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PPP TOOLKIT for Improving PPP
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Sector: State Highway  |  Module 2: Work through the PPP process

Guidance on use of advisors

The project development process might require the inputs of a transaction advisor if the Project Sponsor feels that capacity within the organisation is not adequate to manage the project development process, especially if the project is complex. Even if the capacity within the organisation is adequate to manage the project development process, a professional firm associated as the technical advisor adds value to the process by:

  • Bringing in their experience in similar transactions and protecting against costly, avoidable mistakes
  • Providing technical strength to the institution’s team
  • Bringing legitimacy to the PPP process and placing an external stamp of endorsement on the Government’s proposals, increasing investor and public confidence
  • Providing an opportunity for knowledge transfer to the institution 

To make it easier and quicker for Sponsor Authorities to find and select advisors, a Panel of pre-qualified transaction advisors has been identified by the Government of India. These advisors have been assessed for their ability to provide services required for PPP development. Use of empanelled advisors is not compulsory. Further information about the Panel and a list of the empanelled firms is available from DEA’s PPP Cell website.

Role of the transaction advisor

The transaction advisor does all the detailed financial, technical and legal work required to prepare the Project Sponsor to implement the proposed project. The transaction advisor will complete a feasibility study to a standard that will enable the institution to establish the commercial attractiveness and bankability of the project. During the procurement phase, the transaction advisor will advise the Project Sponsor on optimum risk allocation and the resultant contract structure including preparation of all necessary documentation and requisite approvals. 

Considerations for appointment of transaction advisor

Some essential considerations to be taken care of when appointing a transaction advisor and during the tenure in the project include:

  • The transaction advisor should be hired at the start of the PPP project development and retained either until after the signing of the PPP agreement or at the end of the procurement phase.
  • In line with the government’s constitutional mandate for the hiring of services, the procurement of the transaction advisor must be fair, equitable, transparent, competitive and cost-effective.
  • The terms of reference for the transaction advisor should be precise and focused on clear deliverables.
  • The terms of the contract between the institution and the transaction advisor should incentivise quality completion of milestones on time and within the budget.
  • The project sponsoring authority should avoid separately retaining or subsequently hiring additional consultants for the project outside of the transaction advisor. Otherwise conflicting work streams and accountability can be created which might be detrimental to both the quality and timing of the project.
  • The project team should meet regularly with the transaction advisor to receive progress updates, provide project direction, resolve impasses, and ensure ongoing institutional input and support.
Terms of Reference (TOR) for the transaction advisor

The terms of reference (TOR) for the transaction advisor should clearly articulate the requirements and expectations of the institution. The terms of reference and the proposal submitted by the transaction advisor will form the deliverables schedule of the transaction advisor’s contract. Hence the more clear and precise the terms of reference, the higher the quality of bids received.
The following provides examples of contents that would usually be included in a terms of reference.

Example contents of terms of reference for appointing a transaction advisor

1. Introduction: Briefly describe the project and its objectives, and how these align with the institution’s strategic vision. Briefly narrate the background of the assignment including the institutional mandate to proceed with the project, needs that led to the project and any preparatory work which has been carried out.

2. Scope of work: Outline the scope of work for the transaction advisor during the project development process, including but not limited to, feasibility analysis and procurement support.

3. Deliverables: List the deliverables required from the transaction advisor and the schedule which they need to conform while submitting the deliverable.

4. Required skills/ experience: List the professional experience of the transaction advisor that is required for the specific assignment. List the firm level skills and team member level skills that are required for the specific assignment.

5. Payment terms: The payment terms will narrate the remuneration system and schedule. 

6. Performance terms: Set out the appointment, reporting and decision-making arrangements under which the transaction advisor will be required team, and the project officer’s contact details.

7. Bidding procedure: Briefly narrate the bidding procedure, mostly in conceptual terms for a general understanding of the bidders.

Further information on hiring and managing advisors is available from the World Bank toolkit.

 

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