What payment methods are recommended by GFOA for municipal advisors when developing an RFP?

The recommended payment methods for municipal advisors when developing a Request for Proposals (RFP) emphasize a structure that promotes transparency and aligns the interests of the advisors with those of the municipalities they serve. Payment structures such as hourly or retainer basis are encouraged because they allow for clear billing practices and promote accountability. These methods ensure that advisors are compensated for the time and resources they devote to providing guidance and tailored financial advice, rather than incentivizing them based on the volume of transactions or outcomes, which could lead to conflicts of interest.

Using an hourly or retainer approach helps establish a consistent and predictable cost structure for municipalities, making it easier for them to budget and plan for advisory services. This method also fosters a working relationship built on mutual trust, as advisors are compensated for the value of their time and expertise, rather than potential commissions or performance fees, which may skew their recommendations. Thus, choosing hourly or retainer payment aligns with best practices in public finance management as advocated by organizations like GFOA.