Administrative Concession (types and characteristics)

  • Jul 26, 2021
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The Administrative concession is a common tactic used in times of crisis to collect money, administrations public institutions have the natural right to exploit the production of a certain good or service, to collect money.

Private companies undertake to develop certain services reserved for the public sector with efficiency and effectiveness.

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Through these types of concessions, public administrations can demand compliance and withdraw the concession in case there are objective excuses that can be demonstrated, before the expiration date.

In this article you will find:

What is an administrative concession?

The Administrative concession It is the act of granting the right to exploit a public good or service, through the State to a private entity and in a period of time and under certain conditions previously established, through negotiation, and registered in a contract.

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It is worth emphasizing that a good or service can be exploited or worked by several private entities, such as in the case of oil, mining or similar concessions. The purpose of the administrative concession is to organize the activities and sustain their development.

Administrative concession

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Characteristics that define administrative concessions

  • Consent of rights or powers to private sector companies in order to provide a public service.
  • Granting of rights or powers to exploit public goods to private sector companies for the development of the industry.
  • Transfer of rights or powers to private sector companies by the state because certain activities do not are attributable to state activities but they do have a social impact, due to the magnitude of the service to lend.
  • Protection of the state to service concession companies.
  • When the state grants the concessions, it can raise funds for each sales transaction after the rights to provide the service or exploitation of the resource have been granted.
  • There is a bilateral benefit, since most of the time, the government does not have the conditions, the resources, or the infrastructure to development of such activities, therefore the companies that assume this responsibility provide the service more effectively, achieving better results.
  • The granting of such concessions does not mean the loss of the right over the resources or assets granted. If at any time the concessionaire fails to comply with the obligations, the public entity may unilaterally withdraw from the contracting.
  • For the concession companies, this means an investment with growth, since they generate higher income, since they are services with a safe market with a wide demand.

Types of administrative concession

  • Concession of a public service

It is the type of concession where the Public Administration grants a private or individual entity the power to carry out activities that should only be carried out by the State.

Examples: Water supply service, transportation service, waste collection, etc.

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  • Concession of a public work

It is the type of concession by contract whose object is the design, implementation, maintenance, restoration and repair of a work, in exchange for the exploitation of that work for a period of time for the entity concessionaire.

It is important to differentiate from the works contract itself, in which case it is only about the execution of the work but not its exploitation.

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Example: Oil companies, mining companies or others. The state cedes to the concession company, the soil and subsoil for the exploitation and extraction of oil and minerals (gold, diamonds, cobalt and others). The private company must make the necessary infrastructure and investment in equipment to carry out the operations.

  • Concession of public domain assets

It is the type of concession where an entity (natural or legal person) is granted the right to use and temporarily enjoy an asset located in the public domain.

Example: The roads, highways, highways. In this case, the state provides the land infrastructure in order to grant powers that will contribute to the development of highways, roads, or railways, etc. In some cases, the private company benefits from the collection of taxes or tolls in order to contribute to the maintenance of road construction, creation of restaurants, etc.

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