through a well-designed contract, but frequent occurrence of renegotiations and
early terminations shows that ex ante risk
management is not sufficient for projects
that are extremely complex and risky,
such as PPP infrastructure projects. The
ex post risk management is a complement
of ex ante risk management and can be
used to deal with risks dynamically in the
long concession period of PPP projects.
The framework can be a foundation for
future studies of renegotiations and early
terminations in PPP projects. Second,
this study proposes a quantitative ex post
risk management model, which involves
a series of ex post risk response measures
in concession renegotiation and early termination. There has been some literature
about renegotiation and early termination in PPP projects, but most literature
concerns particular types of them, such
as that from Xiong and Zhang (2014b),
which develops concession renegotiation
models for three types of renegotiations
and that from Xiong, Zhang, and Chen
(2015), which builds a compensation
model for early termination based on the
MV method. The ex post risk management
model involves seven different types of
risk response measures and compares
their effectiveness and characteristics, so
it enables the decision makers to select
the most suitable one in serious risk
Limitations and Future
A main limitation of this research is
that the illustration of the ex post risk
management approach is based on a
hypothetical case. Since the quantitative
model is original and not applied in real
life PPP projects, much effort should
be devoted to applying and testing this
model in the future. Some suggestions
for future research are as follows:
1. The execution of renegotiations
and early terminations should be
studied. This research only con-
structs a theoretical framework and
conceptual models for an ex post
risk management approach, but
more executive insights on how the
proposed approach may be written
into initial contracts are needed.
2. The transaction costs of different risk
response measures should be evalu-
ated. In the choice of risk response
measures, effectiveness and charac-
teristics are certainly main concerns,
but transaction costs of different
measures are also important.
3. The hold-up problems in ex post risk
management can be investigated.
The authors build the objective
function of ex post risk management
based on the financial equilibrium.
Nevertheless, we do not exclude the
possibility of hold-up problems, so
combining hold-up problems and
financial equilibrium in ex post risk
management is a topic for future
The authors’ special thanks go to all
reviewers of the article and to the
National Natural Science Foundation of
China (NSFC-71472037, 71671042); the
Social Foundation of Jiangsu Province,
China (13GLB005); and the Program for
Outstanding Young Teachers of Southeast University (2242015R30009).
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