How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets

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PROJ EC T  A DV ISER S
7.
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It would be unusual for the project team to have all the necessary specialist 
skills available internally. Professional advisers should be used where their 
skills will add value to the project’s preparation, procurement, and man-
agement activities, but the objectives and leadership of the project should 
remain the public sector’s responsibility. Gaps in skills should be identified 
at the outset, and options should be considered for securing any additional 
resources required. As part of their appointment, advisers should be required 
to transfer their skills to the project team (for example, by preparing guid-
ance notes or providing training at the conclusion of an assignment). Where 
the governments are new to public-private partnerships (PPPs), they may 
need external advice to assist them in identifying which external advisers 
to hire, what sort of advice they can expect to obtain, and where they can 
obtain assistance in developing the terms of reference for these advisers and 
even in managing the interface with the various advisers. International finan-
cial institutions and other development agencies can assist governments in 
considering their options.
1
Role of Advisers
The primary role of advisers is to give the project management group appro-
priate advice in their area of expertise. External advisers likely to be required 
for a PPP project will usually include a technical adviser, a financial adviser, 
a legal adviser, an environmental adviser, and, in countries with limited PPP 
experience, a lead transaction adviser (see table 7.1). Other specialists, such as 
social impact, insurance, accounting, and tax advisers, may also be required.
1
  For a more detailed discussion on the topic of this chapter, see World Bank and PPIAF (2001).

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How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets
Table 7.1  Role of External Advisers
Type of adviser
Role
Lead transaction 
adviser
Assist government to coordinate the work of all advisers and 
manage the interface between government officials and the 
other advisers (may be relevant for countries new to PPPs)
Technical adviser
Support the development and feasibility of the technical 
aspects of the strategic plan and outline business cases
Draft the project output requirements and specifications
Develop payment mechanisms in conjunction with the 
financial advisers
Ensure that all technical aspects of the project meet the 
objectives
Evaluate and advise on all technical solutions throughout the 
procurement phase
Scrutinize the costs of the bidders’ solutions throughout the 
procurement phase
Undertake technical due diligence on bidders’ solutions
Carry out any site condition, planning, and design work
Provide support in the clarification and fine-tuning of 
technical issues
Financial adviser
Support the development of the financial aspects of the 
project’s business case, in particular, the appraisal of 
different options, financial modeling, and input on bankable 
finance terms 
Develop project payment mechanisms in conjunction with 
the technical advisers
Prepare the requirements for submitting a financial bid 
Ensure that all financial aspects of the bidders’ solutions 
meet the requirements for submitting a financial bid 
Optimize and scrutinize the financial models submitted 
by bidders
Evaluate and advise on all financial proposals throughout 
the procurement phase
Review the funding, accounting, and taxation aspects of 
solutions proposed
Undertake financial due diligence on bids submitted 
Provide support in the clarification and fine-tuning of 
financial and commercial issues
(continued next page)

Project Advisers
95
When to Use Advisers
Advisers typically are involved at each stage of a PPP project:
•  The prefeasibility phase. Advisers may assist in preparing the prefeasibil-
ity analysis, helping to determine the strategic investment case, the studies 
that may need to be commissioned, what questions to ask in the feasibility 
studies, whether the existing legal framework might allow the project to 
be developed as a PPP, and other basic parameters in which projects can 
be developed and implemented. 
•  The initial feasibility assessment. Advisers may assist in framing the out-
line proposals for procurement in the form of a commercial deal that can 
be taken to both contractors and the funding market. As part of this pro-
cess, advisers should provide advice regarding what the funding market 
can be expected to deliver, the key constraints on the deal, and insight into 
the appetite of the market.
•  Development of the deal. Advisers may assist in developing the detailed 
deal, including development of documentation such as the draft contract, 
Legal adviser
Assist the public authority in assessing the requisite powers 
and legal feasibility of the project
Develop the contract documentation for the project
Develop other legal aspects of bid documents, including 
analysis of the project’s assets, land ownership, interface 
agreements, and other site-related issues
Ensure that bids meet legal and contractual requirements
Evaluate and advise on all processes and legal and contractual 
solutions throughout the procurement phase and minimize 
the risk of bid challenge
Undertake legal due diligence on bids
Provide support in the clarification and fine-tuning of legal 
aspects
Environmental 
adviser
Examine the potential environmental impact of the project
Identify the potential risks
Consider risk mitigation measures and impact on scope and 
design of the project
Source: Authors.
Table 7.1  Role of External Advisers (Continued)
Type of adviser
Role

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payment and performance mechanisms, allocation of risks between 
 parties, financial models and other projections, and environmental 
assessment. Advisers can also assist in developing areas of tender 
documentation.
•  Execution of the deal. Advisers may participate in the clarification and 
evaluation of bids. They may assist in negotiating the deal and providing 
analysis (legal, financial, technical, and environmental) on the implica-
tions of the positions adopted by the parties to the deal. This assistance 
may include advice on the optimum funding route and the timing and 
method of approaching the funding markets.
•  Construction and operation monitoring. Advisers may also play a role 
during the operational phase, especially assisting in complex issues that 
may arise, such as refinancing or dealing with changes in the contract. 
They can also assist in monitoring compliance of the private sector with 
the terms of the contracts.
Appointment of Advisers
The competitive process for selecting advisers should aim to secure the best-
quality and best-value advice. It is important to define the scope of work as 
closely as possible before contracting with advisers. In addition to consider-
ations of cost, the selection of advisers ideally should involve an assessment 
of the depth and relevance of their expertise, their willingness and ability to 
access experience from other PPP markets if necessary, their capacity and 
willingness to provide advice relevant to the local conditions, their under-
standing of the project and the procuring authority’s requirements and pro-
cesses, and information regarding the availability of individuals who will 
do the work. The experience of the individuals put forward can often be 
more important than the reputation of the firm itself. The scope of work 
should set out clear milestones of advice at which point clear deliverables 
are to be provided by the advisers before payments are made. Fee arrange-
ments should be set out clearly, specifying any assumptions that have been 
made to establish fixed-fee or cap arrangements together with any specific 
rules regarding expenses and travel. If input from particular individuals or 
a certain level of expertise are required, it is important to specify a mini-
mum quantity of this expected input or expertise. If a particular individual 
is to travel internationally, this should also be specified.
2
 In some markets, 
advisers may be appointed for the project preparation phase only and then 
2
  Sample terms of reference for various advisers on PPPs can be found on the World Bank and 
PPIAF’s PPP in Infrastructure Resource Center for Contracts, Laws, and Regulation at www
.worldbank.org/pppiresource.

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97
reappointed (or not) for the bidding phase of the project; this provides an 
opportunity to reassess their performance.
Role of Public-Private Partnership Units
Advisory support can be costly, and it is important for the public sector to 
be a sophisticated procurer and customer of external advisers. Their ser-
vices should be used in a focused way to maximize their effectiveness and 
value. In countries where they have a track record of experience in under-
taking transactions, PPP units can play a useful role in supporting the proj-
ect team in the hiring and use of external expertise. This role can include 
offering advice on which advisers should be approached, the selection, 
appointment, and contracting process, and the terms of reference against 
which advisers should bid for the advisory mandate. PPP units often develop 
guidance in this respect and even become involved in the approval process 
(especially if they are managing the funding mechanisms for project devel-
opment). By developing a more coordinated and consistent approach to the 
market, the government can help to encourage and develop the supply of 
good-quality advisers.
Management of Advisers
It is essential to give professional advisers sufficient access to the public 
authority’s planning, deal development, management, and decision-making 
processes for them to understand the project’s objectives and constraints and 
thus provide the best advice. It is counterproductive not to involve advisers 
fully in these aspects of a project, as this runs the risk that they will not have 
a complete picture and will give poor advice as a result. Advisers are not 
paid to agree with their clients; they are paid to offer professional, objective 
advice within their area of expertise. 
Regular meetings should be held with advisers to discuss their reports, 
monitor their performance, enable them to account for their activity in a 
project, and discuss the issues faced. 
In addition to regular meetings, it is good discipline to require advisers 
to sign off formally at key stages of a project, indicating that the project is 
ready to proceed to the next stage and that the proposals and timetable are 
realistic and deliverable. This encourages advisers to exercise due care and 
attention. If advisers do not believe that the project is ready to proceed, their 
objections should be formally recorded as well. 
During the initial planning stages, project teams should budget appropri-
ately for the cost of advisers throughout the process. A PPP unit can advise 
on the realistic costs of using advisers based on the complexity and size of 
the deal in question. While advisers’ fees may seem expensive, in the context 

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of deals that can exceed hundreds of millions of dollars in value, it is a false 
economy not to spend sufficient resources to ensure the availability of appro-
priate, high-quality advice. 
The appointment of a lead or transaction adviser who then subcontracts 
and manages the other advisers can simplify the procurement process and 
reduce the burden on the public authority, which only has to manage one 
adviser. This would be particularly useful in countries that are just starting 
their PPP program. However, hiring a consortium of advisers can sometimes 
deny access to the most appropriate advisers in each area of expertise. In 
more mature PPP markets, advisers are generally appointed separately 
for this reason. An alternative procedure to avoid this pitfall would be to 
appoint advisers separately, but to include in this process the choice of an 
adviser whose terms of reference would be to assist in managing the inter-
face of the government with the other advisers.
In the case of the rehabilitation and extension of the Queen Alia Airport 
(see the case study at the end of this chapter), the International Finance Cor-
poration (IFC) acted as lead adviser to the Jordanian government, while 
also providing long-term financing to the project. In this instance, strong 
controls existed to ensure that there was no conflict of interest between the 
IFC’s advising and lending activities and that the project benefited from the 
lender’s clear knowledge of the sources and terms of finance. The case study 
also illustrates the role of an adviser in coordinating the various sources of 
advisory support and in developing the credibility of the project. 
Advisers may receive part of their remuneration by way of a success fee 
paid when the contract is signed (and associated financing is made avail-
able). However, caution should be exercised, especially where advisory 
support is required at the initial stages of project development: the public 
sector’s interests in doing the right project and the adviser’s interests in clos-
ing a deal, if a large part of its fee is based on successful signing, may not 
always be aligned. It is generally better to pay advisers when they deliver a 
predefined work package, covering each identifiable phase of the project’s 
development process. PPPs are not about “doing the deal,” but about doing 
the right deal. Finally, the quality and reputation of the public authority’s 
advisers are an important factor for the private sector to consider when 
assessing whether or not to submit a bid. Good advisers add considerable 
credibility to a project. 

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Case Study: Queen Alia Airport Expansion, Amman, Jordan
Project: 
 Queen Alia International Air-
port expansion
Description: 
 25-year contract to upgrade, 
expand, rehabilitate, operate,
and maintain Queen Alia 
International Airport, Jordan. 
Financial close:    December 2007
Capital value: 
 US$675 million, of which 
US$370 million is debt and 
US$305 million is equity
Consortium: 
 Airport International Group, 
comprising Abu Dhabi Invest-
ment Corporation of Abu Dhabi (40 percent), NOOR of 
Kuwait (25 percent), J&P Avax of Greece (10 percent), 
EDGO Investment Holdings of Jordan (10 percent), Joan-
nou & Paraskevaides—J&P Avax subsidiary (10 percent), 
and Aéroports de Paris Management of France (5 percent)
Lead adviser: 
 International Finance Corporation 
Financiers:  
Islamic Development Bank (US$100 million lease); Inter-
national Finance Corporation (IFC “A loan” of US$70 
million; IFC “B loan” of US$160 million provided by 
Calyon, Europe Arab Bank, and Natixis; IFC “C quasi-
equity loan” of US$40 million; US$10 million stand-by 
facility)
Jordan aims to develop the country’s only international airport into a gate-
way to Africa, Asia, and Europe. Jordan’s Queen Alia International Airport 
(QAIA), located 32 kilometers south of the capital Amman, is an increas-
ingly popular transit point for tourists, business travelers, and international 
air freight. Passenger traffic has grown 6 percent a year in the last decade, 
rising to 3.5 million visitors in 2006. According to the Ministry of Trans-
port, the figure is expected to rise to 12.8 million passengers a year by 2030.
3
In a bid to position the QAIA as a regional financial, trade, and transport 
hub and meet increasing demand for capacity, the Jordanian government 
decided to rehabilitate and increase the capacity of the 25-year-old interna-
tional airport through a concession for a user-fee PPP. This would involve 
upgrading and operating the existing terminal building and constructing an 
3
 http://www.mot.gov.jo/en/statistics. 

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How to Engage with the Private Sector in Public-Private Partnerships in Emerging Markets
adjacent state-of-the-art terminal building covering 90,000 square meters. 
However, this project presented several challenges due to legislative changes, 
high up-front capital costs, and long payback periods that were required for 
a project of this size. Furthermore, the airport involved an iconic design that 
had already been chosen and approved. The design had to be brought back 
into line with the project economics, but with scope for future expansion. 
Disturbance to operations also had to be minimized during construction. In 
addition, commercial banks were not willing to provide long-term financ-
ing for a project without mitigation of the perceived high political risk in 
the region. 
The Jordanian government appointed the IFC as lead adviser to assist 
with these challenges.
4
 One of its first steps was to commission traffic reports 
from independent advisers to confirm the volume of air traffic and revenue 
forecasts and assess the bankability of the design and legal framework. The 
IFC advisory team then helped the Jordanian government to hold a fair, 
transparent, and competitive bidding process that attracted most of the lead-
ing international and regional airport operators and construction companies. 
In June 2006 expressions of interest were invited, and 28 responses were 
received. By October 2006, six consortia were short listed. In May 2007 the 
Airport International Group was chosen and granted a 25-year contract to 
upgrade, expand, rehabilitate, operate, and maintain the airport. The new 
building is expected to be operational in 2012. In exchange for assuming 
construction, operation, and demand risks, the private partner is entitled to 
a share of the airport’s gross revenue.
The winning consortium combined a strong lead investor, an experi-
enced airport operator, and construction experts from both the region and 
internationally. 
Total project costs of US$675 million are financed through a combina-
tion of shareholders’ equity, cash from operations, a US$100 million lease 
provided by the Islamic Development Bank, and a US$280 million financ-
ing package provided by the IFC itself, consisting of the following:
•  US$70 million, 17-year senior loan
•  US$40 million, 18-year subordinated loan with a 15-year grace period to 
match the cash flows generated during the concession
4
 Part of the World Bank Group, the IFC fosters sustainable economic growth in developing 
countries by financing private sector investment, mobilizing private capital in local and inter-
national financial markets, and providing advisory and risk mitigation services to businesses 
and governments.

Project Advisers
101
•  US$10 million stand-by loan to be disbursed in the event that the cash 
flows generated by existing operations are insufficient to complete the 
financing of the new terminal during the construction phase
•  US$160 million in a 16-year syndication that attracted French banks 
Calyon and Natixis as well as Europe Arab Bank. It also provided a swap 
to Airport International Group to minimize the interest rate risk on the 
transaction.
5
 
Key lessons of the project include the following:
•  Development finance institutions can play an important role as advisers, 
financiers, and guarantors in the development and implementation of 
large, complex PPP projects. Their participation can improve the credibil-
ity of a project and provide greater assurance for other providers of long-
term finance, investors, and contractors.
•  Capacity is important to the effective management and coordination of 
different advisers.
•  Advisers play an important role throughout the process, especially with 
regard to detailed project preparation and diagnosis before launching the 
bidding phase. This includes realistic demand forecasts, realistic cost esti-
mates, and well-defined project requirements; that is, requirements are 
not subsequently developed during the bidding phase. 
•  High-quality project documentation should be prepared in advance of the 
bid phase.
•  Strong management of the bidding phase and a fair, transparent, and 
competitive bidding process are essential to attracting and retaining inter-
est from high-quality international bidders.
•  Effective bid evaluation processes mean that the technical competence, 
strength, and experience of a well-balanced consortium are as important 
as the price.
•  It is important to integrate project design with project economics and 
bankability; predesigned iconic designs can present challenges and may 
not always be bankable.
5
  Project Finance International: http://www.pfie.com/. 

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M A N AGING   T H E   INI T I A L   IN T ERFACE 
W I T H   T H E   PRI VAT E   SEC TO R
8 .
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Project selection and preparation are likely to be ineffective if they are not 
based on a good understanding of how private sector bidders will view the 
project and what the costs are likely to be. In addition to input from the 
project advisers, project preparation needs to be informed by continual input 
from the private sector market.
Can this be done without launching the procurement process itself? Mar-
ket sounding (or “soft” market testing) is a tool that can provide the public 
authority with an opportunity to cross-check its thinking about the project 
with that of private sector specialists, including contractors, lenders, and 
equity investors, up to the end of the preparation phase (4Ps 2002; United 
Kingdom, Office of Government Commerce 2005). It provides an essential 
opportunity for the private sector to deliver feedback on how the packaging 
and scope of the project could be developed to ensure private sector par-
ticipation and improve competition. It may also give useful insight into the 
likely level of market interest, ensuring a better fit between the outcomes 
required by the public sector and those that the private sector can deliver. 
Good-quality feedback will come from sophisticated players who have par-
ticipated in similar schemes in other countries. It is important to identify who 
these players might be and to encourage them to participate in the process.
While the approach varies depending on the scheme under consideration, 
the issues commonly covered by market-sounding exercises include the 
scope of the project, any technical issues affecting the ability of potential bid-
ders to deliver the services, identification of any potential supply-side capac-
ity constraints, expected costs, payment mechanisms, key risks envisaged