A Research on the Elastic Adjustment Mechanism of the PPP Contract

Abstract

PPP is a long-term cooperative relationship between the government and social capital. The PPP contract is not a business relationship but a kind of cooperation. The implementation of the PPP project is based on cooperation” and its problem-oriented is regarded as the effective solution of the public service supply. During the operation of the PPP project, the uncertain factors will break through the risk prediction of the PPP contract, which will lead to the loss of the foundation of contract conclusions, the imbalance of contract interests, and the deadlock of cooperation or the incompleteness of the PPP contract. Moreover, the information that can be obtained by both parties is limited and the risk is inexhaustible. The traditional contract system is based on the functional purpose of resolving disputes, paying attention to the rigor and strictness of the contract design, emphasizing on the measures of checks and balances, and paying attention to the division of all aspects including responsibilities and rights, lack of cooperation atmosphere flexibility. The logical starting point of the PPP model is cooperation” rather than confrontation”. The problems arising in the performance of the contract must be resolved in a more flexible manner, rather than focusing directly on the sharing of liability for termination of the contract and damages for breach of the contract. It is necessary to set up flexible management thinking of the PPP contract, establishing effective flexible adjustment mechanisms of the contract, forcing the PPP contract to be embedded by legislation, including flexible concession period, flexible price adjustment, flexible income distribution and stock right change, etc. The parties are needed to provide a path for renegotiation, allowing both parties to change the content of the contract through negotiation. In response to the challenge of contractual uncertainty and resulting problems, the path to the implementation of the variable clause of the PPP contract should include defining the trigger condition for the clause to be adjusted quickly, introducing to periodic review fixes, setting conditions for the contract to be renegotiated”, and arranging for renegotiation” between the government and the private sector. In the process of the PPP long-term contract performance, not all uncertain risks and situation changes can be adjusted and renegotiated. It is necessary to start the PPP contract adjustment within the framework of the contract system. Due to the diversity of participants and the complexity of the structure of the PPP model, the change situation of the situation of the contract cannot be defined uniformly, so it should be interpreted by expansion. Force majeure” and change of law” leading to contract change of circumstances” is the most important trigger factor of the PPP contract adjustment. That adjustment can construct an effective flexible adjustment mechanism of the PPP contract, so as to reduce the cost of project negotiation, to control the spread of risks, to avoid the breakup of the relationship between the two sides under the pressure of changes, and to save the crisis of cooperation, in line with the PPP model of the government and social capital long-term sustainability of the basic concept of cooperation.