Although the Structural Funds regulations give considerable freedom to beneficiaries over the timing for submitting grant applications, in practice it is difficult to schedule the preparation and submission of a grant application in a way which will interface smoothly with the PPP procurement process. In particular, a choice has to be made as to whether to submit the grant application and gain certainty over its approval before financial close of the PPP (which reduces risks to the private sector over grant availability and therefore may encourage more bidders) or procuring the PPP first so that the project revenues and structure can be more accurately described in the grant application (which could increase the chances for a successful and shorter grant approval process). Either approach is possible, and the choice will depend on the project itself, the size of grant funding in total funding, the nature of the in-country approval process, and the risk appetite on the part of both the public and the private sector.
Whilst EU rules permit grant funding to be approved after a project is already implemented or under implementation, this carries the risk that the public and private sectors must commit themselves to the project before it is known whether the Commission will approve the project and confirm its funding. In practice, this is a major problem for a 'project financed' PPP structure where lenders will wish to be assured that the full construction financing has been contractually assured before committing themselves to a project. For this reason, a possible solution could be the choice of a so-called 'Design / Build / Operate' (DBO) project which, whilst retaining some aspects of a PPP structure, removes from the private sector responsibility for securing capital funding7.
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7 Please also see Annex III.