Concession agreement

A concession agreement is a contract in which an owner, usually a public body, grants a private operator the right to run a facility or deliver a service, and the operator earns its return from that operation. The operator is the concessionaire. It pays the grantor a fee or a share of revenue and carries the commercial risk. In EU law, a concession is defined by exactly that: the operator gets the right to exploit the works or services and takes on an operating risk of not recouping its investment and costs [1].

"Concession contract" and "concession agreement" mean the same instrument. In the US, the name on the paper does not decide the matter. Federal airport rules say a business is a concession whether its paper is called a lease, sublease, permit, or contract [2]. What decides it is what the grant covers and who bears the risk.

That is the difference from the two documents it gets confused with. A lease gives you space. A vendor contract buys you a service for a price you pay. A concession gives you the right to operate a business or service, and you earn your revenue from the public or customers, then pay the grantor for the privilege. The rest of this guide covers what the agreement is for, who signs it, which terms matter, which dates to track, where it goes wrong, and how to manage it after signing.

Purpose and common uses of concession agreement

A concession agreement lets an owner put an asset or a service into private hands without selling it. The owner keeps the asset. The concessionaire invests, operates, and takes the revenue risk. The owner gets the service delivered, a fee, and often a rebuilt or improved asset at the end.

Common uses:

• Infrastructure. Roads, ports, water, and similar assets run by a private operator under a public grant. This is the classic public-private partnership (PPP) shape, and EU rules treat it as works or services concessions [1].
• Public lands. The National Park Service (NPS) uses concession contracts to authorize private operators to provide accommodations, facilities, and services to visitors in National Park System units [3].
• Airports. Federal rules cover for-profit businesses serving the traveling public on an airport, such as food, retail, and rental cars, under whatever agreement type the airport uses [2].
• Venues and property. Private and municipal owners use the same structure for food service, vending, and similar operations at venues. These usually follow local law and the owner's own template, so read the actual document.

The NPS also separates concession contracts from commercial use authorizations and leases. They are different instruments with different rules [4]. A permit or a lease is not a concession just because it sits nearby.

Parties involved in concession agreement

Two sides sign.

The grantor (also called the concession authority or owner) holds the asset or the right to offer the service. It sets the minimum requirements, selects the operator, collects the fee, and monitors performance. In the NPS system, the grantor is the Director acting for the agency [5].

The concessionaire operates. It raises the money, builds or maintains what the agreement requires, runs the business, and pays the fee. In larger infrastructure deals the concessionaire is often a special purpose company with lenders behind it. Lenders, insurers, subcontractors, and sub-concessionaires are usually not parties, but the agreement often controls how they can step in or be replaced.

Key terms and clauses in concession agreement

Every concession is different. This section describes what each clause is trying to do. It is not legal advice, and a deal of any size deserves review by qualified counsel.

• Grant and scope. What the concessionaire may do, where, and what is excluded. NPS prospectuses, for example, set out the minimum visitor services the concessionaire is authorized to provide [5].
• Term. Under Title 54 of the US Code, NPS concession contracts are generally awarded for 10 years or less, and up to 20 years where the terms, including required capital improvements, warrant it [3]. Under the EU directive, a concession longer than five years should be limited to the period in which the operator can reasonably recoup its investment with a return [1].
• Fees and revenue. NPS contracts must provide for a franchise fee or other payment to the federal government. The amount is set in the contract and may be modified only to reflect extraordinary unanticipated changes [3].
• Investment and capital works. Minimum capital investment, maintenance duties, and who owns improvements. NPS contracts can give the concessionaire a leasehold surrender interest, a right to compensation for capital improvements that survives expiry or termination [3].
• Performance standards. Service levels, hours, quality, and protection of the asset. NPS prospectuses also set minimum measures to protect and conserve park resources [5].
• Risk, insurance, and indemnity. Who carries operating, demand, and damage risk, and what cover is required.
• Change and modification. How terms can change mid-term. The EU directive has a dedicated rule on when a concession may be modified without a new award procedure [1].
• Termination and handback. Grounds for ending early, notice, payout, and the condition in which the asset must be returned. The EU directive has its own rule on termination [1].
• Transfer and assignment. Whether the concessionaire can sell the contract or pledge its rights. For NPS leasehold surrender interest, it can be pledged as security for financing and transfers with the contract [3].

Important dates and lifecycle events

A concession runs for years. Most of the risk sits in dates nobody diarised.

• Award and signature. The competitive process ends and the clock starts.
• Effective date and handover. The day the concessionaire takes the site or begins operating.
• Construction or capital-works milestones. Deadlines for required investment.
• Fee and reporting dates. Payment due dates, revenue statements, and audit rights.
• Insurance and bond renewals. Evidence of cover and any security the grantor holds.
• Review or reopener dates. Points where fees or terms can be revisited. Under NPS rules, fee modification applies only for extraordinary unanticipated changes [3].
• Expiry and renewal decisions. In the NPS system, concessioners generally have no preferential right of renewal, with narrow exceptions [3]. Do not assume you can renew. Check the document.
• Handback. The date the site must be returned, and the inspection and compensation steps before it.

Risks and common mistakes

• Treating it as a lease. A lease gives you possession. A concession gives you an operating grant with obligations on service, investment, and fees. If you track it like a lease, you miss most of what it requires.
• Assuming a right to renew. Many public grants are re-tendered at the end. In NPS contracts the general rule is no preferential right of renewal [3].
• Ignoring who owns the improvements. Capital you spend may not be yours at expiry. The contract decides, and compensation, where any exists, follows a formula [3].
• Taking demand risk without modelling it. The concessionaire earns only if customers show up. EU law treats this operating risk as the defining feature [1].
• Missing the fee schedule. Fees are fixed in the contract and cannot be reopened casually [3].
• Skipping the lender and sub-contract paper. Step-in rights, assignment limits, and consent conditions often sit in side documents.
• Losing the performance record. Disputes about service standards turn on records. If the reports are scattered, the argument is lost before it starts.

Related contract types

These documents often sit beside a concession agreement or get mistaken for it.

• License agreement. Grants permission to use something, often intellectual property, without handing over an operating business.
• Franchise agreement. Grants the right to run a business under a brand and system. A concession usually grants the right to operate at a place or on an asset.
• Commercial use authorization or permit. A narrower authorization to carry out a limited activity. The NPS treats these as a separate instrument from a concession contract [4].
• Service level agreement (SLA). Measures performance. Concessions often embed service standards of this kind, and the SLA is the document that states them.
• Business insurance policy. The required cover under a concession is usually proven by policy documents that have their own renewal dates.

Contract-management checklist

Run this against a real concession agreement as soon as it is signed.

Capture

• Parties, grantor contact, and the exact scope of the grant.
• Effective date, expiry date, and any extension or renewal mechanism.
• Fee formula, payment dates, reporting duties, and audit rights.
• Capital investment commitments and their deadlines.
• Who owns improvements at expiry, and any compensation formula.
• Termination grounds, notice periods, and handback conditions.
• Insurance and bond requirements, with policy end dates.
• Assignment, pledge, and lender consent terms.

Diarise

• Each payment and statement due date.
• Capital-works milestones.
• Insurance and bond renewal dates, set ahead of expiry.
• Fee review or reopener dates.
• The decision date for renewal or re-tender, well before expiry.
• The handback date and inspection window.

Review on a cadence

• Quarterly: performance against the service standards and fee reconciliation.
• Annually: insurance evidence, capital plan, and any legal or regulatory change.
• Two years before expiry: renewal position, handback condition, and compensation claims.

Spreadsheets cope with a few of these. A portfolio of concessions, leases, and permits does not. Contracko is an AI contract management platform. It reads an uploaded agreement to extract parties, dates, fees, and renewal terms, keeps agreements in a searchable contract repository, and sends expiration reminders before notice windows close. You can start a free trial, or see the plans and pricing.

Sources

[1] European Parliament and Council, Directive 2014/23/EU on the award of concession contracts (definition, operating risk, duration, modification, termination). eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32014L0023

[2] US Department of Transportation, 49 CFR 23.3 (airport concession definition, agreement type does not decide coverage). law.cornell.edu/cfr/text/49/23.3

[3] US Congress, Title 54 of the US Code, sections 101913 to 101917 (visitor-service concession contracts, 10 to 20 year term, franchise fee, leasehold surrender interest, renewal). law.cornell.edu/uscode/text/54/101913, /101914, /101915 and /101917

[4] National Park Service, Concessions, CUAs, and leases (separate instruments). nps.gov/subjects/concessions/index.htm

[5] National Park Service, 36 CFR 51.3 and 51.5 (concession contract definition, prospectus minimum requirements). law.cornell.edu/cfr/text/36/51.3 and law.cornell.edu/cfr/text/36/51.5

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