Concession contracts under the Procurement Act 2023: the official guidance, explained

The key facts

• Under a concession contract, the supplier receives at least part of its remuneration from the users of the works or services it provides.
• Suppliers carry demand risk: they are exposed to a potential loss on their investment due to demand fluctuations.
• The guidance identifies two types: works concessions, such as building and operating a toll road, and services concessions, such as operating a leisure centre.
• The general rule is that the Act applies to concessions in the same way as it applies to other procurement.
• Exceptions and additional flexibilities for concessions exist, but only those set out in the guidance apply.
• The legal framework for concession contracts is section 8 of the Procurement Act 2023.
• The guidance signposts mixed procurement, valuation of contracts, exempted contracts and thresholds as particularly relevant companion documents.
• The document sits in the Plan stage of the commercial pathway, covering strategy and plan, commercial pipeline, and market strategy and management.

What this guidance is and who it applies to

The guidance is one of the technical guidance documents published to support the Procurement Act 2023. It is aimed at procurement practitioners and commercial policy leads in contracting authorities, and it is intended to help with interpretation and understanding of the Act rather than to replace it. The guidance is explicit that it should be read in conjunction with the Act and its associated regulations, and it closes with a simple instruction: make sure you read the guidance documents in full.

Within the wider suite, the document sits in the Plan stage of the commercial pathway. It is flagged as relevant to strategy and planning, to building the commercial pipeline, and to market strategy and management. In other words, it speaks to the point where a contracting authority is still deciding what it is buying and how, before any notice is published.

What counts as a concession contract

The guidance defines the feature that sets concessions apart. Under a concession contract, the supplier receives at least part of its remuneration from the users of the works or services it is providing. Because income depends on how many people actually use the asset or service, suppliers are exposed to a potential loss on their investment due to demand fluctuations. That transfer of demand risk to the supplier is the heart of the concession model.

The guidance identifies two different types of concession contract. The first is a concession contract for the supply of works, for example the construction and operation of a toll road where the supplier receives income directly from users of the toll road. The second is a concession contract for the supply of services, for example a contract to operate a leisure centre where the supplier receives income directly from customers using the centre.

How the Act applies to concessions

The general rule stated in the guidance is that the Act applies to concessions in the same way as it applies to other procurement. There are exceptions to the general rule, and in some instances specific provisions provide additional flexibility for concessions, but the guidance is clear that the only exceptions and flexibilities are the ones it sets out. Teams should not assume a wider special regime exists.

That framing has a practical consequence which the guidance spells out: contracting authorities awarding concession contracts need to understand the whole of the Act. The same provisions that govern any other contract award, for example those relating to competitive tendering procedures, conditions of participation and award criteria, apply to concessions as well. The legal framework specific to concessions sits at section 8 of the Act.

The guidance also signposts four companion documents as being of particular relevance to concession contracts: mixed procurement, valuation of contracts, exempted contracts and thresholds. Between them, these cover the questions that tend to decide how a concession is treated in practice: what happens when a contract combines different elements, how the value of the arrangement should be estimated, whether anything takes it out of scope, and which threshold applies.

Practical application

The first practical step is classification, and the definition gives the test. If the supplier is paid entirely by the authority, the contract is not a concession. If part of the supplier's income comes from users, and the supplier genuinely stands to lose on its investment if demand falls away, the concession provisions are in play. That analysis belongs early in the process, at the strategy and pipeline stage where this guidance places itself, and the reasoning should be recorded at the time rather than reconstructed later.

From there, teams should work through the signposted companion guidance in order: mixed procurement where a deal combines works, services or supplies; valuation of contracts to estimate value on the correct basis; exempted contracts to confirm nothing removes the arrangement from scope; and thresholds to confirm which rules apply. Because the flexibilities for concessions are limited to those set out in the guidance, the safest working assumption is that the full regime applies unless the guidance says otherwise.

How eSourcing Data helps

eSourcing Data gives contracting authorities one place to run the decisions this guidance asks for. Classification calls, valuation assumptions and the reasoning behind them can be recorded against a project from the pipeline stage onwards, so the audit trail shows why a contract was treated as a concession and which flexibilities were relied on.

Because concessions follow the same core rules as other covered procurement, the platform's standard workflow carries them without a parallel process: publishing notices, running competitive tendering procedures, managing conditions of participation and evaluating tenders against published award criteria, with each step logged as it happens.

Reporting then lets commercial leads see concession projects alongside the rest of the pipeline, which supports exactly the strategy, pipeline and market management work the guidance attaches this document to.

What to do about it

1. 1Map the remuneration model for any contract where users pay for the works or service, and test it against the concession definition.
2. 2Record the classification decision and the demand risk analysis at the strategy and plan stage.
3. 3Read section 8 of the Act and the concessions guidance in full before fixing the procurement route.
4. 4Work through the companion guidance on mixed procurement, valuation of contracts, exempted contracts and thresholds.
5. 5Plan the procurement on the basis that competitive tendering procedures, conditions of participation and award criteria apply as normal.
6. 6Add planned concessions to the commercial pipeline early so market engagement can start in good time.