Concession (contract)
Encyclopedia
A concession is a business operated under a contract
or license
associated with a degree of exclusivity in business within a certain geographical area. For example, sports arenas or public parks may have concession stand
s. Many department stores contain numerous concessions operated by other retailers. Similarly, public services
such as water supply
may be operated as concessions. There are now over 3000 garden centre concessions
. These concessions are operated from fixed internal areas and are fitted out by the operating concession company. Concessions are either unmanned or manned formats. Short term concessions are operated on garden centres and shopping malls from promotional space for short periods of between a single day to six months
The owner of the concession — the concessionaire — pays either a fixed sum or a percentage of revenue to the entity with the ability to assign exclusive rights for an area or facility. A concession may involve the transfer to the concessionaire of the right to use some existing infrastructure
required to carry out a business (such as a water supply system in a city); in some cases, such as mining
, it may involve merely the transfer of exclusive or non-exclusive easement
s.
In the case of a public service concession, a private company enters into an agreement with the government to have the exclusive right to operate, maintain and carry out investment
in a public utility (such as a water supply system) for a given number of years. Other forms of contracts between public and private entities, namely lease contract and management contract
(in the water sector often called by the French term affermage), are closely related but differ from a concession in the rights of the operator and its remuneration. A lease gives a company the right to operate and maintain a public utility, but investment remains the responsibility of the public. Under a management contract the operator will collect the revenue only on behalf of the government and will in turn be paid an agreed fee.
Some countries, such as Chile
, Canada
and the United Kingdom
, have built toll highways on a concession basis (e.g. M6 Toll
in the UK). Concessions have also been used in London
in construction of extensions to the Docklands Light Railway
system.
Public-private partnerships (PPPs) and private finance initiative
s (PFIs) may be considered similar to concessions.
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
or license
License
The verb license or grant licence means to give permission. The noun license or licence refers to that permission as well as to the document recording that permission.A license may be granted by a party to another party as an element of an agreement...
associated with a degree of exclusivity in business within a certain geographical area. For example, sports arenas or public parks may have concession stand
Concession stand
A concession stand , snack kiosk or snack bar is the term used to refer to a place where patrons can purchase snacks or food at a cinema, fair, stadium, or other entertainment venue. Some events or venues contract out the right to sell food to third parties...
s. Many department stores contain numerous concessions operated by other retailers. Similarly, public services
Public services
Public services is a term usually used to mean services provided by government to its citizens, either directly or by financing private provision of services. The term is associated with a social consensus that certain services should be available to all, regardless of income...
such as water supply
Water supply
Water supply is the provision of water by public utilities, commercial organisations, community endeavours or by individuals, usually via a system of pumps and pipes...
may be operated as concessions. There are now over 3000 garden centre concessions
Garden centre
A garden centre is a retail firm that sells plants and products related to gardens as its primary business. It is open to the public, with facilities to care for and display plants.- UK :...
. These concessions are operated from fixed internal areas and are fitted out by the operating concession company. Concessions are either unmanned or manned formats. Short term concessions are operated on garden centres and shopping malls from promotional space for short periods of between a single day to six months
The owner of the concession — the concessionaire — pays either a fixed sum or a percentage of revenue to the entity with the ability to assign exclusive rights for an area or facility. A concession may involve the transfer to the concessionaire of the right to use some existing infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
required to carry out a business (such as a water supply system in a city); in some cases, such as mining
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...
, it may involve merely the transfer of exclusive or non-exclusive easement
Easement
An easement is a certain right to use the real property of another without possessing it.Easements are helpful for providing pathways across two or more pieces of property or allowing an individual to fish in a privately owned pond...
s.
In the case of a public service concession, a private company enters into an agreement with the government to have the exclusive right to operate, maintain and carry out investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
in a public utility (such as a water supply system) for a given number of years. Other forms of contracts between public and private entities, namely lease contract and management contract
Management contract
A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions in return for a fee. Management contracts involve not just selling a method of doing things but involves...
(in the water sector often called by the French term affermage), are closely related but differ from a concession in the rights of the operator and its remuneration. A lease gives a company the right to operate and maintain a public utility, but investment remains the responsibility of the public. Under a management contract the operator will collect the revenue only on behalf of the government and will in turn be paid an agreed fee.
Some countries, such as Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, have built toll highways on a concession basis (e.g. M6 Toll
M6 Toll
The M6 Toll , connects M6 Junction 4 at the NEC to M6 Junction 11A at Wolverhampton with of six-lane motorway. The weekday cash cost is £5.30 for a car and £10.60 for a HGV...
in the UK). Concessions have also been used in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
in construction of extensions to the Docklands Light Railway
Docklands Light Railway
The Docklands Light Railway is an automated light metro or light rail system opened on 31 August 1987 to serve the redeveloped Docklands area of London...
system.
Public-private partnerships (PPPs) and private finance initiative
Private Finance Initiative
The private finance initiative is a way of creating "public–private partnerships" by funding public infrastructure projects with private capital...
s (PFIs) may be considered similar to concessions.