The importance of advisors in PPPs has been emphasized by Jangun and Marques (2006): [34]
“As governments transition from their role of monopoly provider of infrastructure services to setting the framework for private provision of infrastructure services, independent “third party” advisory assistance is essential to making these public-private partnerships successful.”
Moreover, as reinforced by the European PPP Expertise Centre[35], if the public sector does not frequently develop PPP projects, it is unlikely to have the required range of competencies available in-house. In addition, the required skills need to be regularly refreshed to capitalize on recent experience, developments in market standards, and innovations.
An indirect and positive effect of hiring external support is the opportunity for skills transfer and/or the development of skills within the public sector over time, thereby building the government’s own internal capability.
If advisors are considered necessary, describe the capabilities needed in order to carry out the full appraisal and justify the need for third party advisors. It is essential to hire advisors who have previous PPP contract experience as well as general infrastructure experience; this means they will have a clear understanding of current market conditions. When planning to engage advisors, the public sector should:
- Describe the scope of such advisory help (different roles/expertise) and the person, or persons, to act as team leader(s) and
- Suggest a budget for hiring such advisors[36]. See box 3.14.
[34] Jagun, J.; Marques de Sa, I. (2006). The Role and Importance of Independent Advisors in PPP Transactions. In IP3’s Public-Private Partnership Information Series.
[35] European PPP Expertise Centre. (2014). Role and Use of Advisers in Preparing and Implementing PPP Projects.
[36] The usual source to fund the advisory contracts is the budget. However, the authority should consider the possibility of asking for support from Multilateral Development Banks (MDB) to fund the studies. Another recent trend for funding the preparation and structuring of PPP projects is the creation of a “development fund” (in which MDBs may also participate). This fund is a revolving fund that provides resources for appraisal and structuring, which will be paid back by applying a fee to the successful proposer.
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