Research On The Dynamic Performance Incentive Mechanism During The Operation Of PPP Projects From The Perspective Of Government

Public-Private-Partnership(PPP)is a new mode of infrastructure development between the government and the private sector.This mode has been widely used in many countries because it emerges largely for merits of relieving public budget constraint and improving infrastructure supplement efficiency by involving the private funds.However,during the operation of the PPP projects,renegotiation,buyback or even project termination may happen,which consequently lead to huge loss for social benefits.The reasons for these situations is shown as follows:(1)the government and the private sector mainly focus on the investment decisions of the PPP projects,but the government pays less attention to its supervision and management;(2)the effective dynamic performance incentive mechanism is limited;(3)the high dynamic uncertainty underlying the PPP projects may lead to the emergence of contract disputes.By deeply analysing of the failure of the PPP projects,we can find that the government is usually not able to establish effective dynamic performance drive mechanism for the private sector during the operation of the PPP projects.The lack of the dynamic performance drive mechanism makes the private sector lack the motivation to improve the private sector's work behavior,leading to inefficient PPP projects operation and the damage of the social benefits.Therefore,establishing the effective dynamic performance drive mechanism for the private sector from the government perspective is expected to operate the PPP project successfully and maximize the social benefit.Not only the academics have been discussed the theory of dynamic performance drive mechanism of the PPP projects,but it has been an important issue in the practice of the public infrastructure.The research explores the dynamic performance drive mechanism for the private sector of the PPP project from the government perspective.By mathematical modeling,which is based on the public infrastructure PPP project as the research object,we try to achieve the continual improvement of the social,economic and comprehensive benefits of the government.We construct the performance incentive model by applying the principal-agent theory,including the static performance incentive model and the two-stage dynamic performance incentive model incorporated with re-examination.Meanwhile,the analyses on the optimal effort level of private sector,maximization of government benefit,period of re-examination as well as the adjustment of the incentive parameters such as performance standards,coefficient of rewards and government subsidy are carried out,thus explaining influential factors to the social,economic and comprehensive benefits of the government and proposing optimization suggestions.Furthermore,the effective adjustment range of coefficient of rewards is discussed under different constraint conditions.The numerical analyses based on a case illustrates that dynamic performance incentive model incorporated with re-examination is able to achieve the maximization of the social,economic and comprehensive benefits.The research aims at providing the government sector with the theoretical foundation and support when making decisions on the performance incentive mechanism and the effective adjustment range of coefficient during the operation of the PPP project.Moreover,it provides scientific guidance for practice to determine the period of re-examination,promotes the dynamic performance drive mechanism for better sustainability of PPP projects and achieves maximization of government benefits.