Concessions Threshold

A concession is a fundamentally different arrangement from a standard public contract. In a standard contract, the contracting authority pays the supplier for delivering works or services. In a concession, the concessionaire has the right to exploit the works or services it provides, typically receiving payment directly from end users or through a combination of user charges and public contributions, and bearing the operating risk of the activity. Motorway toll operations, airport ground handling concessions, and water treatment plant concessions are common examples.

What is the concessions threshold?

Directive 2014/23/EU applies to works concessions and services concessions where the estimated value of the concession equals or exceeds approximately 5,382,000 euros (current 2024-2025 period). This threshold is the same as the works threshold under the classical directive, reflecting the typically large scale of concession arrangements.

The definition of a concession depends critically on the transfer of operating risk. If the authority guarantees demand or revenue regardless of actual usage, the arrangement may be a services contract rather than a concession, and would fall under the classical or utilities directive instead. Directive 2014/23/EU explicitly states that the concessionaire must be exposed to the vagaries of the market, meaning that its potential estimated loss must not be merely nominal.

The estimated value of a concession is calculated as the total revenue the concessionaire is expected to generate over the life of the concession, net of VAT. This includes payments from users, subsidies from the authority, and proceeds from ancillary commercial activities. See threshold calculation methods for the general approach.

Why it matters for bidders

Concessions are a major procurement market in infrastructure, transport, utilities, and public facilities. If you operate in sectors such as toll roads, port services, parking management, sports facilities, or water supply, understanding the concessions directive and its threshold is essential.

Above the threshold, contracting authorities must publish a concession notice in OJEU and run a competitive award procedure. The procedure is less prescriptive than a full open procedure: authorities have significant freedom in designing the selection and award process, provided they respect the principles of non-discrimination, equal treatment, transparency, and proportionality. Unlike the classical directive, there is no mandatory use of specific named procedures.

Estimated contract value for concessions must be calculated honestly, and the VAT exclusion in threshold calculation rule applies.

Example

An Italian city authority wishes to award a concession to operate a network of public car parks for fifteen years. The estimated total revenue from parking fees over the concession period (net of VAT) is approximately 12 million euros. The authority transfers to the concessionaire the risk of insufficient vehicle demand. Because the estimated value exceeds the concessions threshold of 5,382,000 euros, the authority must publish a concession notice on TED and run a competitive award procedure before signing the concession agreement.

Frequently Asked Questions

How is a concession different from a public-private partnership (PPP)?

A concession is one form of PPP, but not all PPPs are concessions in the legal sense. PPP is a broad policy term covering many types of long-term public-private collaboration. A concession specifically involves the right to exploit works or services, with operating risk transferred to the private partner. Other PPP forms, such as availability-based PFI or DBFOM contracts where the authority pays a unitary charge regardless of demand, are typically services contracts rather than concessions.

Does the concessions directive apply to utilities entities?

Yes, in part. Directive 2014/23/EU applies to both contracting authorities and contracting entities (utilities) for works and services concessions. However, certain activities of utilities entities in the water sector are specifically exempted from the directive in recognition of the special status of water as a public resource.

What happens to concession contracts that started before the directive came into force?

Concessions awarded before 18 April 2016 (the directive's implementation deadline) are not covered by the directive. They continue under the terms of their original agreements. The directive applies only to award procedures started after that date.