Contract Governance, Uncertainty, and Project Performance: Evidence from Water Environment Public–Private Partnerships of China

A public–private partnership (PPP) contract is a long-term procurement contract between the government and private sector, which inevitably faces uncertainties. Existing studies have shown that uncertainty has a significant negative impact on project performance. Some strategies to deal with uncertainty have been proposed; however, they lack systematic attention to PPP contract governance. This paper builds a theoretical framework of PPP contract governance under the constraints of “behavior and environment” through the derivation of classic theories. The framework includes four theoretical variables: output-based specification, good-faith cooperation, flexibility, and public interest protection. The theoretical framework was tested empirically based on data from 368 respondents of a set of survey questionnaires regarding water environment PPP projects. Results reveal that the four theoretical variables are an organic unity and that PPP contract governance and its four dimensions have a positive impact on project performance. Meanwhile, this paper uses the NVivo12 quantitative analysis tool to identify the PPP mechanism: PPP contract governance promotes project performance through the prevention and reduction of behavioral, environmental, and semantic uncertainties. These findings provide evidence from the context of developing countries, such as China, for the improvement of PPP contract governance theory. Moreover, these findings contribute empirical experience and wisdom from contract governance theory to the improvement of long-term project performance.