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Project Identification and PPP Screening

313.3. Timing and Scope of the Advisory Contracts

The procurement and selection of advisors may be done as a group, that is, selecting a consortium of firms under a single advisory contract to cover all the areas of work, or under separate procurement and contracts.

There are pros and cons to both of these options. A single integrated team will ensure the cohesion and coordination of all the tasks and work, while separating the procurement will help to select the best/optimum firm or advisor for each specific area of work — although this route will demand/consume more time and resources from the government.

Several considerations may be useful to decide the best approach for each project.

  • Time constraints may make it more advisable to appoint only one team under one single contract. A single team is likely to be better coordinated and could be more efficient (as much of the process management will be the responsibility of the lead adviser) and is already prepared to work together from the outset;
  • When technical advice and work is very important or very intense (for example, when the approach of the authority to project design and requirements is to deliver a detailed project), it may be reasonable to separate that task to ensure that the best technical solution is designed and the selection of technical experts is not influenced by the procurement of PPP advisors;
  • A number of authorities only select a separate technical team. A joint financial and legal advisory team is selected in a separate contract, as these two areas are more clearly linked and overlap in some tasks; and
  • There will always be some things that a third party adviser cannot do, such as approving advisers’ invoices on behalf of the procuring authority. The procuring authority must always have staff to perform these functions.

Another consideration is the duration of the engagement: whether to enter into one contract to cover all the processes through to contract execution, or to appoint advisors only for the Appraisal Phase and decide later on the selection of advisors to support the structuring and design of the contract and tender process (including potentially supporting the Tender Phase).

In general terms, it is often more appropriate that the advisors involved in appraisal ultimately structure the project contract and define the final contract and tender solution because PPP preparation through to structuring and tendering is a progressive process.

However, if there are no relevant time constraints (especially if the project is not yet a clear and immediate policy decision) or if there are doubts as whether it is suitable to be a PPP, it may be sensible to limit the advisory contract or contracts to the Appraisal Phase. This has the added advantage of preventing potential conflicts of interest that might arise if advisers during the Appraisal Phase are also contracted for the later phases and hence recommend a tender process that offers the best outcome for them (for example, that will provide them with the most work and profit).

Another solution to deal with potential uncertainty regarding the result of the appraisal and the decision to procure is for the tender and contract for the advisory role(s) to provide an option for the procuring authority to retain the advisors for the next stage (structuring and drafting the contract and tender package). In addition, some flexibility as to the ability of the advisory firms to change team members should be included in the contract.

Consideration must be given to the advisor's technical capability and experience of working on similar projects in addition to price. International experience is a must, especially in countries in the early stages of PPP development, but this has to be enriched with adequate local knowledge.

BOX 3.14: Ways to Obtain and/or Fund the Studies

The costs of project preparation should not be underestimated (see Farquharson, de Mästle, and Yescombe 2011).

Development Finance Institutions (DFIs) and donor organizations have established facilities in many regions to support the payment of costs of project preparation including the hiring of advisors.

A revolving project development fund established and managed by the government is another approach to mobilize resources for project development. In this case, there is also the possibility of it being done with donor support. The winning bidders refinance their costs at contract signing, recycling funds back to other public authorities.




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