An application for a grant pursuant to this chapter shall not be approved by the department unless the department determines that the public agency is otherwise unable to meet minimum safe drinking water standards established pursuant to Chapter 4 (commencing with Section 116275) of Part 12 of Division 104 of the Health and Safety Code. No grant shall be made by the department except upon approval by the State Department of Health Services of project plans submitted by the applicant and upon issuance to the public agency of a permit or amended permit as specified in Chapter 4 (commencing with Section 116275) of Part 12 of Division 104 of the Health and Safety Code.