1.23 The Department appointed their advisers following competitive selection processes. Although CSFB demanded fee rates that were 16 per cent higher than their nearest competitor, they were preferred as lead adviser because the Department considered the high quality and relevant experience of their advisory team was the best on offer. We examined the Department's decision-making process for this selection, and found its decision to be reasonable given the particular experience of the CSFB team.
1.24 The Department agreed to pay CSFB a fixed monthly retainer of £222,000 for 18 months, based on the total cost of their bid spread over the expected number of months needed to complete the PPP. This would be irrespective of how much work they did in any given month. They also negotiated the right to stand down CSFB at nil payment for up to a total of six months if there was little or no work for them to do. CSFB told the Department that they would not provide records of actual time spent to enable payment on the basis of "actuals." CSFB were not stood down and received the agreed monthly fee for some 33 months. The Department's legal advisers, Slaughter and May, were paid amounts relating to the amount of actual time spent on the project (subject to a cap for the first two years of their engagement). This was not possible under the arrangement with CSFB. The absence of documentary evidence means that it is not possible to conclude whether payments to CSFB were justified on the basis of the time put in. A further difficulty with such an arrangement is that it makes it harder for the client to monitor and manage the work of the adviser.
1.25 There was no incentive element to CSFB's remuneration, for example through success fees or the achievement of milestones on time. Though CSFB expressed their willingness to include some form of incentives, the Department considered that such an arrangement might put in question the objectivity of their advice. We found no evidence that the basis of remuneration had led CSFB to protract the duration of the PPP process to maximise their fee. The Department were very happy with the quantity, quality and responsiveness of their service, and believed that they had obtained good value for money from the contracts with both of their main advisers, CSFB and Slaughter and May. CSFB told us that their impression was that the fixed monthly retainer had worked to the Department's financial advantage not theirs, because there had been periods in which they did more work than was funded by their fixed retainer. They argued that their prime motivation in bidding for the work had been to position themselves in an important new market sector, of public private partnerships, rather than to make a substantial profit.