Hiring and Managing Advisors

Guides government officials through the issues involved in hiring and managing advisors for tendering, contracting, and managing private sector contracts in various sectors.

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Section Title	Download
1. Principles of selection for advisory services to support Private Participation in Infrastructure	96KB, PDF
2. What is PPI?	228KB, PDF
3. The role of advisors	436KB, PDF
4. Defining the project and contract	421KB, PDF
5. Use of advisors for small-scale projects	36KB, PDF
6. The role of donor agencies in PPI	729KB, PDF
7. Selecting advisors	438KB, PDF
8. Paying advisors for their advice	185KB, PDF
9. Managing the PPI advisory services	41KB, PDF
10. Annexes	118KB, PDF

1. Principles of selection for advisory services to support Private Participation in Infrastructure

Why PPI?	Governments choose PPI to reduce the risks associated with operating and constructing infrastructure, and also, with limited budgets, to use available funding for other purposes. Proper use of advisors is critical to successful PPI.
The role of government in PPI	For successful PPI, governments must set clear policy objectives, establish a sector framework and manage implementation of PPI.
Effective advisors	General characteristics of a successful PPI include a government's determination of the chain of command for a project, its management role, the project's timeline, and determining available resources prior to choosing external advisors.
Principles for selection of advisors	Common characteristics of effective selection processes for advisors include transparency, fairness and cost effectiveness, and seek to address conflicts of interest.

2. What is PPI?

Stages of PPI	There are broadly four stages for governments' involvement in PPI: formulating the policy; establishing a legal and regulatory framework; tendering the contract; and managing the contract. Advisors' roles throughout are characterized.
Stage one: Formulating the policy	Establishing the broad policy framework prior to introducing PSP requires defining clear objectives, developing options for meeting these objectives, appraising the options, and then selecting one.
Stage two: Establishing the legal and regulatory framework	Developing the preferred option in greater detail, drafting legislation and other legal instruments, and developing appropriate institutions while taking steps to ensure their effectiveness are required to establish a legal and regulatory framework for PPI.
Stage three: Tendering the contract	Outlines the steps necessary to tender a PPI contract. These include designing project timetables, alerting potential private sector investors through various media, short-listing preferred bidders, developing requests for proposals, evaluating bids, and awarding the contract. A sample project timeline is provided.
Stage four: Managing the contract	The level of government management required for the contract to perform effectively varies according to the PPI's structure. Governments should allocate significant resources for contract management, particularly if it is new to PPI.

3. The role of advisors

Overview	Advisors should be chosen based on their skills, as many different companies offer different services. Advisors' range of skills includes economic, financial, legal, technical, human resources, public relations and others. Each can lend expertise at specific stages of a project's development. A timeline sets out the roles played by different types of advisors within the PPI framework.
Advisors in the four stages of the PPI process	Different types of advisors are used to formulate policy, establish a regulatory and legal framework, to tender the contract, and to manage the contract. Discussion of whether advisors should provide a lead or supporting role for each stage.
Topics in hiring advisors: Local advisors	Local advisors are useful for their country knowledge, and can assist in building local capacity or in transferring knowledge. They also may be more qualified than international consultants.
Topics in hiring advisors: Private sector and advisors	The private sector may also use advisors in the project, either to gain additional expertise or to lower costs. Discussion of how to avoid potential conflicts of interest when using advisors that may work for both the private and public sectors.

4. Defining the project and contract

Defining the project and contract	This module outlines best practices for defining a project's scope and introduces key concepts for project design.
Grouping advisors	Governments should specify the skills they need, not the type of company they require. Companies can group themselves for a project to ensure quality and performance.
Grouping projects	Project units or governments have the option of awarding one larger contract or several smaller ones. Disadvantages for awarding several small contracts include increased project management role, impact on timetable, and increased number of companies in uncoordinated roles. Pre-formed consortia are preferred.
Setting a timetable and budgeting	Timetables should be realistic but flexible. A budget should be defined to meet the program requirements and include types of advisors needed.
Conflicts of interest	A credible process to resolve conflicts of interest should be established prior to awarding the contract, along with criteria for disqualification. Options for conflict resolution are briefly discussed.
Recognizing constraints	The government should design the scope of work to reflect the budget. Otherwise, advisors may have to meet terms of reference that don't match a project's funding. Governments can limit budgets by including junior staff on the project, assuming responsibility for some tasks, or by reducing the project's scope.

5. Use of advisors for small-scale projects

Costs	Small projects' budgets often do not allow for expert technical assistance and other costs because the cost of advisors may be expensive relative to the project's total cost.
Shortening the PPI process	Shortening the four-stage process can reduce costs, as there is less need for rigorous policy development and institution building, and the range of options for small projects is smaller and less complex.
Decreasing or eliminating advisory involvement	Eliminating the need for some services and combining some advisory roles can reduce a project's total costs. Also, states with previous experience in PPI may reduce the need for advisors by assuming increased responsibility.
Selection process	The appraisal process for small projects has unique characteristics. In particular, size and knowledge of the project will limit the number of interested companies, and the project unit's lack of experience will limit the evaluation/selection process.
Wrinkles in competitive bidding	National competitive bidding, listing with interested companies, and coordinating joint bids from several small communities may limit the cost of undertaking a bid.
New risks	Because the level of expertise for a smaller project is probably lower because of its size, small projects face the risk of hiring bad advisors. Risk reduction strategies are provided.

6. The role of donor agencies in PPI

Overview	This module describes the main multilateral and bilateral agencies and their lending policies (as of November 2000), along with their sources of funding for technical assistance.
Why use donor agencies in PPI?	External funding for technical assistance has many benefits, including expertise in procurement and experience in project management, but it also has tradeoffs that need to be considered.
Overview of donors	Overview of multi- and bi-lateral agencies' roles and programs, including the World Bank, African Development Bank, Asian Development Bank, Inter-American Bank, the European Bank for Reconstruction and Development, the EU, the Caribbean Development Bank, along with various targeted trust funds.
Criteria for donor assistance	Eligibility, selection, advertising, and evaluation criteria, along with criteria for using individuals, vary by donor agency. Detailed charts provide information on each of these for various agencies.

7. Selecting advisors

Overview	Once the scope of the project has been defined and funds have been allocated, an appropriate tendering process can be chosen to select and hire advisors.
Principles of the tendering process	Generally, competitive tendering for advisory services helps the government achieve an appropriate balance between quality and price, while meeting a government's stated objectives.
Steps in the evaluation process	Outlines the steps and documents that comprise the competitive bidding process, and provides a rationale for their inclusion in the process. These include: terms of reference, shortlisting, soliciting expressions of interest, setting evaluation criteria and committees, addressing stakeholder acceptability, finalizing the request for proposals, approaches to score proposals, and informing both the successful and unsuccessful bidders.
Advisors' proposal strategies	Bidders use different strategies to procure business such as bidding low for market entry, for prestige projects, or to undermine new competition. Bidders also may offer senior staff in a proposal, only to substitute less experienced, junior staff once the project begins.
Advisors' conflicts of interest	To avoid potential conflicts of interest with advisors, governments should establish clear rules and procedures to be used throughout the hiring and managing process.

8. Paying advisors for their advice

Paying advisors for their advice	This module describes how fixed fee contracts, success fee contracts, time and materials contracts, and indefinite quantity contracts (IQCs) can be structured to best manage advisors, and discusses the situations under which these contract types are appropriate.
Special considerations for indefinite quantity contracts	IQCs are used when the specific workload is unknown, but advice is needed. Special considerations such as controlling costs, selection and evaluation criteria, and limitations are discussed.
Advisors' remuneration	To balance the needs of advisors with the goals of governments, payments should be linked to specific outputs set by government.
Contracting	Contractual safeguards assist in protecting government interests and limiting liability for the project. Suggestions for elements to include in the contract are provided.

9. Managing the PPI advisory services

Managing the PPI advisory services	Managing advisory services of PPI and securing private investment may require internal reorganization and reform of government institutions. This involves heavy commitment, stakeholder involvement, project management skills, financial monitoring, conflict resolution mechanisms, and high-level support.
Staffing the agency	The scope of PPI will determine the number of staff, level of expertise and seniority, and need for inputs from external experts. A detailed process for determining staffing requirements is provided for a management contract and an asset sale.
Resource requirements	The significance of managing advisors is addressed, including the need for highly qualified and dedicated staff, the potential for paying above- normal civil-servant pay scales to attract able staff, and attention given to the time required for effective management.
Organizations for monitoring	Steering groups and privatization units are both common approaches to monitoring advisors and facilitating communication between advisors and the government unit.
Stealth management	For smaller projects, establishing a privatization unit may not be cost effective. In this case, regular progress reports may be used as a substitute. When relevant expertise is not available within the government to monitor advisors, an independent external advisor may be able to evaluate the advisors' work.
The importance of communication	Because communication among stakeholders and project participants in a PPI is so important, interaction through seminars, workshops, publications, road shows and information campaigns can help promote the reform process and generate support for PPI.

10. Annexes

Annex 1: Sample terms of reference	Power sector regulation Mulitmodal transport strategy Water regulation Power sector reform Rail sector PSP
Annex 2: Sample forms to evaluate proposals	Includes technical and financial evaluation.
Annex 3: Format for proposals (from World Bank)	Format for technical and financial proposals.

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