What is an administrative concession?

The concept of administrative concession refers to the authorization provided by a public entity to a private initiative for the purpose of exploiting a specific service or good.

In a more rigorous way, it could be ensured that the definition of administrative concession is the legal business by which the administration assigns the management of a public service or the use of a belonging to the public domain to an entity or person with certain conditions and during a set period of time for him to exploit and remove profitability.

This link is materialized in a contract and the rights that until date were reserved for the administration can now be managed by different companies or people in exchange for money.

Benefits of administrative concessions

Administrative concessions have several benefits, where the most important is undoubtedly the collection of money by the State or City Council.

  • The government that grants it puts money into its coffers by granting administrative concessions to a private initiative. It could be considered a kind of rental.
  • The private companies that obtain these concessions for their exploitation manage to increase the value and efficiency of this service. This is so because the administrations do not have enough resources to carry out a task with the same effectiveness.
  • The bodies that grant the concession have the possibility of withdrawing it at the moment in which the awardee of the service or does not comply with the agreed obligations.

Examples of administrative concession

There are several examples of administrative concession. The most common are the following:

  • Roads: public land is assigned for the construction of highways. It may be the case that construction company at the end of the work can collect a percentage of the profits for the toll.
  • Energy: administrations, for example, give up dams for the production of electricity.
  • Petroleum exploitation: publicly owned land is granted to a private company for the extraction of petroleum.

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