Service Concession in Public Procurement
Service concession in procurement law: contract for the provision of services in which the concessionaire bears the operating risk. Threshold EUR 5,538,000.
Definition: A service concession is a contract for pecuniary interest by which one or more contracting authorities entrust the provision and management of services to one or more concessionaires, the consideration consisting either solely in the right to exploit the services, or in that right together with payment, with the concessionaire bearing the operating risk associated with the exploitation of those services (Article 5(1)(b) of Directive 2014/23/EU).
Last updated: January 2026 · Legal basis: Article 5(1)(b) of Directive 2014/23/EU, §§ 175 et seq. BVergG 2018, KonzVgV
What is a service concession?
The service concession is a special form of public procurement contract under which an undertaking does not receive a fixed payment but the right to exploit a service vis-à-vis third parties – bearing the operating risk itself. This fundamentally distinguishes the service concession from the classic service contract, where the contracting authority pays an agreed price and the economic risk remains with the authority.
Typical examples of service concessions are awarding the operation of car parks, canteens, civic halls, swimming pools or public transport services to private undertakings. The concessionaire finances itself through revenue from users, not primarily through payments from the public sector.
The concept of the service concession was for a long time legally uncertain and only comprehensively harmonised by Directive 2014/23/EU. Before that, service concessions fell into a grey area between procurement-exempt contracts and classic service contracts – with considerable legal uncertainty for contracting authorities and economic operators.
Purpose and significance
The separate regulation of service concessions serves the goal of also realising the principles of competition, transparency and non-discrimination in this area, without ignoring the particular economic characteristics of the concession model. Before Directive 2014/23/EU was adopted, contracting authorities had considerable discretion in awarding service concessions, which led to opacity and possible favouritism of individual suppliers.
Directive 2014/23/EU creates a uniform EU-wide minimum standard for the award of concessions above the threshold. At the same time, it gives concession grantors more flexibility than in classic award procedures, because the economic complexity of concessions makes full standardisation difficult. Service concessions are also a key instrument of public-private cooperation: they allow the public sector to leverage private investment and entrepreneurial know-how for services of general interest.
Operating risk as the distinguishing feature
Operating risk is the decisive feature distinguishing a service concession from a service contract – without a genuine transfer of risk, the CJEU's case law holds that there is no concession.
Under Article 5(1) of Directive 2014/23/EU, operating risk covers demand risk, supply risk or both. It exists where the concessionaire, under normal operating conditions, is not assured of recouping the investments made and the costs incurred in operating the services.
Demand risk
Demand risk relates to uncertainty about the actual uptake of the service. Where a car park is operated under a concession, the undertaking bears the risk that fewer vehicles use it than calculated. If, however, the contracting authority pays a fixed fee regardless of utilisation, there is no operating risk and therefore no concession.
Supply risk
Supply risk relates to the cost side – in particular the risk that the operating resources needed to provide the service are not available in the planned quality or quantity, or that unforeseen cost increases occur.
Substantial transfer of risk
The transfer of risk must be substantial. The concessionaire does not need to bear all of the risk – but must take on a substantial part of the demand or supply risk. Minimal or purely theoretical risk transfers are not enough. The CJEU has stressed this in its settled case law (e.g. Cases C-382/05, C-458/03).
Threshold and scope
Directive 2014/23/EU applies above a threshold of EUR 5,538,000 (from 1 January 2024, net), which reflects the estimated total value of the concession over its entire term.
The estimate must include all revenue of the concessionaire, including payments and subsidies from the contracting authority as well as income from third parties. Deliberately splitting concessions to fall below the threshold is prohibited (anti-circumvention). The thresholds are reviewed by the European Commission every two years and adjusted. For concessions below the threshold, primary-law principles of the TFEU (transparency, non-discrimination) apply where the markets concerned have a cross-border interest.
Distinction from service contracts
The distinction between service concessions and service contracts is often complex in practice and can have considerable legal consequences, since different procurement regimes apply.
| Feature | Service concession | Service contract |
|---|---|---|
| Remuneration | Right to exploit (possibly + payment) | Fixed fee from the contracting authority |
| Operating risk | Borne by the concessionaire | Borne by the contracting authority |
| Legal basis (EU) | Directive 2014/23/EU | Directive 2014/24/EU |
| Threshold | EUR 5,538,000 | EUR 221,000 (central authorities: EUR 143,000) |
| Procedural flexibility | Greater | More heavily formalised |
| Typical duration | Long-term (often > 5 years) | Variable |
Legal basis
At EU level, the service concession is governed by Directive 2014/23/EU on the award of concessions, which entered into force on 18 April 2016 and for the first time created a uniform European framework for concessions.
Key provisions:
- Article 5(1)(b) of Directive 2014/23/EU – Definition of the service concession
- Article 8 of Directive 2014/23/EU – Threshold
- Article 18 of Directive 2014/23/EU – Duration of the concession
- Articles 30 et seq. of Directive 2014/23/EU – Procedural requirements
- Recital 18 of Directive 2014/23/EU – Detailed definition of operating risk
National implementation
Austria (BVergG 2018)
In Austria, the rules on service concessions were implemented as part of the Federal Procurement Act 2018 (BVergG 2018) in a separate section (§§ 175 et seq.) that reflects the specifics of concession awards as against classic contract awards. The BVergG 2018 adopts the EU-law definition of operating risk and sets the threshold in line with the Directive. For concessions below the threshold, the general principles of procurement law apply. Procurement remedies in Austria are provided by the Federal Administrative Court (BVwG) and the regional administrative courts. Austrian procurement practice has clarified the distinction in several BVwG decisions. The question of when municipal services (services of general interest) qualify as a concession or as an in-house award is of particular importance in Austria.
Germany (GWB / KonzVgV)
In Germany, Directive 2014/23/EU was implemented by §§ 148 et seq. GWB and the Concession Award Ordinance (KonzVgV), which has been in force since 18 April 2016 and sets out the procedural requirements for concessions above the threshold. § 152 GWB contains the statutory definition; § 153 GWB sets the threshold. The KonzVgV regulates in particular the obligation to publish a notice, minimum time limits (30-day tender period), selection criteria and exclusion rules. Procurement remedies for concessions above the threshold are provided by the federal and state procurement chambers and the procurement panels of the higher regional courts. Below the threshold there is no formalised procurement review; primary-law EU principles and budgetary law apply.
Related terms
FAQ
How does a service concession differ from an administrative authorisation? A service concession is a contract between a contracting authority and a concessionaire, based on an active decision of the authority and containing mutual obligations. Authorisations and permits, by contrast, are unilateral acts of public authority granting an undertaking the right to pursue an activity without creating a contractual relationship. Procurement law applies only to the former.
Must a formal award procedure be run for a service concession? Above the threshold of EUR 5,538,000, yes. Directive 2014/23/EU requires publication of a notice in the Supplement to the Official Journal of the EU (TED) and observance of minimum procedural standards. The concession grantor, however, has more freedom in designing the procedure than in classic procurement – for example in setting award criteria.
Can a service concession run indefinitely? No. Article 18 of Directive 2014/23/EU limits the duration to the period necessary for the concessionaire to recoup its investments and earn a reasonable return. For concessions with a duration of more than five years, the total duration may not exceed what is reasonably necessary for the recovery of the investments together with a return on the capital invested.
What happens if a contracting authority wrongly classifies a service contract as a concession? Incorrect classification can render the contract void where the stricter rules of Directive 2014/24/EU have been circumvented. Review bodies and courts assess the substantive classification independently of the label chosen. In Austria the BVwG is competent for review; in Germany the procurement chambers.
Do service concessions also apply to utilities (sector contracting entities)? Yes. Directive 2014/23/EU also applies in principle to sector contracting entities (utilities), where they act within the scope of their sector activity. Article 7 of Directive 2014/23/EU contains special rules. The threshold for sector contracting entities is likewise EUR 5,538,000.
Last updated: January 2026 All information provided without warranty. For legally binding advice please contact a law firm specialising in procurement law.
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