1.2.1. Terms of Reference

At the beginning of the recruitment process, a Transaction Advisor Terms of Reference ("ToR") should be prepared. The ToR should provide the Government Entity with a comprehensive evaluation mechanism and will be used as a basis whilst drafting the RfP. The clearer and more carefully prepared the ToR, the higher quality the average Bidder response will be, and the more assured the procurement process will be. At a minimum, the ToR shall include the following; in parentheses, inclusion of the terms suggested to be included in the RfP:

Background (should be included in RfP): An outline of the Project, including a description as prepared in the Project Concept Report, along with a summary of why the Government Entity/State are interested in procuring this project based on the needs that the particular project aims to fulfill.

Scope of work (should be included in RfP): Indicate the clear extent of the scope of work, including the output specifications and reference drawings - if applicable - for which the Transaction Advisor is being procured.

Deliverables schedule (should be included in RfP): The entire list of Deliverables that the Transaction Advisor is expected to prepare, along with suggested dates of delivery, should be stated clearly in order to help the Transaction Advisor price their services accurately.

Skills and experience (should be included in RfP): The range of skills and project-specific experience that is required - particularly on niche, complex projects that Dubai has had no precedent experience in - must be stated clearly. Additionally, particular emphasis must be given to the requirement that the resources named in the submitted proposal are available - on the ground, if required - once the project commences, and are committed to devoting their time to successfully closing the Project.

Budget for the Transaction Advisor's professional fees (if declared, should be included in RfP): Based upon the careful costing performed by a technical specialist within the Government Entity, a budget for the project and, subsequently, for the Transaction Advisor's services, is set and can either be declared or not declared.

If declared, the Government Entity has a definitive yardstick to measure all technical responses against, as a result of which there is no incentive for Bidders to submit cheap but technically poor proposals, improving the quality of the average bid, in principle. However, there is a risk that inaccurate costing may price out highly competent advisors who would have provided technically superior solutions, but do not prefer to Bid as a result of the underestimation of services costing.

If undeclared, there is a higher chance of receiving well-diversified bids, as both components of the submission - the response to the RfP scope of work (technical proposal) and the pricing (financial proposal) - will be weighed, and an incentive to compensate quality in one for the other will be reduced. However, there is a risk present that some advisors, who have poorer Credentials and technical expertise, might deliberately underprice their services. Moreover, it is also possible that were an extremely low Bid to be rejected, despite obvious technical flaws, the Government Entity will be required to justify it as a loss to the exchequer.

In summary, the decision is to be taken individually on every project by the Government Entity, in consultation with the Department of Finance. On projects where specific technical expertise is required, the budget can be declared in order to ensure that scoring is done exclusively on the quality of the technical response; and, on projects where there is local and regional precedent and sufficient competition amongst Bidders, the budget need not be declared, so as to encourage competition.

Remuneration system and schedule (should be included in RfP): The Transaction Advisor must be paid on a fixed schedule using a combination of retainer fees, which are disbursed at the completion of every agreed deliverable, and success fee(s) - which is usually paid upon reaching financial close. On large, complex projects, it is entirely possible that the work performed by the Transaction Advisor goes beyond the agreed scope. If so, a method of payment to compensate the Advisor for this additional work, such as utilising stated daily rates, should be agreed upon. The scope of work agreed with the Transaction Advisor must contain Deliverables at the end of every stage, and, pending their successful submission, retainer fees must be disbursed. It is important not to subject the disbursement of retainer fees to competent authority approval, as disapproval by these bodies is not necessarily a reflection on the quality of work performed by the Transaction Advisor.

Payment arrangements (should be included in RfP): There are two options of disbursing payments:

Expenses such as travel are paid as reimbursement of costs, conditional on the submission of supporting invoices, up to a ceiling as stated by the Transaction Advisor in its proposal; or,

The Transaction Advisor can be asked to Bid a price inclusive of its internal budgeting of expenses, and the Government Entity disburses the winning payment as a series of retainer payments.

On balance, the second option, as followed by most nations in the region, is recommended. The first option involves excessive administrative burdens, given that each individual expense will have to be approved, while the second option solves this hassle by quoting a lump sum that is inclusive of budgeted expenses and mitigates the risk that firms might have over-budgeted for expenses.

Government Entity's management arrangements: This will set out the reporting and management protocols the Transaction Advisor will have to follow.

Conflict of interest (should be included in RfP): Full disclosure regarding any vested interest Bidders might have in the Project should be sought, and the Transaction Advisor should be informed that, should they be selected as the winning advisor, they will be precluded from advising one of the Bidders on the procurement.

Bidding rules (should be included in RfP): The rules surrounding the submission of the Bid by the Transaction Advisor should be detailed. Typically, the Transaction Advisor will be asked to submit a proposal combining a technical response which responds to the RfP scope of work, and a financial response which comprises of the stated price for the services.

Bid submission requirements (should be included in RfP): The rules surrounding the submission of the Bid must be outlined clearly, including requisite supporting documentation, the format to be submitted in, and the address to which it must be delivered, amongst other details. Importantly, the submission must be carried out in two separate envelopes - one for the technical response and one for the financial response, so that the price is not known when the technical proposal is being evaluated.

Bid process (should be included in RfP): The processes regarding the conducting of the bidding and the briefing session are to be detailed.

Bid evaluation weightings and criteria (should be included in RfP): The criteria for evaluating the Transaction Advisor's response should be outlined clearly, with weightings given to the technical and financial responses, as well as other components including Credentials, the experience of team members, relevant finance-raising experience, etc.

Background and supporting documentation: If deemed appropriate, any non-confidential supporting documents, prior work or research, and background knowledge shall be made available to all interested Bidders, preferably through a Data Room. This could include any prior internal feasibility studies, any needs assessment performed, any relevant policy or regulatory documents that the project might help fulfill, and any project-specific objectives that have been outlined by the Government Entity in advance. This is important in order to assess pricing, as reviewing and updating prepared work will be priced very differently from preparing entirely new feasibility studies.

Draft agreement (should be included as part of the RfP) - Bidders have a right to be informed of the contractual provisions of the agreement they will enter into should they be awarded the project, and, to this end, a model draft version of the final agreement should be attached to the ToR in order to enable Bidders to submit their comments and mark-ups on it, if applicable.