May 2011 – Regional Growth Fund: Round 2 - To bid or not to bid?
The second round of bidding to the Regional Growth Fund (RGF) opened on 12th April 2011. Across England, private sector organisations and public/private partnerships have until noon on 1st July 2011 to submit full applications to the Department for Business, Innovation and Skills (BIS).
Round 1 was massively oversubscribed. Some 464 bids with a combined value of £2.78bn were submitted to the BIS. On 12th April 2011, 50 awards were made with prospective RGF contributions totalling £450m (subject to due diligence checks). According to data released by BIS, the majority of successful bids were physically located in the midlands or north; many were allied (more or less closely) to large industrial firms; and a good proportion had sectoral foci clustered around the stalwarts of industrial policy, both traditional (aerospace, automotive) and new (environmental technologies, bioscience).
Whatever the fall-out from Round 1, codified “lessons” – over and above those already distilled from BIS data – are unlikely to be instructive at this stage. Those who bid unsuccessfully into Round 1 were promised feedback, but our understanding is that the BIS RGF secretariat has been overwhelmed with enquiries from prospective Round 2 bidders such that feedback sessions may, in many cases, be squeezed out. In addition, BIS seems reluctant to release more specific information about the Round 1 outcomes. Further analysis is therefore unlikely to be rewarding at an aggregate level, certainly within a timescale that is useful for informing Round 2 bidding decisions.
Against this backdrop, many public/private partnerships are currently deciding whether it is worth bidding into Round 2: the effort required will be substantial and success is far from certain. On the assumption that would-be bidders have learned all they are going to learn from Round 1, how should Round 2 “bid/no bid” decisions now be made?
Think hard about eligibility…
With regard to Round 2 – as Round 1 – there are immediate issues relating to eligibility. In principle, these ought to be straightforward. However one of the (largely unstated) lessons from Round 1 is that the eligibility question is actually quite complicated, particularly as regards State Aid compliance. The rules in relation to State Aid vary by sector, by geography, by the size of firm and by the type of support, and bids need to be capable of being structured so as not to fall foul. It all sounds very obvious. But the provision of an extensive annex in the Round 2 guidance1 is testament to some of the stumbling blocks that were encountered repeatedly in Round 1.
Submit your Round 2 RGF Expression of Interest as a matter of urgency…
In part to check issues relating to eligibility, we would strongly advise would-be bidders to submit Expressions of Interest (EoIs) to BIS. The Round 2 process differs from Round 1 in including this additional stage. It is not compulsory. However, used appropriately, it could save prospective bidders from (potentially) wasting a good deal of time, energy and resource for with the EoI comes the possibility of an individual meeting or 1:1 session (with a BIS advisor) at one of the RGF Roadshows.
In this context, time is of the essence. The Round 2 guidance advises that requests for these sessions – triggered by the submission of an EoI – are needed by 1st June 2011. However, some of the Roadshows are planned for later in May. The implication is that would-be bidders that wait until the end of the month could miss the boat. Moreover, our expectation is that these slots will again be heavily oversubscribed.
Consider whether there is genuine “partnership capital” to be generated (or lost) through the bidding process…
Assuming eligibility and a broadly supportive “nod” from one of the bilateral sessions, there is still a decision to be made with regard to the full application: is it worth proceeding? It is very difficult to know what to read into the Round 1 outcomes in this context. It could be that Round 1 was all about “quick wins” whereas Round 2 – with the opportunity for programmes rather than just projects or project packages – may be more developmental in focus and longer term in timescale. Hence whereas Round 1 was (apparently) mostly about large firms, it might be that Round 2 brings with it more space for small firm solutions, perhaps over a more dispersed territory, and perhaps focusing as much on rural areas as large urban ones. Or it could be that – effectively through case law – the Round 1 model is now the favoured one and that Round 2 will simply endorse and confirm it.
What is clear, though, is that Round 2 is likely to be as oversubscribed as Round 1, and that bids that are immediately and obviously consistent with the two main RGF objectives will be the favoured ones. Beyond that, there are few certainties and no guarantees.
“Bid/no bid” decisions need to be made in this context. Particularly for emerging Local Enterprise Partnerships, it could be that the process of bidding should actually be seen as part of the ultimate prize. Whether or not it succeeds in securing RGF monies, the process of bidding will require priorities to be defined and evidenced. Additionally, particularly in the context of programme bids, it will require some consideration of strategic linkages to European Programmes, possible Enterprise Zones, and longer term opportunities surrounding Tax Increment Financing (TIF). It will also require strong working relationships to be forged across the private and public sectors in pursuit of area-based regeneration and growth. What will be the catalyst for building “partnership capital” of this nature if it is not the RGF process? Will it plausibly happen without the immediate carrot of a funding prize? And without it, what is the future of Local Enterprise Partnerships which – in many situations – remain embryonic and fragile? Simply by engaging in the RGF process, it could be that “partnership capital” is created and this, in turn, could yield potential benefits. But the reverse may also be true. Might an unsuccessful bid finally convince key private sector players that “the economic development thing” is simply a waste of time and effort? These are important issues and ones that should be considered fully as the deadlines for the Round 2 RGF bidding process approach rapidly.