Concessions CSES 260210
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Ref. Ares(2015)1072698 - 11/03/2015 Framework Contract for projects relating to Evaluation and Impact Assessment activities of Directorate General for Internal Market and Services Analysis of Sectors concerned by Service Concessions Final Report December 2009 P O Box 159 Sevenoaks Kent TN14 5RJ United Kingdom Tel/fax: +44 (1959) 525122 Web site: www.cses.co.uk Partners: B Bright; MA Coyne; MIM Gardiner; A J Malan; M Whittle, J Smit Registered number OC309369 Registered Office: Westering House, 17 Coombe Road, Otford TN14 5RJ, UK. Analysis of sectors concerned by service concessions Contents SECTION PAGE Executive Summary 1. Introduction and Background 1 2. The Nature of Service Concessions 10 3. The Identification of Service Concession Sectors 20 4. Baseline Description 36 5. Potential Impacts of Legislation 88 6. Sectoral Impacts of Potential Legislation 114 7. Conclusions and Recommendations 166 Annexes – Page A. Definition of service concessions 176 B. Services set out in Annex II of the Classic Directive 177 C. Country summary descriptions 179 Analysis of sectors concerned by service concessions Executive Summary CSES has conducted an analysis of sectors concerned by service concessions over the period from mid-August to early December 2009. The aims of this analysis were : • the determine the sector spread of service concessions in eight Members States (the Czech Republic, Germany, Greece, Spain, France, Italy, Portugal, the United Kingdom); • to identify any sectoral issues to be taken into consideration in an assessment of the potential impact of certain legislative provisions that would bring service concessions into the public procurement framework. Service concessions are defined by the ‘Classic’ procurement Directive (2004/18/EC) as follows : ‘Service concession’ is a contract of the same type as a public service contract except for the fact that the consideration for the provision of services consists either solely in the right to exploit the service or in this right together with payment. The counterpart of the right to exploit the service is that the concessionaire is expected to take on a significant degree of risk in operating the service. Service concessions are an important vehicle for promoting innovation in public services and in the ways that they are delivered. The main conclusions on the extent of service concessions are : • currently there are major variations between Member States in the extent of the use of concession arrangements; • the use of service concessions is growing, if only to a limited extent, in all of the Member States considered, even in those where concession arrangements have not been used widely before; • there appear to be a wide range of sectors in which service concessions are arising or could potentially arise (listed in chapter 3); • Some companies (Suez, Veolia, SCC) have concession contracts across different sectors and operate in a number of countries; • the choice of the service concession form is less to do with sectoral considerations than with the relative advantages of this type of public private partnership, particularly as a means of encouraging innovation in services and their delivery ; 1 Analysis of sectors concerned by service concessions Executive Summary • there are reasons to believe that service concessions could become more widespread, as a result of a ‘natural tendency’ for works concessions to become service concessions, and as the demand for quality and choice in public services becomes more important; • there is, however, significant difficulty in distinguishing between works concessions and service concessions in practice. In the examination of the potential impact of legislative provisions covering service concessions, it was apparent that there are very significant differences across the Member States in the scope of national legislative provisions and in the traditions and administrative culture associated with their use. This gives rise to strikingly different perceptions of the potential impact of any legislation. The differences of impact that could potentially arise in different sectors appear to be one of degree rather than being of a fundamentally different nature as between one sector and another. The following points summarise the situation as we perceive it : The situation for concessions in general : • All those we spoke to subscribe to the core principles of transparency, equal treatment, proportionality and mutual recognition in the relations between public authorities and the private sector. • It was generally agreed that one of the main potential impacts of any legislation relates to whether such legislation would promote or hinder the development of concession arrangements in the future. • There is clearly a significant degree of uncertainty about the nature and status of service concessions in some Member States, though there is less uncertainty where concessions have been well-established for some time. • The legal definition of ‘service concessions’ in the existing EU legislation is often perceived to be difficult to translate into operational terms. • The objectives of procurement policy : ensuring transparency through publication, ensuring the use of fair and recognised procedures, having a level playing field through provisions on economic and financial standing etc, are all understood and generally supported; • Case law, and especially the Telaustria ruling, has led to a situation where service concessions have increasingly been advertised ‘voluntarily’ in national official journals and in the OJEU; generally these notices and the associated procedures 2 Analysis of sectors concerned by service concessions Executive Summary make use of the full range of procurement procedures, though they tend to involve more negotiated and restricted procedures than public procurement in general; in effect, many (service) concession procedures already use something close to normal public market procedures • However, it is generally agreed that concessions have areas that make them different, including the sensitivity of the public service objectives in many concession arrangements, the relationship of trust between a public authority and a concessionaire, the complexity and length of concession arrangements and the need for discussion and negotiation; • Central to these differences is the responsibility for the effects of unforeseen circumstances. With public markets, these generally remain with the contracting authority; concessionaires, however, often have to shoulder the responsibility. Consequently there is a greater degree of risk associated with a concession. • The major difference of opinion among those interviewed relates to the extent to which using the usual public procurement framework could accommodate the different features of service concessions. • Some regard the difference between public contracts and concessions as being a matter of degree. Others see a difference in the nature of the two conceptions. • Those that tend to see concessions as being significantly different from public contracts tend to see considerable disruption taking place, if concessions are brought within the public procurement framework, principally because greater risk will be perceived. • The provisions relating to the tendering procedures to be adopted and the award criteria are seen as particularly difficult, but also the failure to have provisions allowing some re-negotiation of contractual terms is seen as significant. • On the other side, it is argued that it is important not to have artificial incentives to use one form of public service provision over another and that a similar regime for public contracts and concessions would ensure this. • It is also felt that the current situation allows abuses to arise and that these need to be tackled. In particular, it is necessary to close the ‘loophole’ whereby public contracts can be deemed to fall outside procurement rules if they are designated as ‘service concessions’ • In at least one Member State, bringing service concessions into the public procurement framework could well have a greater impact on the number of public contracts than on the number of service concessions. 3 Analysis of sectors concerned by service concessions Executive Summary Sectoral Impacts : Generally we did not find any fundamental differences between sectors. Rather we found that similar issues apply to differing degrees. Variations appear to be determined by : o The nature of the public service interest o The public profile of the sector o The complexity of the contract o The size of a typical contract and the time period over which they operate o The influence of legacy systems o The degree of innovation expected o The extent to which competition issues arise o The extent to which existing legislation applies. The main differences in the potential impact of any legislation arise from the contrast with the current situation. If service concessions are already established and already follow something close to standard procurement procedures, the impact will not be major, but if concessions are introduced into areas where they had not previously existed or in areas where provision is currently made through public contracts or if the procedures are tightened up in areas where the granting of concessions currently does not follow standard procedures, then the impacts will be greater and will vary considerably, sometimes introducing greater competition and in other cases promoting greater innovation. The detail of the various situations