Cabinet Office unveils new concession and utilities contracts rules

United Kingdom
The UK Cabinet Office is currently consulting on sets of draft regulations transposing the new EU procurement directives applying to concessions contracts and utilities (Directives 2014/23/EU and 2014/25/EU respectively). The key issues surrounding both directives have largely already been consulted on given that many of the provisions of these directives mirror those of the Public Sector Directive (Directive 2014/24/EU), which has already been transposed in England, Wales and NI (see here). Nevertheless, the consultations highlight a number of interesting points that will be of interest to both public bodies, private sector utilities and to contractors.

Concession Contracts Regulations 2016 (CCR 2016)

The CCR 2016 will apply a specific set of procedural and substantive rules to the award of ‘works concession contracts’ and ‘services concession contracts’ by both public authorities and utilities. The typical example of such contracts is the provision of infrastructure (a bridge, tunnel or toll road) where the contractor is to recover its capital costs through charging the public for its use. Other examples though can include the provision and/or operation of sports or leisure facilities, the provision of bus shelters, bailiff services contracts, catering contracts and certain waste collection services (e.g. scrap metal). Certain concession contracts are however specifically excluded, such as public passenger transport (rail franchises) and air transport services.

These new rules will apply where the estimated value of such contracts exceeds €5,186,000. Moreover, where such contracts are to last for more than 5 years, the duration must not exceed the time the concessionaire could reasonably be expected to take to recoup its investments made in operating the works or services together with a reasonable return on capital. As well as setting out obligations governing selection and award criteria the CCR 2016 will apply the full set of remedies currently available under the rules governing the award of public and utilities contracts. These include standstill obligations, interim automatic suspension orders pre-award and the ineffectiveness remedy post-award.

Whilst there is very little of substance to consult on in terms of the transposition of these rules, the consultation does include some interesting statistics. For example, that over the last three years the UK has advertised 78 concession contracts (26 per year) with an annual value of services concession of £7.8 million. Also, the estimate that there will be no more than one successful challenge to a service concession every five years, the total costs of that challenge amounting to 15% of the concession value (including legal fees, the costs of a re-procurement process, delays and damages for loss of profit).

Utilities Contract Regulations 2016 (UCR 2016)

The UCR 2016 will replace the Utilities Contracts Regulations 2006 (UCR 2006). The consultation only really includes one substantive question: whether utilities wish to maintain the option in the UCR 2006 to apply for an exemption directly rather than requests having to be made to the European Commission by Member State governments?

More interesting perhaps is the point highlighted in the consultation that there will no longer be an indicative list of the utilities subject to the rules, and that there will be much greater scope for private sector utilities to consider themselves exempt from the UCR 2016 on the ground of not operating on the basis of ‘special or exclusive rights’. The consultation explains that ‘utilities will need to consider whether they are covered by the definition of special or exclusive rights or not’.

The deadline for responses to the consultations is 18 September 2015. Both draft regulations and the accompanying consultation documents can be found here.

Whilst the two sets of draft regulations are said principally to apply to England, Wales and NI they each include a drafting note that they are intended to extend to and apply in Scotland ‘in relation to implementation which is for the UK Government’, with the drafting to be adjusted to give effect to that intention.