2021/05/17 by Wei Xiong, Yilong Han · 1 citation
Business, Management and Accounting · Decision Sciences · #Auction Theory and Applications #Public Procurement and Policy #Public-Private Partnership Projects
paper · doi:10.1109/tem.2021.3074662
openalex publication_date 2021/05/17 · crossref created 2021/05/17 · crossref issued 2023/06/01 · crossref published 2023/06/01 · crossref published-print 2023/06/01 · crossref deposited 2024/01/09 · openalex created_date 2025/10/10 · openalex updated_date 2026/06/26 · crossref indexed 2026/08/01
Public–private partnership (PPP) projects often end in early termination and the governments must compensate private-sector partners and take over project assets. Based on multicountry experience, this article proposes a systematic approach on when and how to compensate efficiently and fairly. A compensation model was first developed to quantify the amount paid to the private-sector partners when early termination occurs, and built upon that, an incentive model was proposed to analyze the incentives of both contracting parties. We then testified our propositions through two realistic cases. In line with the incomplete contract theory and the reference point theory, the findings demonstrate that the proposed compensation method increases the the private sector's incentives of relationship-specific investments, but discourages its efforts to prevent early termination in serious risk scenarios. This article not only contributes to the theoretical development of PPPs on contract design and incentive mechanisms, but also offers solutions for practitioners in the early termination of PPP projects.