To provide Technical Support to the Debt Management Section (DMS) to re-engineer the Debt Recording and Management System (CS-DRMS)

Reference: PX/CWG/090
Location: London, UK with travel to client sites in 4 Commonwealth countries
Duration: Eight person weeks or 40 person days
Closing Date: 6 Feb 2013

Project purpose

To Provide Technical Support to the Debt Management Section (DMS) to Re-Engineer the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS) for the Valuation of Guarantees, Lending Pricing and Calculation of Guarantee Fees

Background

The Debt Management Section (DMS), of the Special Advisory Services Division (SASD), implements the Commonwealth Secretariat’s capacity building programme in debt management in its member countries. As part of the debt programme, DMS has developed and continuously maintains debt management software comprising the Commonwealth Secretariat Debt Recording and Management System (CS-DRMS) and the Commonwealth Secretariat Securities Auction System (CS-SAS). They are used by 61 countries around the world, including 15 non-member countries. Further information on CS-DRMS is available at: www.csdrms.org

The Secretariat will soon embark on a project to re-engineer the CS-DRMS suite based on new technologies and user requirements. Proposed architectural and functional enhancements aim to render the software more business-friendly and transform it into a decision making tool that better assists public sector debt managers. One of the new functions to be introduced will be a module on contingent liability management to better support governments record, monitor, analyse and manage contingent liabilities within a risk management framework. The module will also include features for analysing and determining pricing of government lending instruments.

Scope of Work

Most governments provide loan guarantees to public enterprises and the private sector that cover credit risk on both principal and interest repayment obligations of the borrower. In other cases, governments offer performance guarantees on infrastructure projects as part of Public Private Partnership. All these financial guarantees provided by the government constitute explicit contingent liabilities of the government. Although contingent liabilities do not demand immediate payment, future obligations are expected. These require careful administration, accounting and management. Governments also engage in lending operations to various public and private sectors and the recovery of money lent has implications on the government’s fiscal balance. Given these liabilities or losses can emerge as a potent source of fiscal risk, there is a need to prudently manage such contingent liabilities through appropriate policy framework, institutional arrangements and technical capacity in measuring and managing such risks.

The Secretariat is envisaging enlisting consultancy services to develop detailed functional requirements of the various methods used by the public sector for the valuation and accounting of guarantees, calculation of guarantee fees, public private partnerships (PPPs) based guarantees, and government lending pricing. The functional requirements will be used as the basis for developing module in CS-DRMS for managing guarantees and lending operations. Specifically, the consultancy services will provide detailed functional requirements for:

• Providing  financial characteristics of public private partnerships (PPPs), government guarantees (guarantees on loans/securities, performance guarantees), and government lending instruments;
• Describing institutional arrangements and business process involved in the management of loan guarantees, PPPs and lending operations;
• Analysing various risk transfer mechanisms involved in the above mentioned operations;
• Surveying policy options and tools adopted by countries in managing contingent liabilities and lending operations;
• Providing a detailed account of various risk assessment mechanisms under different settings;
• Measurement and valuation of contingent liabilities;
• Describing methods of guarantee valuation models including the probability of occurrence of the trigger event for calling of guarantees or leading to non-recovery of money lent;
• Describing the various methodologies for analysing the fiscal impact Estimation of charges like guarantee fees and pricing of lending ;
• Provisioning and disclosure mechanism for various contingent liabilities and lending;
• Specifying existing and emerging methods of guarantee accounting;
• Using of other instruments like escrow accounts to bolster the credibility of a guarantee;
• Credit rating methodologies for the calculation of guarantee fees and lending pricing.

These details are expected to be provided in two separate reports. The first report will comprise a survey of country experience on the management of contingent liabilities and lending operations that would set out a generic framework on the financial structures; institutional arrangements; business process; policy aspects; analytical issues and methodologies on its management including risk analysis and risk management; pricing and provisioning aspects; and accounting treatments. 

The second report will detail out the various functional requirements to cater the above mentioned requirements that would form the basis for the development of contingent liability module in the redeveloped version of CS-DRMS. Draft and final deliverables produced during this assignment will be the property of the Commonwealth Secretariat which will hold the copyright to their use.

Required Technical Expertise

Consultant(s) should have the following mix of expertise: 

• A good knowledge of public debt and fiscal management process;
• Demonstrable experience and good understanding of issues and industry best practices in pricing of government lending to other institutions;
• Demonstrable experience and good understanding of issues and industry best practices on contingent liabilities  based on various public private partnership service vehicles; 
• Demonstrable involvement in, and good understanding of issues and industry best practices in valuation, accounting and risk assessment of government guarantees;
• Consulting experience with regard to provision of functional requirements for software application;
• Knowledge of technical assistance work and processes will be an added advantage;

In cases where a bid comprises a team of experts, the bid should clearly specify the lead consultant and roles and responsibilities of each team member.

Location and Level of Effort

The consultant(s) will be expected to work closely with DMS staff and regularly demonstrate progress to DMS. 

Consultant(s) will need to travel to the Commonwealth Secretariat office in London, UK for initial discussions with the team and also for the presentation of findings and recommendations. As part of this assignment, the consultant(s) will be expected to travel to four countries for two days each at different stages and methodologies of guarantees valuation and lending pricing.  The specific countries to be visited will be communicated to the successful bidder by the Commonwealth secretariat. The Secretariat will also arrange for the visits and meetings with relevant parties in the respective countries. Other client sites may be surveyed through teleconferencing/video conferencing or email/questionnaire. Any other relevant work can be done at the consultant’s premises.

The level of effort anticipated for the assignment is up to around 40 person days/8 person weeks during period February – April 2013.  This would include consultations with DMS and other relevant parties, survey of clients, research, documentation and submission of draft report, presentation of recommendations to the Secretariat and finalisation of the report. Bidders will specify the number of person days they expect the assignment will take.

Remuneration

The Secretariat will offer:

• Consultancy fees (the daily rate would be up to £499 per day)
• Economy class return air fare to London and client sites, as applicable.
• Daily subsistence allowance for nights spent in London and at client sites at prevailing UN per diem rates, as applicable

These payment terms will apply:

• 20 per cent of the consultancy fees after signature of contract.
• 30 per cent on submission of the first draft of the first report (on generic framework) to a standard deemed satisfactory to the Secretariat.
• 20 per cent on submission of the first draft of the second report (on functional requirements) to a standard deemed satisfactory to the Secretariat.
• 30 per cent of the fees after completion of work to the satisfaction of the Secretariat.

Assessment Criteria

Bids will be assessed based on:       

• Understanding of the terms of reference;
• Methodology and work plan for undertaking the assignment;
• Qualifications and Experience of bidder/consultant.
• Consultancy fees

Submission of Proposals

Proposals must include:

• The profile of the consultant and details of similar projects undertaken;
• A write up explaining:

• the bidder’s understanding of the assignment;
• the methodology for undertaking the assignment and achieving the objectives;
• the adequacy of the consultant’s knowledge and experience with reference to the assignment and required expertise;

• Detailed CV of consultant(s) showing skills and experience related to the assignment;
• A detailed work plan with milestones showing involvement of proposed consultants for different activities; the work plan will also show which activities will be carried out in London for which there will be need for consultants to travel to the Secretariat;
• Total consultancy fees

Further Information

How to apply

Terms of Reference