2.1.2
Overall, the GHM model has got below defects: 1, lack of a solid power base, it is very difficult to reconcile these conflicts between two fundamental assumptions of “bounded rationality” and “future earnings foresee”, moreover, the incomplete degree of contract is exogenesis given; 2, lost sight of the fact of separation between ownership and control in the enterprise, and hard to explain the actions of professional manager that without ownership, therefore it is hard to provide a hierarchies or decentralization theory; 3, focused on the level of prior specific investment that direct result in the complete ignorance of afterwards adjustment process in the organization; 4, did not think about the asymmetric information therefore ignored many issues record; 5, lack of the supports of empirical facts.
 
2.1.3
Since the beginning of 1980s, there were some of foreign scholars already started researches the application of BOT model in the infrastructure, but the correlation domestic researches were appeared later, the first research of BOT model was appeared in the late of 1990s. However, there is not many using of the incomplete contract theory to research the BOT model literatures in both foreign of China currently, and there is no any research about BOT project assets ownership problems.
Present, the researches about BOT model in foreign and domestic are mainly focused to project risk period, concession period, concession price, laws and regulations and specific cases. The literatures of BOT project assets ownership issue research from the angle of incomplete contract theory is very less in foreign, most of the foreign scholars are mainly put the emphasis on using the incomplete contract theory to research the influence from assets ownership to PPP (Public-private partnership) model, the research method is having the significance to the research of this text. The one who made contribution to this aspect are:
On the basis of incomplete contract, Hart, Shleifer and Vishny get the issue of public services provided by government or enterprise attribute to ownership distribution, and built the model (HSV model) and analyzed the influence from ownership distribution to private sector investment level.
Then Hart and Iossa have expanded for HSV model, and put the key emphasis of the research on how to solve the inner externalities problem that in the construction period and operation period in long-term contracts through the ownership distribution.
On the basis of GHM model, Besley and Ghatak have taken using the incomplete contract theory researched the distribution problem between public and private sectors that when they cooperative producing the pure public goods.
Furthermore, on the basis of incomplete contract, Hart has researched efficiency difference of hand over the project construction and operation to one same company or multi companies to operate in the PPP model through the angle of ownership distribution.
 
2.3
As an infrastructure and public service supply mechanism that different with the traditional full charged by the government, the PPP given the multi links of value added chain that in the infrastructure to private sector, and the government should purchase the service from the private sector through the long-term contract. The PPP does not equal to the form of private sector (in China, the preferred terms are private sector and social capital) participate in infrastructure investing and financing and charge user fee by provide services in the narrow sense, in fact, it can be seen as a kind of comprehensive public marketing plan or franchise plan. According to the summary of PPP concept from Peirson and Mcbride (1996), a very important characteristic of that is, in the given period, the private sector entity provide public services through the infrastructure, there into, usually have a certain limit to operation and pricing. However, in the PPP concepts that from the 1998 United Nations Development Program, the cooperation parties could reach the more favorable results compare to operate independently through the cooperation of PPP form.
Because there are many forms and contracting schemes existing, the exact meaning of PPP is usually needs to determine by different cases and conditions, even the international bodies such as World Bank, International Monetary Fund and European Union are also have different definition and taxonomy for PPP. Withal, Wanghao (2004) has systematic summarized the definition and taxonomy for PPP. In recent years, the conceptual aspect research about PPP is deepening; it is included in IMF (2004), J-Edebettignies and Ross (2004) as well as Hodge and Greve (2007). According to the existing research findings and own understanding, this article is defined the PPP is launched by government, and it is the established long-term contract relationship according to the specific public projects (consist mainly of rigid or soft infrastructure project) between public and private sectors, there into involving in allocation of responsibilities of financing, construction and operation. The target is to integrate the power of private sectors and better provide the traditional infrastructure and public service by public sector. Firstly, the government will aim at the new project that has the long-term operation characteristics to create the quality and price standard of infrastructure and service, and on this basis to carry out the tender to ensure the private association that willing to participate in PPP and sign the formal contract that having certain deadline. And the required project construction investment will go through a complex financing plan that responsible by government and private association to finish, as well as the construction and operation of the infrastructure will normally responsible by private association, within the contract period, the invisible incoming is included in user charge and government subsidies.
For the traditional public service supply way, apart from the construction of infrastructure is normally determine the person in charge by tender thus allow the participation for private sectors objectively, the public sector is usually in charge of the investing and financing as well as the operating service of the infrastructure of the project. As a special form of alliance (or it can be called as hybrid organization) that based on the contract which established between public and private sectors, PPP has got three significant different common characteristics compare with the traditional infrastructure and public service supply form.
Firstly, project responsibility integration. PPP usually get the investing and financing, construction and operation of a new infrastructural project hand over to an association that constituted by one private sector to take charge, and the role of government will converted into promoters and regulators from an all-round person in charge. According to the difference of each situation, the association maybe constituted together by public sector and private sector as well.
Secondly, the transfers of project risk. The PPP contract is contained a complex rules that from public and private sectors to risk allocation. Compare to the general government procurement outsourcing, PPP is easier to transfer the responsibility and risk to private sector. On the basis of the government create the quality and price standard of infrastructure and service and effective supervision, the private association of PPP have got the de facto control of the actual construction and operation, this is made the government is easier to transfer the management responsibility and risk to private sector. For the specific case, the original adopted operation mode of bird's nest is just the PPP.
Thirdly, the incomplete contracting of long-standing relationship. The contract period of PPP is 15-30 years in general. Just as the emphasized in transaction cost economics, the relationship-specific investment of public-private partnership parties is the key of the next surplus, the prior complete competition environment will convert into bilateral monopoly environment afterward. The afterward produced quasi-rent will lead to each kinds of opportunism risk, so the PPP must use the long-term contract to manage their relationship. The creation, implementation and modification of the contract are exactly the essential elements; it is also the foundation of public and private cooperative partner surviving. Due to the chronicity of project cooperation relationships as well as the uncertainty of economic and geopolitics environment, the PPP contract has got the naturally incompleteness.
The things need to emphasize are: through the innovation of PPP system, the role of government will converted into promoters and regulators from an all-round person in charge, his responsibilities are mainly: one, create the reasonable public service price plan and the quality standard bout the communal facilities and services and supervision to this, let allocation of resources consistent to government’s other policy targets, such as the social policy and environmental protection. Two, provide the prior and afterward guarantee and supports to private sectors in order to ensure effectiveness of the symbiosis. Three, according to the demands of the projects, the government maybe joint venture with private sectors; in the operation stage of the projects, the government maybe compensate based on the costs or profits according to project risks that private sector taken; when the accidents happened and lead to renegotiation of the contract, maybe the government needs to compensate to the lost of private sectors.
 
2.4.1
Three reasons are likely to cause the incompleteness of contract in BOT project. One is that the contract of BOT project is unable to stimulate a detailed performance level to the facilities and service quality standard provided. Another one is because the long concession period of BOT project, the concession period, usually will last 20 to 30 years and even more, a new technology will probably emerge during that period, and also will make a great improvement to the efficiency of this project, however, this contract of BOT project is unable to predict this and give a detailed clauses to this new technology. The last reason is about the empirical cost, the important information in contract is observable for both parties, but is unsustainable to the third party (for example: the court). We make an analysis at length to the reasons that could result in the incompleteness of contract in BOT project as below:
(1)    The contract of BOT is unable to stimulate a detailed performance level to facilities and service quality standard provided, this shall result in the incompleteness of BOT contract.
We can conclude from above analysis that government entrusts private enterprises with the rights of financing, construction, operation and maintenance by through concession agreement signed with these private enterprises, in which concession price, facilities performance level, and service quality standard are stimulated. Just as what has been mentioned in before, this kind of concession agreement is a contract between government and enterprise about BOT. BOT contract lists a good deal of indexes and clauses about facilities and service quality provided. But it is absolutely impossible for BOT contract to set pretty appropriate evaluation indexes to all, or list all appropriate evaluation indexes or clauses in detail. This is because the limited rationality of human being and uncertainty to future. The limited rationality of human being determines that people is unable to set pretty appropriate evaluation indexes and clauses. And the uncertainty to future will probably result in the increase and decrease of evaluation indexes and clauses, or even changes, and thereby bring about the incompleteness of contract in BOT project.
(2)    New technology will probably arouse the incompleteness of BOT contract.
Generally, BOT enjoys a comparatively long concession period, it is probably that this new technology emerging during the concession period will be adopted by BOT, and greatly improve the efficiency of BOT.
Usually, BOT contains some phases as below table 3.1 shows:
①Project setting up. That is to primarily determine the project invested in the way of BOT.
②Bid inviting. Once a BOT project was determined by government, the best way to seeking for investors is to invite bids.
③Evaluation and award of bid. Bidding agency organizes a bidding evaluation agency which consists of experts in BOT project, and these experts will evaluate the bidding documents and choose the suitable bidder.   
④Project development. Bidder and government will form a project company after initiating a concession agreement, and then begin to negotiate with other participators in BOT, and get a clear commitment, Project Company then shall sign a official concession agreement with government and sign contract with entity.
⑤Project construction. Project Company starts its construction according to official concession agreement, among them, most of projects in BOT are built by contractor, and transfer projects to project company after accomplishment. 
⑥Project operation. Project Company transfers the construction to Operation Company since the accomplishment of construction by contractor; Project Company recovers cost and gets benefit.
⑦Project transition. When the concession comes to the end, Project Company shall transfer the construction to government for free. The process of transition as follows:
 
From above discussion, we know that Project Company is in charge of construction, operation management of a project, and then transfer to government by free of charge. In the concession period of 20-30 years, there exists the possibility of changes of performance standard or the introduction to new technologies in the period of operation. However, this uncertainty to future is unable to be written in the concession agreement of BOT. We take the sewage treatment in BOT as an example, we tend to adopt activated sludge wastewater treatment in the beginning in China, afterwards, as time goes on, and the development of new technology, a series of new technologies of sewage treatment were adopted, such as AB process, A/O process, AA/O process, CASS process, SBR process, oxidation ditch, stabilization process, earth disposal technique etc., they improve the efficiency of sewage treatment in BOT. because of the long concession period, this situation will probably happen in the construction in BOT mode of power factory, expressway, and other infrastructure. Under this situation, the contract of BOT project signed between government and enterprises is absolutely unable to reflect the detailed clauses to these new technologies; therefore, we say the contract of BOT project is incomplete from that aspect.
(3)    Empirical cost gives rise to the incompleteness of the contract in BOT project.
This mainly refers to that some important information shared by government and enterprises is observable, but is unsustainable (for example: the court) for the third party. For example, the performance level of social infrastructure include: the elements, such as: the pits, cracks etc. in the surface of building and construction that could be explained by evaluation index (we call it prescribed elements); the damages to construction itself or to its internals, as well as hypo-function etc. uncertain elements (we call it non-prescribed elements). We can make an evaluation by clear indexes for the former. Because these elements are observable and could be verified by the third party, they could be written in contract as a clause. But for the latter, although they are observable, is unable to be verified by the third party, they are not permitted to be added in contract, that is to say the contract of BOT project is unable to describe all performance level and service quality in detail, therefore, the contract of BOT project is an incomplete contract.世联翻译公司完成经济专业领域英文翻译

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