Demand risk decides it: reading the Procurement Act guidance on concession contracts
Concessions have always been the slightly odd corner of public procurement: contracts where the public body pays little or nothing, the supplier earns from the public, and everyone argues about which rules apply. The Procurement Act 2023 guidance on concession contracts is short, but it settles the two arguments that matter most. First, what makes a contract a concession is who carries demand risk. Second, concessions now live inside the same regime as everything else, with a limited and closed list of flexibilities. Both points change how planning conversations should run.
One regime, not a side door
Under the previous legislation, concession contracts had their own dedicated rulebook, and plenty of commercial strategies were built around getting into it or staying out of it. The new guidance takes a different line: the general rule is that the Act applies to concessions in the same way as it applies to any other procurement. The exceptions and extra flexibilities that exist are only the ones the guidance itself sets out.
That closed list matters. It means a concession is no longer a route into a materially lighter regime, and it means an authority cannot infer flexibility by analogy. If the guidance does not grant a freedom, the standard rules on competitive tendering procedures, conditions of participation and award criteria apply exactly as they would on any other contract. Teams that treat concessions as a separate world are working from an out of date map.
Who pays for an empty leisure centre
The definition in the guidance is refreshingly concrete. In a concession, the supplier takes at least part of its remuneration from users of the works or services, and it is exposed to a potential loss on its investment if demand fluctuates. The guidance offers two worked pictures: a toll road built and operated by a supplier who collects from drivers, and a leisure centre operated by a supplier who collects from customers.
The test is a useful discipline in both directions. Some teams label an arrangement a concession because it feels like outsourcing with income attached, even though the authority underwrites the revenue and the supplier carries no real demand risk. Others miss that a contract with genuine user charging has quietly become a concession, with everything that follows for valuation and route selection. The honest question is simple: if the users stop coming, who loses money? If the answer is the supplier, you are probably looking at a concession.
What a competent team does with this
Classify early, in writing, at the point the guidance targets: strategy, pipeline and market planning. The classification drives which of the companion documents you need next, and the guidance names four: mixed procurement, valuation of contracts, exempted contracts and thresholds. Valuation deserves particular respect on concessions, because the money moving through the contract is not the money the authority pays out.
Then read the whole Act, because the guidance says so in terms. Concession awards still run through the same competitive procedures, the same participation conditions and the same award criteria as everything else. The flexibilities are real but narrow, and the burden is on the team to point to where the guidance grants them. A recorded classification, a defensible valuation and a clean procedural trail will carry an authority through challenge far better than a creative reading of a closed list.
The takeaways
- A concession exists where the supplier earns from users and carries real demand risk.
- The Act applies to concessions like any other procurement; the flexibilities are a closed list.
- Classify and record the decision at strategy and pipeline stage, not at award.
- Valuation, mixed procurement, exemptions and thresholds are the four companion checks that matter.
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