Concession Modification Rules

Because concession contracts run for 15, 20, or 30 years or more, the world will change considerably between award and expiry. Circumstances that no one anticipated at the time of award will arise, costs will evolve, technology will advance, and the scope of services may need adjustment. Concession modification rules determine when those changes can be made contractually without re-tendering, and when they are so fundamental that the market must be given a fresh opportunity to compete.

What are Concession Modification Rules?

Article 43 of the Concessions Directive 2014/23/EU sets out the circumstances in which a concession contract may be modified during its term without a new award procedure. These rules mirror, but are not identical to, the modification rules in Article 72 of Directive 2014/24/EU for standard public contracts.

The permitted modification grounds under Article 43 are:

Modifications provided for in the original contract documents. If the initial concession notice, tender documents, or contract included clear, precise, and unequivocal review clauses specifying the scope, nature, and conditions of possible modifications, those changes can be made without re-tendering. The clause must have been published and known to all tenderers at the time of the original competition.

Additional works or services from the original concessionaire where a change of concessionaire is not possible for economic or technical reasons. Such modifications are limited to 50 percent of the original concession value. They must relate to additional works or services not included in the initial contract, and a change of operator would cause significant inconvenience or duplication.

Modifications required by unforeseen circumstances. Where circumstances could not have been foreseen by a diligent contracting authority at the time of award, modifications are permitted provided they do not alter the overall nature of the concession and the price increase does not exceed 50 percent of the original concession value.

Modifications below the threshold values. A modification that is below both the EU threshold (EUR 5,538,000 for concessions) and below 10 percent of the original concession value may be made without a new procedure, provided it does not alter the overall nature of the concession.

Successor concessionaire changes. Where a new concessionaire replaces the original following a corporate restructuring, merger, insolvency, or engagement of a sub-concessionaire pursuant to clauses in the original contract, this substitution does not require a new procedure provided the new entity meets the original selection criteria.

A modification that does not fall within any permitted ground and materially alters the overall nature of the concession requires a new award procedure under the concession award procedure rules.

Why concession modification rules matter for bidders

For concessionaires, these rules define the envelope of contractual flexibility over the life of the contract. A modification that would extend the concession duration, substantially increase the scope of works, or significantly change the risk allocation between authority and operator must be assessed against Article 43 before it is agreed. An unlawful modification can be challenged by third parties, potentially resulting in the modification being declared ineffective or the concession being terminated.

For bidders who lost a concession award, the modification rules are the gatekeeping mechanism that prevents the winning bidder from subsequently negotiating a fundamentally different contract. If a modification is so extensive that the contract awarded differs materially from the one competed, competitors who might have won the modified contract are entitled to challenge.

Lenders financing a concession must also understand the modification rules. Where the contract structure includes provisions for scope changes that may affect operating risk transfer, the lenders' security analysis must account for whether those changes could trigger a legal challenge and jeopardise the concession's continuity.

Example

A French regional authority awarded a 25-year waste treatment concession. Seven years in, new EU environmental regulations require the concessionaire to install additional filtration equipment costing EUR 12 million, which was not foreseeable at award. The authority and concessionaire agree to extend the concession duration by two years to compensate the operator for the additional capital cost. The extension is below 50 percent of the original concession value and results from genuinely unforeseen regulatory change. It falls within Article 43(1)(c) and does not require a new award procedure.

Frequently Asked Questions

What counts as a modification that "alters the overall nature" of the concession?

A modification alters the overall nature if it introduces conditions that, had they been part of the original procurement, would have allowed different candidates to participate, or would have resulted in a different winner. Examples include a fundamental change in the type of service provided, a transfer of operating risk back to the authority that changes the legal classification of the arrangement, or a change that extends the scope so substantially that it is effectively a new contract.

Can the concession duration be extended as a modification?

Yes, in limited circumstances. A duration extension required to compensate for authority-caused delays, force majeure, or unforeseen scope additions may fall within Article 43, provided it meets the percentage thresholds and does not alter the overall nature of the concession. A simple extension to give the concessionaire additional revenue without justification does not fall within any permitted ground and requires a new award.

Do the modification rules apply the same way in the UK?

The UK Concession Contracts Regulations 2016 implemented the equivalent of Article 43 as part of pre-Brexit transposition. Following the Procurement Act 2023 reform, the UK now has its own modification rules that track similar principles but differ in detail from the EU position. UK contracting authorities and concessionaires should consult the current UK regulations rather than applying the EU directive directly.