21 useful facts about concessions

Author: Lyubomir Alamanov

I'm using the tension surrounding Bansko to quickly recall some basic principles of concession procedures. Here they are, just for information:

1. The concession is a good tool for partnership between state and municipal administrations with private companies.

2. A concession is the granting of a state or municipal resource or property to a company called the concessionaire. The concessionaire must manage the resources granted to it well and pays a concession fee for this.

3. Thus, the authorities are freed from non-core activities, such as managing a resort or a market for extracted natural resources, for example.

4. It is beneficial for the state and municipal budgets - revenues from the concessionaire's activities come in. Otherwise, very often the authorities themselves do nothing and the activity does not develop. For example, the state can hardly extract molybdenum and seek its realization on the international market. There are companies that do this well.

5. The companies that operate the concession have an interest in doing well in order to make more money. Otherwise, they will pay the concession fee in vain. The fee itself must simultaneously protect the public interest and not be too high so that the companies do not refuse.

6. It is good to conduct a concession procedure after analyzing the specific situation and development needs. For example, taxis in New York are municipal. This is a strategic decision of their municipality. The choice should be made on a competitive basis, only competition will preserve the interests of all parties in the procedure.

7. It is good to choose experienced companies as operators. Because they have done it in other places, they know how it is done, how it can be developed. And they will not be trained on our backs. For example, it is good for a company that has established international markets and proven technology to extract a precious metal in order to sell it quickly and at good prices. And to pay the concession fees, of course.

8. It is good for the companies that are selected to have a vision for development. It is one thing to simply fulfill the terms of the contract, it is another to constantly upgrade and develop not only the specific project, but the entire sector.

9. It is good that the companies that are chosen are Corporate Responsible Citizens. After all, they are part of our society. A well-known international company not only extracts mineral water near Sofia, but also invests enormously in CSR projects, development of municipalities, work with children, environmental causes and many others.

10. It is good that the companies that are chosen are well-known, large and with an international reputation. Not only because of the experience. But also because of the responsibility they will bear. An offshore company in the name of an unemployed foreigner cannot be condemned in case of need. Large companies, especially those listed on stock exchanges, bear enormous responsibility and operate according to strong internal rules and ethical norms.

11. It is good for the companies that are selected to communicate continuously with the mass audience. Not only with reports, but also with continuous communication about their activities, their plans, development, the sector, anything else that might be interesting to the mass audience.

12. Sometimes concessionaires are in a condition of "natural monopoly". There is nothing wrong with that. It is imposed by purely natural laws. For example, in one frequency spectrum there can be only one telecom operator. Or only one television station can broadcast. Otherwise, the signals will get mixed up.

13. Sometimes it is the other way around. Due to the size and complexity of the concession, several operators are allowed. For example, Sofia is divided into several districts and different companies have a concession for garbage collection. Or for public transport lines.

14. In both of the above cases, the administration has imposed more legal restrictions to ensure that concessionaires do not abuse their rights. For example, they are required to announce public procurement for every delivery, every subcontractor and almost every expense. Unlike standard companies, which do not have similar restrictions.

15. Sometimes a concessionaire can receive a concession for more than one site, if there is economic and social logic. And if it undertakes firm guarantees that it will maintain the equality of the sites and will not develop one at the expense of the other. When the concession for the airports of Varna and Burgas was being discussed, there were some concerns whether the future concessionaire would not develop only one at the expense of the other. Maintaining equality between the two was enshrined in the application conditions and all international operators complied with this.

16. If a concessionaire takes two or more sites, but purposefully only develops one of them, this may mean that he took the others only to block their development. And he calculated their concession fee in the profit of the only site he is developing.

17. The role of the administration is to control the implementation of the concession contract. And to prevent situations like the above example. Because this example shows damage to the public interest. In such cases, the administration must step into its role and sanction the concessionaires.

18. The role of society is to control the administration to ensure that it does not harm the public interest.

19. Concessionaires cannot and should not operate without the support of society. Especially if they are in the utility sector. There will be natural resistance, which no one needs.

20. The administration should conduct real on-site inspections, not just from offices based on documents.

21. Large companies, with a reputation and a sense of responsibility, with a vision and capacity to develop not only the business, but also the social life of the community in which it operates. This is the ideal option for an operator to relieve administrations of their non-core functions, make a profit and contribute to the overall development of society.

In conclusion, I will repeat that the principle of concession is a very good tool. Problematic situations arise if any of the three parties involved – society, administration or operator – does not want to comply with the rules and laws.

The post was taken from the author's Facebook profile.

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