What exactly is a concession contract?

At a glance

On the 6^th June 2023, the High Court considered the case of Dukes Bailiffs Limited v Breckland Council [2023]. This case is one of only a small number of cases regarding the definition and scope of ‘concession contracts’ under the Concession Contracts Regulations 2016 (‘CCR 2016’). The case outlines principles which help to differentiate between a concession contract and a public services contract. In summary, the High Court refused the claimant’s claims on the basis that the contract in question did not fall within the remit of Public Contracts Regulations 2015 (‘PCR 2015’) or CCR 2016, and the decision to award was not subject to a judicial review (‘JR’) claim on the grounds that it was a commercial decision in a price regulated industry.

Facts

Dukes Bailiffs Limited (the ‘Claimant’) was the incumbent contractor for Breckland Council’s (the ‘Authority’) debt enforcement services (the ‘Contract’). The Contract was provided on the basis of a bespoke regulatory and fixed tariff regime. In December 2022, Anglia Revenues Partnership, on behalf of the Authority, re-tendered the Contract through the Dynamic Purchasing System (DPS) 953. The Claimant tendered for the Contract, but in January 2023 were told they had lost out by a narrow margin of 2.5% on their scoring.

The Claims

Consequently, the Claimant alleged that it should have been awarded the Contract and progressed two separate claims as detailed below.

1. The ‘TCC Claim’:

A. The first claim was a CPR 7 claim brought in the Technology and Construction Court. The Claimant contended that there was an apparent bias in the selection process and further claimed the Authority had provided inadequate reasons and incorrect scoring.

B. The Authority, in its defence to the TCC Claim, contended that the PCR 2015 did not apply as the Contract was a concession contract under the CCR 2016 and, in any event, the TCC Claim was not actionable under CCR 2016, as the Contract was below the CCR 2016 minimum threshold (currently £5.3m).

2. The ‘JR Claim’:

A. Here, the Claimant issued a CPR 54 JR claim in the Administrative Court, on grounds of irrationality, procedural unfairness and failure to provide reasons.

B. In its defence to the JR Claim, the Authority highlighted that the Contract was not open to JR as the claims concerned commercial decisions or conduct.

Key principles

Concession Contract distinction

The case examined the differences between the CCR 2016 and PCR 2015, an important distinction because of the strong statutory remedies available under the PCR 2015.

Helpfully, the outcomes of previous case law such as JBW and Newlyn, were re-confirmed, namely that the main distinction between a public services contract and a services concession contract is how they are remunerated; a public services contract is remunerated directly by an authority whereas a concession contract is remunerated by the third parties who are utilising the services being provided.

The case also reinforced the principle that a concession involves the contractor’s right to exploit payment for its own benefit and therefore places risk on the contractor who is providing the service. It was, however, emphasised that the rules of public law often limit the degree of risk faced by the contractor, but as long as there is a transfer of all, or significant share of risk, this indicates that a concession contract has been established.

In addition, the implications of the analysis in this case show that legislative price regulations, authority financial support or underwriting from an authority will rarely take a contract that involves payment from third parties, outside the scope of a ‘concession contract’.

“Public Services Contract” – Application of Regulation 2 of the PCR 2015

Case law was used to successfully argue that the Contract was not a “public services contract” under Regulation 2 PCR 2015.

Apparent bias

As part of the TCC Claim, the Claimant argued that the scoring was unfair due to an apparent bias caused by the close relationship between a current employee of the Authority (‘Ms H’) and former employee of the Claimant (‘Mr J’) who left on bad circumstances. Ms H was one of the four bid evaluators and she had given the Claimant the lowest score in some sections compared to other evaluators, which the Claimant argued was due to the bias she had from her personal relationship with Mr J.

The judge (HHJ Tindal) held that the relationship would not lead a fair-minded and informed observer to believe that there was a real possibility that the evaluator was biased. This was especially emphasised by the fact that Ms H gave the same scoring as other evaluators in other sections, and the judge found that the relationship was ‘relatively anodyne, consistent with a professional friendship’. The judge also concluded that there would be no difference in the outcome for the Claimant if a different evaluator had been used.

Key takeaways / Looking to the future

This case provides useful confirmation of the distinction between a concession contract and a standard public services contract, particularly around the importance of transfer of risk and third-party remuneration in making this determination.

In addition, the case provides a reminder of the principles to be applied when considering apparent bias in tender evaluation.

Finally, contracting authorities are reminded that the PCR 2015 is not the only basis for procurement challenges – contracting decisions are also amenable to judicial review.

The common law contract claim in this case, in relation to lost opportunity, will be proceeding to trial. If it is successful, the Claimant’s remedy is limited to damages as the failed claim under the PCR 2015 means that it will be unable to reverse the Contract awarded.