4.32 A number of PPP units manage funds which defray some of the costs of developing PPPs (see Table 1 in Section 2). There are two arguments for the use of these funds. The first is that many governments new to PPPs do not appreciate the need to spend more on preparation of PPP projects than was spent on the procurement documents for civil works projects in the same sector. The second is that since PPPs are relatively new, the costs of preparing initial projects may be higher and that with learning some of these will come down.
4.33 One important issue is the terms on which this fund would be accessed. A purely grant-based fund would maximize chances of uptake, but would bring with it risks that it was not being used for priorities. This could be mitigated to some extent by having clear eligibility criteria for accessing these development funds - for example in particular pre-specified sectors, or sectors where the state concerned had done no previous PPPs, or projects serving mainly the poor. Having states borrow these funds would reduce the need for this but may negate the rationale for the funds, as given above. An alternative may be to have some form of matching grant scheme, with the states providing some financing to complement what comes from the project development fund. A national PPP unit could oversee the project development fund.