A:

We presume that it is the Coordinator that is requesting this bank guarantee and not the Commission.

There are several other ways that the Coordinator could minimise any liability. We assume that there is also no third party that could provide a guarantee - it does not have to be a bank.

One way is to minimise the prepayment you receive.  i.e The Coordinator instead of giving you all the pre-financing, they could give you only half of it or say enough for six months work or three months work and then give you the next trench when you complete your first set of activities. Ultimately they could pay you in arrears for work undertaken but this is rarely necessary. Another way to handle liabilities is for example 10% to be withheld from the entire consortium to act as a reserve against any defaults. However, the most optimum solution is dependent on the exact circumstances of the individual members of the consortium and the levels of funding allocated.