2.1.2 Engage a team of advisers
The importance of having a strong group of expert advisers in place cannot be overstated. The engagement of PPP advisers requires sufficient resources to be budgeted for early in the project cycle. The project management team will require different types of advisers for different phases of the PPP project preparation process. Consultants will almost certainly have been used to prepare the various feasibility reports. They may have been hired separately and in a more ad-hoc manner. It is when the procurement phase begins that a comprehensive plan needs to be developed for how advisers will be used:
• The core team of advisers for the procurement phase will usually consist of a financial adviser, a technical adviser and a legal adviser (each of these composed of more than one individual). Other consultants will be required for specific inputs (e.g. separate consultants for environmental, social impact, regulatory risk and insurance matters). The exact nature of the broad advisory team will depend on the project and the in-house resources available (see Box 1).
• An Authority with considerable experience in PPP procurement can engage the advisers on separate mandates rather than on a consortium mandate, with the project director managing the entire process. It may be advisable, however, to hire a consortium of consultants, under one contract, led by one of them (often the financial adviser). 
Guidance 20, 21
• Even if a single consortium of consultants is engaged, it is useful for the project director to be able to discuss issues with each member of the advisory group separately to ensure that any differences of opinion on difficult issues are elicited and solutions are identified. Guidance 22, 23
Authorities should pay careful attention to the incentives created by different ways of engaging advisers and remunerating them. For example, if the consultants hired to carry out the feasibility work are fairly certain that they will be kept on board to advise on the transaction, they may have a disincentive to disclose major problems for fear that preparation will not continue. Alternatively if the transaction advisers are paid a success fee in full when the PPP contract is signed, they may have an incentive to deliver a project that is not bankable and will take many months (or years) to reach financial close. It may therefore be useful at the outset of the process for the Authority to hire an initial high-level consultant to assist in the planning of all the technical assistance that will be needed during the process (e.g. prepare terms of reference).
Box 1 • PPP advice during procurement |
Advisers are normally involved at every stage of the PPP project cycle, including the initial feasibility assessment, project preparation, project procurement and project implementation. Examples of the legal, financial, technical and environmental assistance typically provided by PPP advisers, in particular during the procurement phase, include the following: Legal adviser • Advise the public sector on the issue of the legal powers (or vires) necessary to enter into the project contracts; • Assist in the assessment of the legal feasibility of the project; • Advise on the appropriate procurement route; • Advise on the initial contract notice; • Advise on procurement documentation such as pre-qualification questionnaires, invitations to tender and evaluation criteria; • Develop the PPP contract; • Ensure that bids meet the legal and contractual requirements for submission; • Evaluate and advise on all processes and contractual solutions throughout the procurement phase, including contract negotiation; and • Provide support in the clarification and fine-tuning of legal aspects. Technical adviser • Draft the output requirements and specifications of the PPP project; • Develop payment mechanisms in the PPP contract (with the financial adviser); • Evaluate and advise on all technical solutions during the procurement phase; • Undertake technical due diligence on bidders' solutions; and • Carry out any site condition, planning and technical design work. Financial adviser • Support the development of all financial aspects of the project; • Advise on how to secure the public funding for the project (if any); • Advise on the applicability of specific sources of funding, and how these can be optimised in the funding structure; • Ensure that all financial aspects of the bidders' solutions meet the requirements for submitting a bid; • Optimise, scrutinise and possibly audit the financial models submitted by bidders; • Evaluate and advise on financial proposals throughout the procurement phase; • Advise on the bankability issues raised by the PPP contract; • Undertake financial due diligence on the submitted bids; • Assist in the negotiations with the lenders; and • Assist in the strategy and completion of the interest rate and currency hedging at financial close. Environmental adviser • Examine the potential environmental impact of the project; • Assist in environmental due diligence, including required permits and certifications; • Identify potential environmental risks and how submitted bids address them; and • Consider the mitigation of such risks and the impact on the scope and technical design of the project. |
