Concession agreements are made between entities to do large projects. These agreements normally revolve around public service projects. It gives license to private sectors approved by the government authorities.
The teams which work on the development of infrastructural projects mainly use concession agreements. According to the contract, teams can implement their projects with certain rights for a limited time period. The objective of these agreements is to give assets to private entities for public benefit. All these project assets will be returned to the government authorities once the agreement is terminated.
What is a Concessions Agreement?
Concession is an allowance of something from higher authorities. In concessionary agreements, the two parties that are involved in the process are:
- Concession Granting Authority: This authority is the government that gives assets or property to the private-sector entity for a restricted time period. The granted assets are for infrastructural projects that need to be done for public welfare.
- Private Concessionaire: This private concessionaire will accept the granted assets and time period from the government in response to their public well-being. In general scenarios, the reason for restricted time is that the government authorities are the foreign country authorities.
In a concession contract, the real owner of the assets is kept by the authorities while the private entity has only constructive control. According to the terms and conditions of the contract, the property will be returned to its owners, that is, the government authorities.
What is Concessions Agreement Used For?
Other than the main structural work of the concessions contract, it is made up for both parties to get an advantage. A concession agreement is an outsourcing contract agreement that outsources the development and operations to other parties. As a result, both sides will earn more money using fewer resources.
This type of agreement also includes some rights to utilize certain areas of public infrastructure. These rights are given to the individual type of businesses or to different organizations by government authorities.
The concession fee given by the concessionaire to the authorities is beneficial when it comes to managing risks. To avoid inconveniences in the future, authorities stand to lose income from concession fees. Furthermore, concession agreements are long-term agreements with large transactions. These agreements are quite different from other commercial contracts.
Moreover, the main advantages due to which concession agreement is used by the higher authorities for large projects are listed below:
- There are high-level private investments on both sides.
- Private entities carry important shares of the risks.
- The large increase in the efficiency in the development and implementation of the infrastructural project.
Types of Concessions Agreement
There are two types of concession agreement samples that allow negotiation over the rights to an organization from government or local authorities. To understand these types of concession agreements, a detailed explanation is provided below:
- Work Concession Agreement
It is the type of concession contract in which the contractor does construction work in return for decided payment. The contractor can receive the full payment at once or in parts.
- Service Concession Agreement
In this type of concession agreement, the contractor will receive the payment of his services whenever the services are being used. Considering both types of the concession contract, it is concluded that the contractor of the operating risk will receive some payment.
There are some countries that come up with the developed form of concession agreements. Such an example can be taken from the government of India that sets up some committees, including the B.K Chaturvedi committee. The report of the committee suggests some changes in the concession agreement.
Some of the recommended changes that can be followed across all kinds of concession agreements are:
- The private entity can get an extension in the decided time by continuing to increase the facility.
- It additionally proposes to give a choice to the advertisers to strip their stake following a long time from the business activities date.
How Does Concessions Agreement Work?
Regardless of considering the types of the concession contract, it is mandatory for the private sector entity to give concession fees to the authorities. The details of the concession fee regarding how they will be received by the government and other information will be mentioned in the contract. CocoDoc, an online platform having templates for concession agreements, makes it easier to get such contracts within a few clicks.
The focus of the concession agreement is mainly on:
- The given period of time for project completion.
- The concession fee details are negotiated by both parties.
- The detailed information of insurance requirements.
The concession contract also contains detailed information regarding payments to the owner of the land; these include:
- The rent of the location where the private sector wants to implement their project.
- A calculated percentage of the sale revenue.
- The responsible party for the payments of maintenance, repair, and utilities.
Other than mandatory information, the concession agreements give the rights to use some public service areas. Government authorities give these rights to many departments and individual businesses.
In the development process of infrastructural projects, concession agreements play an important role. The above discussion reveals the importance and different aspects of concession contracts. These contracts are highly beneficial for public welfare.
Considering the user's facilities, an online platform CocoDoc offers these types of agreement templates. It provides both work concession agreement templates and service concession agreement templates.