

2 

Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of 
procedures for the award of public works contracts, public supply contracts and public service contracts, and 
Directive 2004/17/EC of the EP and of the Council of 31 March 2004 coordinating the procurement procedures of 
entities operating in the water, energy, transport and postal services sectors (OJ L 134, 30.4.2004). 

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1.3. 

Insufficient legal protection of tenderers 

Services concessions, and to a certain extent works concessions, are not covered by the rules 
providing for legal remedies in the area of public procurement. Therefore, aggrieved tenderers 
do not benefit from important judicial protection afforded by the Remedies Directive. Despite 
the fact that certain Member States have extended the application of this Directive to service 
concessions,  others  have  not  done  so.  As  a  result,  possible  violations  of  the  EU  Treaty 
principles cannot be adequately addressed. 

2. 

SUBSIDIARITY 

Although  the  aforementioned  problems  produce  their  material  effects  at  national  level,  they 
also affect the efficient functioning of the EU internal market. 

Even if Member States were to take legislative action to establish a legal framework based on 
the Treaty principles, at least two problems would still remain unresolved: the risk of the legal 
uncertainty  related  to  interpretations  of  those  principles  by  national  legislators  and  large 
disparities between the legislation in different Member States. 

A  common  understanding  across  Member  States  of  the  obligations  flowing  from  the  EU 
principles can only be achieved by action at EU level. Similarly, approximation of the rules 
by the EU legislator can best eliminate discrepancies between national regimes. 

3. 

OBJECTIVES 

The  overall  objective  of  the  present  initiative  is  to  create  a  supportive  framework  for  wider 
use of concessions, hence contributing to economic growth and innovation. The initiative will 
concentrate  on  solutions  allowing  the  quality  and  accessibility  of  many  socially  and 
economically  important  services  to  be  improved  by  facilitating  investment  and  increasing 
competition for  the award  of concessions, thus creating more business opportunities for EU 
companies and fostering innovation. 

4. 

SCOPE OF LEGISLATION 

Legislation  on  concessions  should  cover  the  award  of  this  type  of  contract  with  regard  not 
only  to  the  ‘classic’  sector  (Directive  2004/18/EC)  but  to  the  ‘utilities’  sector  (Directive 
2004/17/EC), which accounts for a significant number of concessions. 

Non-priority services  (e.g. health, education and social services) are presently only partially 
covered  by  the  Public  Procurement  Directives  since  they  were  deemed  not  to  present  a 
significant  potential  for  cross-border  trade.  However,  in  the  light  of  recent  findings  by  the 
Commission  following  the  evaluation  on  the  impact  and  effectiveness  of  EU  public 
procurement  legislation,  many  categories  of  services  formerly  classified  as  non-priority 
services  showed  a  relatively  high  ratio  of  cross-border  provision.  Any  new  proposal  in  the 
field  of  public  purchases  must  take  account  of  these  findings.  Therefore,  such  conclusions 
justify the extension of the envisaged rules to those services. Nevertheless, services such as 
social,  health  and  education  continue  to  have  a  limited  cross-border  dimension,  due  to  the 
strong  impact  of  different  national  cultural  traditions,  and  are  less  often  awarded  as 
concessions. 

Concessions  contracts  for  certain  specific  types  of  services  are  already  subject  to  specific 
regulation with regard to the contracts they award, such as public passenger transport services 

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by  rail  and  road  (covered  by  Regulation  1370/2007)  and  air  transport  services  (covered  by 
Regulation  1008/2008)  and  therefore  should  be  excluded  from  the  scope  of  the  future 
legislation on concessions. 

5. 

POLICY OPTIONS 

The Commission has analysed different policy options aimed at meeting the objectives set out 
in the previous section. These include the following legislative and non legislative actions: no 
policy change; a focused infringement policy; soft law; legislation: basic rules, detailed rules, 
mixed rules. 

Only the legislative options above will be analysed in detail since, as will be explained below, 
neither  the  focused  infringement  policy  nor  the  soft  law  option  seem  fully  adequate  to 
accomplish the objectives set out. 

5.1. 

Base line scenario (Option 1) 

This  option  implies  no  action  to  address  the  status  quo.  In  this  case  the  economic 
inefficiencies  caused  by  legal  uncertainty  and  the  existing  entry  barriers  to  the  EU 
concessions  market  would  persist:  contracting  authorities  and  entities  would  miss  the 
opportunity to ensure best value for money in the award of concessions, economic operators 
would  miss  out  on  substantial  business  opportunities  and  consumer  benefits  would  remain 
limited. 

5.2. 

Focused infringement policy (Option 2) 

This option would consist in increased and more systematic use of the infringement procedure 
under Article 258 of the TFEU to address cases of violation of the Treaty principles during 
the award of concessions. While this option offers certain positive effects it would not address 
the  problems  identified  and  results  could  only  be  expected  in  the  long  term.  Therefore,  this 
option would not meet the objectives of the initiative and can also be discarded. 

5.3. 

Soft law (Option 3) 

The  soft  law  option  would  consist  either  in  an  interpretative  communication  of  the 
Commission or a recommendation. The Communication on concessions of 2000 has not so far 
ensured  legal  certainty  and  compliance  with  the  Treaty  principles3.  A  new  communication 
would probably raise stakeholders’ awareness of the case law of the Court but could not go 
beyond interpretation of the existing case law. Furthermore, a communication is not binding 
and  therefore  would  not  be  likely  to  ensure  publicity  of  concession  contracts  in  the  EU  or 
fairness of the procedures used to award them. 

The  above  comments  also  apply  to  a  recommendation  by  the  Commission.  It  therefore 
appears that neither a communication nor a recommendation would achieve the objectives of 
the initiative. This option can therefore be discarded. 

5.4. 

Legislation — content of the options 

The two ‘extreme’ legislative options are the introduction of basic rules corresponding to the 
existing provisions on works concessions of Directive 2004/18/EC or detailed rules based on 
the  current  legal  framework  for  public  contracts.  The  third  option,  mixed  rules,  would  be 
some compromise between the two. 

3 

Commission interpretative communication on concessions under Community law (OJ C 121, 29.4.2000). 

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6. 

ASSESSMENT OF IMPACTS OF THE LEGISLATIVE OPTIONS 

6.1. 

Scope of legislation 

A  proposal  for  directive  on  concessions,  irrespective  of  its  actual  content,  would  cover 
concessions in both ‘classic’ and utilities sectors. 

By  contrast,  new  rules  would  not  apply  to  services  concessions  currently  governed  by  the 
Transport Regulation4 and the Air Transport Services Regulation5, for the sake of the stability 
of  their  separate  legal  regimes,  and  only  partially  to  social  services.  The  threshold  for  both 
works and service concessions should ensure that these rules cover only concessions with a 
manifest cross-border interest. 

6.2. 

Option 4: Legislation — basic rules 

Basic  rules  would  include  provisions  currently  applicable  to  works  concessions  in  the 
‘classic’ sectors, as well as clarification of the notion of concession. 

Clearer criteria distinguishing between public contracts and concessions could be expected to 
reduce the number of public contracts wrongly labelled as concessions. 

The  most  important  of  these  rules  is  the  obligation  to  publish  a  concession  notice  in  the 
Official Journal of the EU. This requirement is expected to reduce a number of direct awards, 
contribute to better information on concessions, eliminate legal uncertainty as to whether the 
standards  of  ‘adequate  advertisement’  have  been  met  and  reduce  the  cost  of  bidding  for 
concessions for SMEs. 

More competition and contestability is likely to result in more competitive bids and hence, in 
better results for contracting authorities and entities and consumers. 

Provisions  on  the  minimum  deadlines  for  the  submission  of  bids  could  help  avoid 
discrimination, combat corruption and encourage participation of cross-border bidders. 

Legislation  is  the  only  option  capable  of  bringing  procedures  for  the  award  of  service 
concessions within the realm of the Remedies Directives. This should substantially improve 
legal protection for bidders, which is likely to enhance their confidence in the impartiality of 
contracting authorities and entities’ decisions and encourage them to bid more often. 

Basic  rules  might  also  ensure  equal  treatment  throughout  the  procedure.  However,  their 
effectiveness  is  more  uncertain  in  this  regard.  One  possible  drawback  might  be  that  greater 
transparency  in  the  award  of  concessions  could  lead  to  increased  dominance  by  large 
companies.  However,  such  an  outcome  is  by  no  means  certain.  Stakeholders  perceive  the 
administrative  and  compliance  costs  likely  to  be  generated  by  basic  legislation  as  rather 
unsubstantial  and  considered  they  would  be  counterbalanced  by  the  efficiencies  achieved 
thanks to greater competition. 

As  to  the  possible  social  drawbacks,  the  current  EU  legislation  on  safeguarding  employees’ 
rights in the event of transfers of undertakings reduces the possibility of redundancies in the 
event that an incumbent operator loses a contract. 

Basic  rules  would  have  no  impact  on  the  ability  of  contracting  authorities  and  entities  or 
regulatory bodies to establish which environmental standards need to be met. 

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5 

Regulation 1370/2007, OJEU, L 315 of 3.12.2007. 
Regulation 1008/2008 OJEU, L 293, 31.10.2008. 

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Basic  rules  could  create  a  stable  legal  framework,  stimulate  the  use  of  concessions  and 
therefore  facilitate  investment  and  promote  innovation.  Greater  transparency,  resulting  in 
more innovative approaches to public services and greater choice and efficiency, would bring 
about positive outcomes for contracting authorities and entities and for users, improve access 
to the market and create new business opportunities. 

6.3. 

Option 5: Legislation — detailed rules 

Detailed  rules  would  include  all  the  legal  solutions  provided  for  in  the  basic  rules  option. 
Thus, the impact of detailed rules on legal certainty would be partly identical to the impact of 
the  basic  rules.  In  addition,  however,  this  option  would  involve  the  application  of  the  same 
rules,  in  particular  those  on  selection  and  award  criteria  and  on  award  procedures,  as  for 
public  contracts.  Thus  in  certain  respects,  these  rules  are  likely  to  raise  the  level  of  legal 
certainty,  as  they  would  comprehensively  enshrine  the  Treaty  principles  applicable  to  many 
aspects of the award procedure. However, despite all the expected benefits, the introduction of 
detailed rules might prove counter-productive and substantially decrease the attractiveness of 
concessions. Indeed, the complexity of rules and specific provisions (such as compulsory use 
of  standard  tendering  procedures  or  the  most  economically  advantageous  tender  (MEAT) 
criteria) might have a deterrent effect and also reduce overall legal certainty, due to a higher 
risk of litigation, ultimately discouraging the use of concessions. Many stakeholders perceive 
the complexity of detailed rules as a major threat. 

The economic impact of the introduction of detailed rules is therefore likely to be negative, as 
undertakings  might  shy  away  from  bidding  for  concessions,  contracting  authorities  and 
entities would fail to reap the benefits they might expect, while consumers would fail to gain 
access to cheaper and better quality services. 

The  impact  on  employment  and  the  quality  of  jobs  is likely to be limited,  while  the overall 
social  and  environmental  impact  might  be  negative, with  less  innovation and poorer quality 
services. 

6.4. 

Option 6: Legislation — Mixed rules 

Nevertheless, the basic rules could usefully be complemented by some provisions on selection 
and  award  criteria,  and  on  the  course  of  procedures.  These  provisions  would  not  strictly 
reproduce the content of public procurement directives (such as rules on MEAT), but would, 
for  example  consist  of  obligations  to  publish  subject-matter-related  selection  and  award 
criteria  in  advance  or  to  observe  minimum  deadlines  for  the  submission  of  tenders.  They 
might  also  include  rules  on  technical  specifications,  obligations  to  disseminate  the  same 
information to all bidders during negotiations, public-public cooperation and modifications of 
concessions during their performance. Finally, they might impose compulsory publication of 
the award notice. 

Such provisions could be expected to have a beneficial impact on transparency, fairness and 
legal  certainty,  thereby  contributing  to  better  achievement  of  a  number  of  objectives  of  the 
present initiative, in particular better access to the market, improved investment opportunities 
and hence more and better quality services. By encouraging the uptake of concessions more 
than either of the alternative options, they would also positively impact engagement in PPPs. 
A substantial number of stakeholders supported the introduction of mixed rules. 

Under  mixed  rules  all  impacts  (economic,  social  and  environmental)  should  be  slightly 
improved in comparison with the effects of basic rules. 

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7. 

COMPARING THE OPTIONS 

Both  the  basic  rules  and  the  mixed  rules  options  are  capable  of  achieving  significant 
improvement  of  legal  certainty  and  hence  facilitate  access  to  the  market,  resulting  in 
improved outcomes for the contracting authorities and entities, users and businesses. Detailed 
rules permit to achieve better results in terms of fairness of the procedures, but are likely to 
generate  important  drawbacks  in  the  form  of  reduced  up-take  of  concessions.  Mixed  rules 
appear  to  deliver  the  best  results  in  terms  of  fairness  and  better  value  for  money  but  also, 
given their flexibility, in terms of encouraging the use of concessions. 

In  the  light  of  the  above  it  is  recommended  to  opt  for  Option  6  —  mixed  rules,  which 
represents an ambitious and comprehensive solution. 

8. 

MONITORING AND EVALUATION 

Evaluation of the legislation will be based on such indicators as the change in the number and 
value of concessions and published and awarded, the number of bidders and successful non-
domestic bidders, and the percentage of SMEs among bidders. 

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