Works Concession

A works concession combines construction and long-term operation in a single contract, with the private party financing the asset and recovering its investment over time from users rather than from a single public payment. This structure underpins much of Europe's infrastructure estate, from toll roads and bridges to waste-to-energy plants and sports stadiums built under public remit.

What is a Works Concession?

Under the Concessions Directive 2014/23/EU, a works concession is defined as a contract in which the contracting authority entrusts the execution of works (and may also entrust the design) to an economic operator, where the consideration is either solely the right to exploit the works or that right together with a payment. The defining legal criterion is that operating risk is genuinely transferred to the concessionaire.

The works element means that construction must be a material part of the concessionaire's obligation. A contract that covers operation alone, with no construction component, is a services concession rather than a works concession. In practice, many concessions blend both: the concessionaire builds an asset (works) and then operates it as a service over the concession duration.

European infrastructure finance relies heavily on this model. The Portuguese toll motorway network, French autoroutes, and Norwegian toll tunnels are all structured as works concessions. The concessionaire raises private finance, often through project finance structures with limited recourse to sponsors, and earns a return from revenue from users or availability fees paid by the authority over 20 to 40 years.

The EU threshold for works concessions (above EUR 5,538,000 as of 2024) triggers the full procedural requirements of Directive 2014/23/EU. Below that threshold, member state rules apply, which vary considerably across Europe.

Why works concessions matter for bidders

Works concessions are complex, high-value, and long-duration. They require bidders to bring together engineering, finance, operations, and legal expertise in a single bid. The concession award procedure under Directive 2014/23/EU grants contracting authorities significant flexibility in designing the process, which means every competition has its own procedural shape.

Bidders must model demand risk carefully because revenue projections over 20 or 30 years carry substantial uncertainty. Lenders financing the project will scrutinise the demand forecasts and the risk allocation between authority and concessionaire. Understanding the precise boundary of operating risk transfer in the draft contract is essential before committing bid costs.

Example

An Italian province awards a works concession for a 15-kilometre bypass road. The selected concessionaire designs, finances, and builds the road over three years, then operates and maintains it for 28 years, collecting tolls from drivers. If traffic is lower than forecast, the concessionaire absorbs the loss. The province contributes no capital and makes no payments during operations unless a minimum traffic guarantee was negotiated, in which case the risk allocation must be assessed to confirm the arrangement still qualifies as a concession.

Frequently Asked Questions

Is a design-build-operate contract the same as a works concession?

Not automatically. A design-build-operate (DBO) contract where the authority pays a fixed fee for output regardless of demand is a standard public contract under Directive 2014/24/EU. A works concession requires the operating risk to be genuinely transferred. If the DBO includes user-revenue collection and demand risk sits with the operator, it may qualify as a works concession and should be procured accordingly.

What procurement procedure applies to a works concession?

Directive 2014/23/EU gives contracting authorities wide discretion in designing their procedure. There is no equivalent of the open or restricted procedures mandatory under 2014/24/EU. The authority must ensure transparency, equal treatment, and non-discrimination, and must set minimum time limits, but beyond those requirements the procedure is flexible. In the UK, the Concession Contracts Regulations 2016 (as retained law) follow the same logic.

Can a works concession be modified after award?

Yes, but within the limits set by Article 43 of Directive 2014/23/EU. Modifications below 10 percent of the original concession value are generally permissible without a new procedure, as are modifications resulting from unforeseen circumstances that were not foreseeable by a diligent contracting authority. The concession modification rules set out the boundaries in detail. Modifications that fundamentally alter the nature of the concession require a new award process.