5.4.1 This should be undertaken by those in procuring organisations who have experience in negotiating contract, fee, and appointment arrangements, but must take account of relevant legal requirements with respect to post-tender negotiations, where applicable. Fee proposals should be competitive. With the exception of the feasibility study stage, this should mean procurers considering at least some success fee element.
5.4.2 Great care should be taken, however, not to distort the performance of the adviser towards obtaining a success fee at the expense of other considerations (eg the validity of the project). Procurers are encouraged to gather as much information as possible in the way of quotes in the ITT in order to negotiate the most advantageous fee structure.
Example of a success fee arrangement
Having secured approval from central government to proceed with a PFI procurement, a public sector body sought financial and legal advisers for the preparation of documentation and negotiation of the contract to award. Both packages of work were offered for competition and bidders were evaluated on the basis of written submissions, a shortlist was invited to make presentations. Legal advisers were engaged on the basis of hourly fees significantly below the market rate and capped for pre-agreed phases of work. Financial advisers were engaged on the basis of a modest monthly retainer fee payable each month that significant work was undertaken. In each case, a success fee became payable on successful closure of the contract. Whilst the monthly fees were paid by the public sector body, as the project proceeded the success fees were met by the successful bidder.
5.4.3 The advisory work involved at each stage of a project should be scoped, based on known assumptions. Monitoring systems for advisers can then control the work undertaken, testing the appropriateness of certain assumptions as the project progresses and revising original budget estimates as necessary in line with hourly rates.