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Para 9.6 - Success Fees | KartavyaDesk

Consultancy Manual

Original Rule Text

3. Depending on the type of activity mentioned above and the circumstances of the Procuring Entity, the RfP specifies the relative weights assigned in the financial evaluation to the retainer and to the success fee, respectively. In some cases, the Procuring Entity offers a fixed retainer fee, and the consultant must compete only on the success fee as a percentage of the value of the privatization transaction. For QCBS (notably for large contracts), cost may be given a weight higher than recommended for standard assignments (such as 30 (thirty) percent), or the selection may be based on LCS selection. The RfP shall specify clearly how proposals will be presented and how they will be compared. Success fees are most appropriate when it is relatively easy to measure results in meeting the Procuring Entity’s objective (successful sale of assets) and when the success is at least partly related to the efforts of the consultant involved. Therefore, success fees are more likely to be adopted at the transaction stage, because by that time the Procuring Entity’s objective is to maximize revenue.

What This Means

Para 9.6 of the Manual for Procurement of Consultancy Services deals with how financial proposals are evaluated, especially when a 'success fee' is involved. Think of it like this: the government hires a consultant, and their payment is split into two parts - a 'retainer' (a fixed amount) and a 'success fee' (a bonus if they achieve specific goals). This rule explains how much weight each part gets in the overall evaluation. The weightage depends on the type of work and the Procuring Entity's needs. Sometimes, the retainer is fixed, and consultants compete only on the success fee percentage. For larger, more complex projects using QCBS (Quality and Cost Based Selection), cost may be given more importance than usual, or LCS (Least Cost Selection) may be used.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Financial evaluation considers both retainer and success fees.
  • •The RfP (Request for Proposal) specifies the weightage of each component.
  • •In some cases, only the success fee is competitive.
  • •For large contracts under QCBS, cost may have a higher weightage.
  • •Success fees are suitable when results are easily measurable and linked to the consultant's efforts.

Practical Example

The Ministry of Tourism wants to privatize a chain of state-owned hotels. They issue an RfP for a consultant to manage the privatization process. The RfP states that the retainer fee is fixed at ₹50 lakhs. Consultants will compete based on the percentage of the sale value they propose as a success fee. Consultant 'A' proposes a success fee of 2% of the final sale value, while Consultant 'B' proposes 1.5%. If all other factors are equal, Consultant 'B' will likely be selected because they are offering a lower success fee, thus maximizing revenue for the government. This aligns with Para 9.6, as the success fee is directly tied to the successful sale of the assets.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Frequently Asked Questions

What is a success fee in consultancy procurement?▼
A success fee is a payment made to the consultant only if they achieve specific, pre-defined goals, such as successfully selling an asset or completing a project within a certain timeframe.
When is it appropriate to use a success fee?▼
Success fees are most appropriate when the results are easily measurable and directly linked to the consultant's efforts. For example, in privatization transactions where the goal is to maximize revenue.
What is QCBS and how does it relate to Para 9.6?▼
QCBS (Quality and Cost Based Selection) is a selection method where both the quality of the proposal and the cost are considered. Para 9.6 states that for large contracts using QCBS, cost may be given a higher weightage than usual.
What does RfP stand for, and what is its role in this context?▼
RfP stands for Request for Proposal. It's a document issued by the Procuring Entity that outlines the requirements of the consultancy service and specifies how proposals will be evaluated, including the weightage of retainer and success fees.
Can the government change the weightage between retainer and success fee after issuing the RfP?▼
No, the RfP must clearly specify how proposals will be presented and compared. Changing the weightage after the RfP is issued would be unfair to the consultants who have based their proposals on the original terms.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Test Your Knowledge

Question 1 of 3

According to Para 9.6 of the Manual for Procurement of Consultancy Services, what document specifies the relative weights assigned to the retainer and success fee in the financial evaluation?

Related Rules

Para 8Manual for Procurement of Consultancy Services, 2025 - Para 8 - Chapter 10 - Annexure 18Para 9Manual for Procurement of Consultancy Services, 2025 - Para 9 - Chapter 10 - Annexure 18Para 1.10.2Manual for Procurement of Consultancy Services, 2025 - Para 1.10.2 - Chapter 1Para 1.11Manual for Procurement of Consultancy Services, 2025 - Para 1.11 - Chapter 1Para 1.13Manual for Procurement of Consultancy Services, 2025 - Para 1.13 - Chapter 1

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