In order for the project to be bankable, it needs to be economically sustainable; not every revenue-generating project will make enough revenue to be able to pay for itself. If the government party still wants to participate in the PPP project, it will need to consider how to fill the viability gap.

1. Some governments have viability gap funding programmes set up for this purpose, discussed previously.
2. Many projects use capital contributions as a means of reducing the financing cost of the project. It is essentially a government grant to the project. This has been addressed earlier under the construction period payment terms.
3. A subsidy would be a similar form of support during the operational period, e.g. payment of an availability fee alongside the right to recover tolls.
4. The government may also consider treating its contribution to the project as equity. This would allow the government to benefit from any upsides in the project.
5. The government’s contribution could also be structured as a loan, perhaps on concessional terms. Some countries have national infrastructure banks set up to play such a role, although the government needs to ensure that by doing so it does not unduly crowd commercial funders out of the market.

Instead of direct contributions, the government’s support could be contingent, and this may be sufficient for commercial banks to rely on to lend the additional funding required.

For example:

• A project with uncertain demand risk (such as a new toll road) could be supported by a traffic guarantee. If traffic falls below a certain level, the government party would be obliged to provide a subsidy to ensure the concessionaire can meet its financing obligations. The subsidy could be conditional (i.e. there could be an obligation on the concessionaire to repay it when profits are available in the future) or alternatively there could be a reciprocal obligation on the concessionaire to share super-profits with the government if they arise. This reciprocal arrangement is termed a “cap and collar”.
• If the procuring government does not have a clear financial covenant, a central government guarantee may be requested. In some projects, the government may provide a weaker letter of comfort, which is a promise that it will ensure that the procuring government is properly funded to meet its obligations. The enforceability of these letters however is not always without challenge.
• Bilateral investment treaties may provide a level of protection outside the contract where the government interferes with the investment, but they are not straightforward in practice to enforce.
• The government may need to provide additional works and services that fall beyond the scope of the project but nevertheless support its aims and objectives. This may include constructing connecting roads or railways, or carrying out upgrades to power networks or other utilities. In some cases there are reserved services within the project that can only be provided by the government, such as air traffic control services in an airport project.