How to tell grants from procurements?
We have already explored how to approach EU funding (read our article here) and shed light on the support from the SME Instrument initiative (read more here). So in the third part of our EU funding series, we aim to give you an understanding for the financial contribution one should expect from the Commission, who in the end owns the results of a project and what are the procedures and legal forms whendifferentiating between grants and procurements.
The common definitions
While a company can be awarded a 10,000 euros grant for software development, a hospital can allocate substantial budget for the procurement of medical supplies.”
A grant is known to be an amount of money given to a person or an organisation, especially by a government, for a specific purpose. Procurement, on the other hand, means the process of getting supplies. While a company can be awarded a 10,000 euros grant for software development, a hospital can allocate substantial budget for the procurement of medical supplies. Moreover, those two options for support from the EU differ from each other in terms of objectives. So, grants contribute to the implementation of an EU programme and public contracts or procurements ensure the operations of EU institutions or programmes.
How much of your work will be financed?
If you are applying for a grant or procurement you might also wonder how much of your project will actually be financed. In the case of support from the EU, the financial contribution principle defines the actual amount of money you will get out of a contract with the Commission.
In this context, the co-financing principle applies for grants. This means, the direct contribution from the EU budget to the funding of a specific project is only up to a predefined ceiling of usually 70 – 80 per cent of the total costs. The difference of 20 – 30 per cent is to be supported by the project initiator, be it a single organisation or a consortium of partners, from its own budget or through third party contributions. When you are looking for a procurement, the contract will be closed on an agreed price of purchase that is usually based on a best value for money principle.
Can you make profit?
The non-profit vs. for-profit principle is another differentiator between grants and public contracts. One is not allowed to make any profit upon the money received through a grant – its purpose is only to cover the actual costs of the implementation of a project, for example, personnel costs or renting of workspaces. This is not the case with procurements. Here, the company or organisation who is selling its services or work to the Commission is allowed to make profit, just like in any commercial agreement.
Who owns the results of your EU funded project?
Concerning grants, the beneficiary of the financial support is also the owner of the results of a specific project or action. Take, for example, a research project. The final study belongs to the organisation or the group of partners who have been working on its delivery.
In the case of procurements, on the other hand, the European Commission is the owner of the outcomes; be they a website as an outcome of a service contract, or an office building as a result of construction works.
And how do you get to learn of these all?
The legal form … between the beneficiary and the European Commission is the grant agreement, respectively the procurement contract.”
The procedure is the way in which the two funding opportunities are made known to the public. While in the case of grants there is a call for proposals, public contracts will be made known through a call for tenders. These are full information packages on the objectives of the actions and technical specifications of the products or services, the conditions of participation such as the eligibility rules, the co-financing rate, the estimated budget, the evaluation criteria and the modalities for submission. The legal form which then concludes the agreement between the beneficiary and the European Commission is the grant agreement, respectively the procurement contract. Drafts of both are made available for consultation.
Dealing with concrete examples will give you an even closer insight into the different options for EU funding. So, taking a look at theH2020 call for proposals opened for SMEs until this December will not only give you an understanding for the scope of the initiatives but may also help you to decide which option is for you.