Project Sustainability and Public-Private Partnership: The Role of Government Relation Orientation and Project Governance

Abstract

In China, the government is not only responsible for the supply of local public facilities and services, but also the maker of public-private-partnership (PPP) policies and systems, and has a greater voice in PPP projects. The attitude and behavior of the government are essential to the sustainable development of PPP projects. This research focuses on the deep-seated connotation of the external attitude and behavior of the government, that is, the impact mechanism and path of the government’s relation orientation on project sustainability. First, enrich the connotation of the government’s relation orientation, project sustainability, and project governance, and improve the measurement scale. Then, construct a structural equation model, collect data through questionnaires, and explore the path of the government’s relation orientation on project sustainability. The research results show that: (1) different relation orientations have different effects on project governance and project sustainability, among which instrumental relation orientation and rent-seeking relation orientation will directly affect project sustainability; (2) relationship governance and contract governance play different mediating roles. The research results provide new ideas and perspectives for improving project governance mechanisms and project sustainability in the practice of PPP projects in China.

1. Introduction

Producing and providing public goods or services with financial funds is the basic economic function of the government. However, with the increasing demand of the public for the quantity and quality of public services, limited financial funds have been difficult to meet the public’s needs for public services. It is very important to adopt the PPP model for investment and financing, construction, operation, and management of public projects. This is also an effective way to use the government’s limited resources to solve the problem of public goods supply under the background of the new normal of China’s economic development and the supply-side structural reform strategy.

Sustainable PPP can not only increase capital mobility, improve project selection and improve project efficiency, such as reducing resource loss, improving labor productivity, and reducing public management costs [1], but also promote economic growth and employment increase in the project location. In the field of PPP research, researchers evaluate the project performance in terms of Key Performance Indicators (KPI) and the whole life cycle but pay less attention to sustainability. For example, the standard emphasized in the Value for Money (VfM) evaluation of PPP projects mainly focuses on saving costs, striving for maximum output, and achieving expected results [2]. PPP projects are generally large-scale public infrastructure projects, and their construction and operation have a great impact on the economy, society, and environment [3]. Today, sustainable development is increasingly advocated in the whole construction field. If a PPP project performance evaluation lacks attention to sustainability, it is incomplete and does not meet the requirements of healthy development. Therefore, it is necessary to put forward a deeper connotation of project sustainability, and design measurement items for empirical research.

On the other hand, in China, the government undertakes the supply task of local public facilities and services and has the autonomy and decision-making power to choose the supply mode at the same time. In PPP projects, the government is often in a dominant or even strong position, and its behavior and governance ability in PPP projects have a strong impact on the smooth implementation of the project. However, so far, due to the unclear positioning of the public sector in PPP projects, it does not understand what role it needs to play, what capabilities it has, and how to improve it in public-private partnerships, leading to project failures from time to time. Therefore, the correct understanding and effective implementation of the government is the premise and guarantee for the smooth performance of the PPP project and the realization of the project value [4]. The attitude and behavior of the government towards the private sector are crucial to the implementation of PPP projects. Therefore, it is necessary to explore the in-depth connotation of the external attitudes and behaviors of the government, that is, the relation orientation, and its impact mechanism on project sustainability.

Relation orientation is not only an attitude but also a way of behavior [4,5]. However, there is a lack of research on the relation orientation of the government in PPP projects and its impact on project sustainability. This paper proposes that the government’s relation orientation in the PPP project means the government takes “relation” as the basis for the cognition of itself and the other sector, defines its own role, and reflects it through external attitude and corresponding behaviors [4]. In addition, the existing literature generally believes that relationship governance and contract governance, are two different aspects of project governance [6,7]. It is reasonable to speculate that project governance plays a role in the process of the government’s relation orientation influencing project sustainability, but the mechanism of this function still lacks theoretical deduction and empirical verification.

In order to explore the gaps in the above-mentioned research content, this paper, with the purpose of improving project sustainability, constructs a structural equation model to study the function path of different government’s relation orientation on project sustainability in PPP projects, and verify the mechanism of project governance in this process.

In conclusion, PPP project governance is a systematic project, which involves the participation of multiple subjects such as the government, social capital, and the public. It includes a series of interactions between public and private parties in each stage of the project. At the same time, “relationship culture” is a unique cultural connotation in China. Based on the government’s relation orientation, it is a new research idea to study the improvement of project sustainability.

This study contains some potential theoretical contributions. The first is to combine the reality of PPP projects in China, propose the definition and connotation of the government’s relation orientation and project sustainability, and divide the dimensions, design measurement scales, conduct empirical research. The second is to analyze the mechanism of the effects of the government’s relation orientation on project sustainability and discuss the mediating role of project governance in it. The research results provide new research perspectives and ideas for the governance of PPP projects, which are conducive to the healthy development of project sustainability.

Therefore, this paper mainly studies the relationship between government’s relation orientation, project governance, and project sustainability. The following are two main research questions (RQ):

RQ1:

How does the government’s relation orientation influence project sustainability in PPP projects?

RQ2:

How does project governance intervene between government’s relation orientation and project sustainability?

Based on the above research questions and ideas, the overall framework of this paper is shown in Figure 1 below. (1) Define the connotation and dimensions of the main variables, including the government’s relation orientation, project sustainability, and project governance. (2) Analyze the influence mechanism of government’s relation orientation on sustainability. (3) The hypothesis of the action path is put forward and verified to draw a conclusion.

2. Theoretical Analysis and Hypothesis

2.1. Theoretical Analysis

• Relation Orientation

At present, the research on organizational relationship orientation mostly focuses on the fields of enterprise management and marketing, and less on project-based organizations. The research of relationships in engineering projects, such as project relationship governance, often focuses on the relationship rules such as communication, trust, and commitment between the two parties. Compared with the static relationship rules, the government’s relation orientation is not static, but a dynamic process reflecting the influence of socialization.

In PPP projects, the government has a great impact on project promotion, the private sector, and project governance [4]. As a developing attitude and behavior, the government’s relation orientation has different effects on the project. Combined with the characteristics of PPP projects, this study divides the government’s relation orientation into three categories: emotional relation orientation (ERO), instrumental relation orientation (IRO), and rent-seeking relation orientation (RRO).

Specifically, ERO refers to that in PPP projects, the government tends to establish a long-term friendly partnership with the private sector, emphasize mutual emotional exchange, and show a series of behavioral reactions such as trust and cooperation, the two sides cooperate well; IRO focuses on the spirit of contract and mutual benefit, it emphasizes the business attitude in cooperation and the rational sharing of responsibilities and risks; RRO is to seek private ownership, which is a damage to the interests of the private sector and the interests of the project. For example, the government interferes excessively in the project implementation or operation stage, or the price adjustment mechanism is unreasonable.

2.

Project Governance

Crawford [8] believe that project governance is a set of common management framework and procedures; Turner [9] points out that project governance is always serving the realization of enterprise objectives, covering a series of methods such as governance structure, value system, process system and so on, which can help to achieve organizational goals. The research of project governance can be divided into two categories: one is the project governance structure, that is, from the organizational level, construct an organizational structure to achieve checks and balances on all parties [10]. The second is the project governance mechanism, that is, to solve the conflicts at the institutional level, integrate project resources and establish a coordination mechanism [11]. The governance mechanism is divided into contract governance and relationship governance.

In PPP projects, contract governance (CG) refers to the design of formal contracts to clarify the responsibility, achieve reasonable benefit distribution and risk sharing, reduce opportunistic behaviors of both parties, and reduce cooperation risks through the constraints of formal contract terms. However, the complexity of the PPP project environment and the characteristics of its social structure make contract governance unable to completely solve the problem, and relationship governance (RG) needs to cooperate with it. Relationship governance (RG) plays a binding role in the informal mechanism through emotional constraints of public and private parties, such as trust, commitment, communication, joint problem solving, etc. [12].

3.

Project Sustainability

The United Nations system is currently promoting the PPP model guided by the concept of sustainable development. The United Nations Economic Commission for Europe proposed to use the PPP model originated in Europe as an important mechanism and effective tool to promote countries to achieve sustainable development goals, research and formulate more than 30 PPP international standards that match the 17 UN sustainable development goals, and promote the realization of global sustainable development [13].

In order to solve the problems of financial budget constraints, insufficient provision of public goods or services, poor efficiency of public management, and so on, the PPP model came into being. The United States, France, Canada, Russia, and other countries are actively using the PPP model for infrastructure project construction or public service supply [14]. It is very important to improve the quality and efficiency of public goods and services with the help of the PPP model, especially after China’s economic development has entered the new normal, the supply-side structural reform has become an important goal [15]. As of December 2021, there are more than 10,000 projects in the National PPP project management database, with a total investment of 16 trillion yuan, involving municipal engineering, transportation, comprehensive urban development, ecological construction, environmental protection, and other industries.

This study holds that project sustainability (PS) refers to adhering to the development concept of “people-oriented”, and the final result of PPP project development will affect and promote economic development, social progress, and environmental protection. Project sustainability is not limited to the scope of the “iron triangle” (cost, schedule, and quality) of project management, which requires careful thinking and action from a macro and long-term perspective. The economy, society, and environment are recognized principles of sustainable development and are widely described as triple bottom lines. Combined with the research of other scholars, this study identifies the project sustainability evaluation indicators of PPP projects from the three dimensions of economy, society, and environment [16].

2.2. Hypothesis Development

2.2.1. The Direct Effect of Government’s Relation Orientation

• The influence of government’s relation orientation on project governance

When the government shows an ERO, out of the maintenance of long-term partnership, the government will strengthen the emotional connection with the private sector, and express more willingness and enthusiasm for good cooperation [17], which is embodied in friendly actions such as mutual trust, candid communication, mutual support, etc., all of which will help to improve the effectiveness of RG. EROs will also be more inclined to consciously perform contracts, and at the same time, communicate equally with the private sector in the process of contract negotiation and signing, which is conducive to signing a contract that is satisfactory to both parties [18]. Therefore, the ERO is also conducive to CG.

The government of IRO focuses on the “mutual benefit” of both parties in PPP projects and shows the characteristics of “instrumental rationality” in the process of cooperating with the private sector [4]. First, it shows the spirit of contract in the government, focusing on the contractual agreement and mutual restraint. The concrete manifestation in action is to earnestly fulfill the responsibilities in the contract, for example, taking risks, paying on time, and adjusting prices in a timely manner [18]. In addition, the government of IRO realizes that it is in an equal position with the private sector. Each party performs its own duties in the project and gives full play. Therefore, in the process of a project, it will communicate with the private sector equally and effectively, rationally resolve emergencies, do not shirk responsibilities, support each other, and give the private sector sufficient autonomy and control over the project [19]. These behaviors contribute to the formation and development of CG and RG.

Different from ERO and IRO, RRO focuses on short-term benefits. In PPP projects, the RRO may obtain private benefits through some franchises and resources [20], which is not conducive to the establishment and restraint of formal contracts and aggravates the conflict between the two parties. In addition, in the Chinese social environment, people hate the naked exchange of power and money and hate the use of power for personal gain. When the private sector realizes that the government has a rent-seeking orientation, it may enter into transactions with the government through bribery and other illegal means or other gray means to fight for competition protection or allow the public sector to relax review conditions. Although this kind of transaction will make the private sector obtain certain short-term benefits, it will also cause the private sector’s psychological disgust and distrust, which is not conducive to the establishment of a good relationship between both parties. Based on this, the following hypotheses are proposed:

Hypotheses 1 (H1):

EROpositively affects project governance.

Hypotheses 1 (H1a):

EROpositively affectsRG.

Hypotheses 1 (H1b):

ERO positively affects CG.

Hypotheses 2 (H2):

IRO positively affects project governance.

Hypotheses 2 (H2a):

IRO positively affects RG.

Hypotheses 2 (H2b):

IRO positively affects CG.

Hypotheses 3 (H3)

RRO negatively affects project governance.

Hypotheses 3 (H3a):

RRO negatively affects RG.

Hypotheses 3 (H3b):

RRO negatively affects CG.

2.

The influence of government’s relation orientation on project sustainability

Under ERO, the government gives full trust and support to the private sector, and the two parties communicate smoothly and interact well. The public sector and private sector will provide each other with true information as much as possible, the relationship is closely maintained, and the opportunistic tendencies and behaviors of both parties will be relatively weakened. Therefore, the cooperation satisfaction of both parties will be improved, and the transaction costs will be reduced [21], which is conducive to improving sustainability. Moreover, under ERO, the government will not be too strong, and the cooperation atmosphere between the two parties is relaxed and pleasant. The private sector has a certain degree of control and initiative, which can give full play to its advantages in project management and contribute to the control of cost, schedule, and quality. In this way, the project management efficiency is high, and the project results and output are guaranteed.

In PPP projects, the cooperation between public and private parties lasts a long time. In addition to the emotional maintenance brought by ERO, the mutual restraint under IRO is also a very important means. Under IRO, the government pays attention to the spirit of the contract, and mainly takes contract terms as the criteria for their actions in projects. In cooperation with the private sector, based on the principle of “business is business and mutual benefit”, the public and private parties can reach a more consistent result on risk-sharing and benefit distribution, and the same goals can also give full play to their respective advantages. On the one hand, it encourages the private sector to make greater efforts for project performance and realize the supply of public products/services in a more cost-effective manner [22]. On the other hand, in order to encourage the private sector to provide more cost-effective products/services, the government will also provide corresponding support, such as policy support, improving the efficiency and transparency of the approval process, etc., which will help to achieve better PS.

On the contrary, rent-seeking behavior is based on the premise that the government, which has specific resources, sacrifices social/public interests in exchange for personal interests [20]. In this case, the private sector, the project user, or the public’s satisfaction will inevitably suffer losses. In the process of project management, the private sector will also pay additional costs for rent-seeking from the government, resulting in an increase in project costs. In addition, the naked exchange of power and money is not conducive to the maintenance of equal partnership between the two parties, and the supervision function of the government no longer exists, which is not conducive to improving PS. Therefore, this research proposes the following hypotheses:

Hypotheses 4 (H4):

Government’s relation orientation has a significant impact on PS.

Hypotheses 4 (H4a):

ERO positively affects PS.

Hypotheses 4 (H4b):

IRO positively affects PS.

Hypotheses 4 (H4c):

RRO negatively affects PS.

2.2.2. The Role of Project Governance in the Influence of Government’s Relation Orientation on Project Sustainability

This article explores the path of the government’s relation orientation on PS. On the one hand, it is to verify the direct role of relationship orientation, and on the other hand, it is to verify whether “project governance”, as an important process to improve PS, plays a mediating role in the influence of government’s relation orientation on PS. Therefore, this article separately analyzes the role of RG and CG in the influence of the government’s relation orientation on PS, and proposes corresponding hypotheses.

• The role of RG in the influence of government’s relation orientation on PS

China is a typical relational society. The complexity of PPP projects makes the management process not only pay attention to changes in the project transaction environment but also deal with the impact of the social environment such as policy changes and government personnel adjustments. In addition, there are many project stakeholders, so PPP projects have significant social networking characteristics [10]. On this basis, many scholars add relational governance into project-based organizations (including PPP projects) for research. Many studies have confirmed the role of RG in improving PS. Benítez-Ávila [23] found that relationship norms such as trust and partner contribution play an important role in improving project sustainability; Yan Ling [24] combined with the Chinese scenario, found that RG has a significant positive impact on PS in the empirical study of public project governance, which is an important means to improve project management performance. In short, in PPP projects, RG can make up for the incompleteness of CG, effectively prevent opportunistic behavior, reduce transaction costs and improve PS. Therefore, Hypothesis 5 is proposed:

Hypotheses 5 (H5):

RG has a significant positive impact on PS.

For PPP projects, the government’s relation orientation not only shows its willingness, enthusiasm, and determination to cooperate with the private sector but also contains a series of specific behaviors. Research on the key success factors of PPP projects has found that relationship orientation will affect the cooperation and risk-sharing between public and private parties, and different relationship orientations will show different participation enthusiasm and ways of handling problems in the project. In PPP practice, a good relationship orientation of the government can derive good relationship norms, which is conducive to the formation of mutual respect, trust, communication, and other relationship mechanisms between public and private parties [25]. Both parties have the same goals and solve problems together. The government provides policy support and the tilt of public resources, while the private sector will also make more efforts to improve performance. On the contrary, a bad relationship orientation will weaken the expectations, communication, and mutual trust generated in the process of cooperation between the two parties, which is not conducive to the role of RG, increases conflicts and opportunistic behaviors between the two parties, thereby reducing management efficiency, and is not conducive to improving PS. Based on this, put forward hypotheses:

Hypotheses 6 (H6):

RG plays a mediating role between the government’s relation orientation and PS.

Hypotheses 6 (H6a):

RG plays a mediating role between ERO and PS.

Hypotheses 6 (H6b):

RG plays a mediating role between IRO and PS.

Hypotheses 6 (H6c):

RG plays a mediating role between RRO and PS.

2.

The role of CG in the influence of government’s relation orientation on PS

The contract clearly defines the responsibilities, rights, and obligations of each party in written form, which is a mandatory constraint for both parties to regulate their own behavior in the transaction process [6]. A PPP project is also a kind of temporary contract organization. The public and private sectors can restrict opportunistic behavior through the effective constraints of the contract, rationally allocate control rights, and ensure project performance [18]. In long-term cooperation, even if both sides have a good cooperation foundation and trusting relationship, it is necessary to sign a formal contract with clear terms, so that both parties have clear constraints on their actions.

The academia has carried out a wealth of research on the role of CG in improving project sustainability. Lumineau [26] believes that a well-designed complex contract has detailed regulations on the distribution of benefits, and penalties for breach of contract, which can reduce transaction costs, reduce the risk of “ripping up”, and ensure the sustainable development of transaction. The research of Roehrich [27] found that CG can restrict the behavior of both parties and guarantee project sustainability through its legal coercion. In summary, the role of CG in improving PS has been widely recognized. Based on this, Hypothesis 7 is proposed:

Hypotheses 7 (H7):

CG has a significant positive impact on PS.

The government will make behavioral decisions in line with its relationship orientation on the basis of preliminary expectations inspired by the inherent characteristics of the private sector in the pre-qualification and evaluation stage. The relationship orientation not only determines the efficiency of contract negotiation but also reflects the completeness, flexibility, and subsequent performance of the contract with specific terms. A good relationship orientation is conducive to promoting the contract terms of reasonable distribution of responsibilities, risks, and benefits, ensuring the relative balance of risks, benefits, and control rights allocation. Contracts with different functional characteristics will have varying degrees of impact on PS. Therefore, the following hypotheses are put forward:

Hypotheses 8 (H8):

CG plays a mediating role between the government’s relation orientation and PS.

Hypotheses 8 (H8a):

CG plays a mediating role between ERO and PS.

Hypotheses 8 (H8b):

CG plays a mediating role between IRO and PS.

Hypotheses 8 (H8c):

CG plays a mediating role between RRO and PS.

Based on the above hypotheses, a conceptual model of “government’s relation orientation, project governance, and project sustainability” is proposed, as shown in Figure 2.

3. Methodology

3.1. Sampling and Data Collection

This study takes energy PPP projects as the research object. The questionnaires are mainly distributed to the managers of large construction enterprises who have participated in the practice of PPP projects, financial institutions and investors who have participated in the investment of PPP projects, and scholars with practical experience in PPP projects, covering energy and power, water conservancy, environmental protection, and other fields. The questionnaires were mainly sent out by email and on-site distribution. Of the 300 questionnaires sent out, 276 were retrieved. After deleting some unqualified questionnaires (including missing information, unified answers, and the respondent declaring that they do not know the relevant fields), 218 valid questionnaires were finally obtained, with an effective rate of 72.7%, which satisfied the model test conditions.

From the distribution of the sample, 64.22% of the respondents are middle and senior managers of PPP projects (27 senior managers; 44 department managers/deputy managers; 69 professional supervisors); 195 people with a bachelor’s degree or above (accounting for 89.45%); Most respondents have been engaged in PPP projects for more than 3 years (accounting for 62.39%). The respondents have rich experience in participating in PPP projects and have a high degree of understanding of the whole process of PPP projects, which ensures the validity of the survey data. The detailed descriptive statistical results of the sample data are shown in

Table 1. Sample characteristics.

Measure	Items	Frequency	Percentage (%)
Education	Ph.D. and above	21	9.63
	Master	93	42.66
	Graduate	81	37.16
	Undergraduate	23	10.55
Work Experience	Less than 3 Years	82	37.61
	3–5 Years	87	39.91
	6–8 Years	33	15.14
	More than 8 Years	16	7.34
Position	Senior management	27	12.39
	Department Manager/Deputy Manager	44	20.18
	Professional director	69	31.65
	General staff	78	35.78

.

3.2. Measurement

This paper divides the government’s relation orientation into three dimensions: ERO, IRO, and RRO. It includes 6, 5, and 5 measurement items respectively. The research on PS is relatively mature. In this paper, PS is divided into three dimensions: economic sustainability, social sustainability, and environmental sustainability, with a total of 13 items. The research on PPP project governance is also relatively complete. This article refers to the research of Li Xiaoguang and others [18,28] on the mediating variables of RG and CG. RG is measured from three dimensions of trust, communication, and joint problem solving, with a total of 8 items. CG is measured from three dimensions of contract completeness, contract flexibility, and strictness of contract performance, with a total of 10 items.

Survey items are listed in

Table 2. List of coded survey items.

Variable	Code	Scale Item
Emotional relation orientation	GE1	The government is willing to provide assistance when we need it
	GE2	In the project, the government regards us as equal partners
	GE3	The government treats us sincerely
	GE4	The government is willing to share its feelings and experience of cooperation with us
	GE5	When there are objections in the project, we can understand each other and deal with them through negotiation
	GE6	The government believes that we have the ability to achieve the desired goals and supports us
Instrumental Relation Orientation	GI1	The communication between the government and us follows the principle of business
	GI2	The government believes that their rights should be equal to ours
	GI3	The government deals with us mainly to achieve its expected objectives (such as social benefits, environmental benefits, public satisfaction, etc.) and let us provide better products or services
	GI4	During the implementation of the project, the government strictly abides by the project process
	GI5	The extent to which the government helps us often depends on how we improve project performance
Rent-seeking Relation Orientation	GR1	The government is in a strong position in contract negotiation and operates according to its own will (for example, unreasonable risk sharing, independent decision-making, excessive intervention in operation and management process, etc.)
	GR2	The government uses administrative power to set up entry barriers to provide competitive protection for some social capital parties
	GR3	The government wants to have one vote veto on most matters of the project
	GR4	The government uses departmental legislation to form monopoly prices, which leads to excessive pricing or the price adjustment mechanism is not in line with the reality
	GR5	The government sometimes formulates cumbersome administrative examination and approval procedures and deliberately sets obstacles
Relationship Governance	Trust	R11	Both parties to the contract fully trust each other’s ability to achieve the expected results
		R12	The other party’s behavior is more consistent with our expectations
		R13	Both parties to the contract will take into account the interests of the other party when making decisions
	Communication	R21	The information communication between the parties to the contract is timely, accurate, and comprehensive
		R22	The communication channels between the contracting parties are flexible and diverse (such as joint office, on-site meetings, and other communication methods)
	Joint Problem Solving	R31	Both parties can actively and continuously implement the project plan
		R32	Both parties did not shirk responsibility for the problems in the project
		R33	Both parties can provide mutual support
Contract Governance	Contract Completeness	C11	The contract contains detailed special terms (project characteristics, rewards, treatment methods for breach of contract, etc.)
		C12	The contract terms are completely detailed
		C13	The provisions of the contract on the responsibilities and rights of each party are clear
		C14	The contract specifies the procedures for conflict resolution
	Contract Flexibility	C21	The contract sets a renegotiation procedure that can be changed and remedied
		C22	The contract establishes a flexible and feasible price adjustment mechanism
		C23	The contract establishes a flexible incentive mechanism for the transfer of control rights
	Strictness of Contract Performance	C31	The contract has strong legal binding force on all parties
		C32	All parties to the contract will consciously perform the contract
		C33	The contract establishes strict punishment measures
Project Sustainability	Economic Sustainability	S11	Life cycle cost is low
		S12	Project financing channels are rich
		S13	Internal Rate of Return is high
	Social Sustainability	S21	The project promotes local development
		S22	The project provides local employment opportunities
		S23	The project is safe
		S24	After the project is completed, all stakeholders are satisfied
	Environmental Sustainability	S31	The project has little soil pollution
		S32	The project has little air pollution
		S33	The project has little water pollution
		S34	The project has little noise pollution
		S35	The energy consumption of the project is reasonable
		S36	The project has good ecological effects

. The items were measured on a five-point Likert scale, from 1 (strongly disagree) to 5 (strongly agree). Cronbach’s alpha for government’s relation orientation, PS, and project governance is shown in

Table 3. Reliability analysis results.

Variable	Code	CITC	α after Deleting This Item	Cronbach’s α
ERO	GE1	0.76	0.81	0.84
	GE2	0.78	0.82
	GE3	0.65	0.83
	GE4	0.74	0.83
	GE5	0.62	0.81
	GE6	0.63	0.79
IRO	GI1	0.71	0.79	0.80
	GI2	0.66	0.76
	GI3	0.76	0.78
	GI4	0.71	0.77
	GI5	0.69	0.79
RRO	GR1	0.74	0.81	0.83
	GR2	0.80	0.82
	GR3	0.64	0.80
	GR4	0.75	0.82
	GR5	0.68	0.79
Trust	R11	0.73	0.88	0.90
	R12	0.81	0.85
	R13	0.79	0.86
Communication	R21	0.87	0.90	0.92
	R22	0.90	0.91
Joint Problem Solving	R31	0.80	0.81	0.89
	R32	0.79	0.88
	R33	0.75	0.87
Contract Completeness	C11	0.78	0.87	0.88
	C12	0.84	0.86
	C13	0.79	0.85
	C14	0.78	0.86
Contract Flexibility	C21	0.81	0.86	0.89
	C22	0.84	0.87
	C23	0.80	0.84
Strictness of Contract Performance	C31	0.79	0.81	0.87
	C32	0.76	0.84
	C33	0.81	0.86
Economic Sustainability	S11	0.78	0.81	0.86
	S12	0.72	0.85
	S13	0.76	0.83
Social Sustainability	S21	0.74	0.85	0.91
	S22	0.79	0.87
	S23	0.81	0.84
	S24	0.77	0.79
Environmental Sustainability	S31	0.74	0.86	0.89
	S32	0.85	0.87
	S33	0.84	0.81
	S34	0.71	0.84
	S35	0.76	0.78
	S36	0.80	0.83

.

4. Model Evaluation

4.1. Hypothetical Model Quality Evaluation

• Reliability analysis

The results of the reliability analysis are shown in Table 3. The CITC values were greater than 0.50, and the Cronbach’s α values were significantly higher than 0.7, indicating that the scale has a good reliability.

2.

Common methods variance

In order to avoid homologous variance, this research ensures the anonymity of the questionnaire and promises that it is entirely for academic research purposes and does not involve commercial purposes. In the design of the questionnaire, a neutral context was used as far as possible to obscure the function of the items, and the restriction of the respondent in answering the items was eliminated to the greatest extent. In addition, using Harman’s single factor test method, 47 measurement items were put together for factor analysis. The result has shown that the load of the first principal component after factor analysis was 21.15%, indicating that there was no single principal factor, that is, the homologous variance was not significant and in a controllable state.

3.

Validity analysis

The validity test is divided into convergent validity and discriminant validity. This study used AMOS 24.0 software to do the Confirmatory factor analysis (CFA). Judgment criteria include χ²/df < 2, RMSEA < 0.05, RMR < 0.05, TLI, NFI, GFI, CFI and IFI were all greater than 0.9, and AGFI was close to 0.9. The results are shown in

Table 4. Convergent validity analysis results.

Variable	Code	Standardization Factor Load	AVE	CR
ERO	GE1	0.78	0.53	0.84
	GE2	0.75
	GE3	0.74
	GE4	0.73
	GE5	0.76
	GE6	0.71
IRO	GI1	0.72	0.56	0.86
	GI2	0.73
	GI3	0.75
	GI4	0.71
	GI5	0.80
RRO	GR1	0.74	0.55	0.87
	GR2	0.78
	GR3	0.76
	GR4	0.75
	GR5	0.78
RG	R11	0.82	0.59	0.87
	R12	0.83
	R13	0.80
	R21	0.81
	R22	0.82
	R31	0.81
	R32	0.80
	R33	0.83
CG	C11	0.82	0.58	0.88
	C12	0.80
	C13	0.83
	C14	0.81
	C21	0.79
	C22	0.81
	C23	0.78
	C31	0.79
	C32	0.77
	C33	0.78
PS	S11	0.79	0.57	0.89
	S12	0.84
	S13	0.81
	S21	0.81
	S22	0.80
	S23	0.79
	S24	0.78
	S31	0.78
	S32	0.81
	S33	0.79
	S34	0.82
	S35	0.77
	S36	0.83

χ²/df = 1.402, RMSEA = 0.038, RMR = 0.035, TLI = 0.969, NFI = 0.953, GFI = 0.947, FI = 0.958, IFI = 0.977, AGFI = 0.921.

.

The discriminant validity is determined by comparing the AVE value and correlation coefficients value. As shown in

Table 5. Discriminant validity analysis.

Variable	1	2	3	4	5	6
1 ERO	0.73
2 IRO	0.52	0.75
3 RRO	0.65	0.44	0.74
4 RG	0.66	0.63	0.59	0.77
5 CG	0.48	0.58	0.34	0.55	0.76
6 PS	0.56	0.52	0.48	0.61	0.57	0.75

, the diagonal bold part is the square root of AVE, which is greater than the correlation coefficients of each variable, so that the model has high discriminant validity.

4.2. Hypotheses Testing and Mediation Analysis

According to the model constructed above, this study used Amos 24.0 software to carry out the path analysis, the results are shown in

Table 6. Results of hypothesis test.

Action Path	Standardized Path Coefficient	p Value	Test Results
H1a: ERO→RG	0.52	***	Passed
H1b: ERO→CG	0.08	0.42	Refused
H2a: IRO→RG	0.10	0.28	Refused
H2b: IRO→CG	0.59	***	Passed
H3a: RRO→RG	−0.22	*	Passed
H3b: RRO→CG	−0.30	**	Passed
H4a: ERO→PS	0.11	0.19	Refused
H4b: IRO→PS	0.30	***	Passed
H4c: RRO→PS	−0.25	**	Passed
H5: RG→PS	0.42	***	Passed
H7: CG→PS	0.45	**	Passed

Notes: * p < 0.05, ** p < 0.01, *** p < 0.001.

.

• The effect of government’s relation orientation on project governance

Hypothesis 1 posits that the ERO of government positively affects project governance. The standardized path coefficient of Hypothesis 1a is 0.52, and the p value is significant at the level of 0.001; Hypothesis 1b posits that ERO has a positive impact on CG, and the standardized path coefficient obtained is 0.08, but it does not reach the significant level (p > 0.05), assuming Hypothesis 1b is rejected.

Hypothesis 2 posits that the IRO of government significantly affects project governance. Hypothesis 2a posits that IRO positively affects the formation of RG, but the standardized path coefficient obtained is 0.10, and p > 0.05, which is not verified. Assuming that the standardized path coefficient of Hypothesis 2b is 0.59, and the p value is significant at the 0.001 level, hypothesis 2b is supported.

Hypothesis 3 posits that the RRO of government negatively affects project governance. The standardized path coefficients of Hypothesis 3a and Hypothesis 3b are −0.22 and −0.30, and the p value is significant at the level of 0.05 and 0.01. Hypothesis 3 is verified.

2.

The effect of government’s relation orientation on PS

Hypothesis 4 posits that different government relation orientations have a significant impact on PS. Hypothesis 4a posits that ERO has a positive impact on PS. The empirical results show that although the path coefficient is 0.11, but p > 0.05, indicating that the direct effect of ERO on PS is not significant, and hypothesis 4a is not supported. Assuming that the path coefficient and p value of hypothesis 4b and hypothesis 4c are 0.30 and p < 0.001 and −0.25, and p < 0.01, both are verified.

3.

The effect of project governance on PS

Hypothesis 5 posits that RG has a significant positive impact on PS, and Hypothesis 7 posits that CG has a significant positive correlation with PS. Hypothesis 5 has a path coefficient of 0.42 and p < 0.001, and Hypothesis 7 has a path coefficient of 0.45 and p < 0.001, both have been verified, indicating that RG and CG have a significant positive effect on PS.

4.

The mediating role of project governance

This paper uses Bootstrapping based SEM test method to test the mediating role of RG and CG with the help of Smart PLS statistical software. The test results are shown in

Table 7. Test results of mediating effect.

Hypothetical Path	Total Indirect Effects	Indirect Effect	p Value	95% Confidence Interval
				Lower Limit	Upper Limit
ERO→PS	0.24		*	0.18	0.35
ERO→RG→PS		0.17	**	0.07	0.16
ERO→CG→PS		0.06	0.72	−0.05	0.13
IRO→PS	0.18		**	0.10	0.26
IRO→RG→PS		0.04	1.06	−0.06	0.14
IRO→CG→PS		0.14	***	0.15	0.27
RRO→PS	−0.13		*	0.13	0.31
RRO→RG→PS		−0.09	**	0.06	0.14
RRO→CG→PS		−0.05	*	0.12	0.27

Notes: * p < 0.05, ** p < 0.01, *** p < 0.001.

. The results show that the indirect effect of different government relation orientations on PS is significant (p < 0.05), indicating that there is a mediating effect between them.

When the mediating variable RG is introduced, the indirect influence path coefficient of ERO on PS is 0.17 and p < 0.01, which is verified; the indirect influence path coefficient of IRO on PS was 0.04, but p > 0.05, failed to pass the verification; The indirect impact path coefficient of RRO on PS is −0.09 and p < 0.01, which is verified. Combined with the above verification results of direct effect, the conclusion is drawn: RG plays a fully mediating role in the impact of ERO on PS, and plays a partial mediating role in the impact of RRO on PS. It is assumed that Hypothesis 6a and Hypothesis 6c pass the verification, and Hypothesis 6b fails.

When the mediating variable CG is introduced, the path coefficient of the indirect influence of ERO on PS is 0.06, but p > 0.05, which fails to be verified; The path coefficient of the indirect influence of IRO on PS is 0.14, and p < 0.001, which passed the verification; The path coefficient of the indirect influence of RRO on PS is −0.05 and p < 0.05, which is verified. Combining the above verification results of direct effects, it is concluded that CG plays a partial mediating role in the influence of IRO on PS and plays a partial mediating role in the influence of RRO on PS. Hypothesis 8b and 8c pass the verification, and Hypothesis 8a fails.

5. Discussion

5.1. Discussion on the Direct Role of Government’s Relation Orientation

Through SEM model verification, it is found that different government relation orientations have different mechanisms of effect on project governance and PS.

First, in PPP projects, ERO mainly plays a role by influencing RG, which further proves the view of Huang and Chiu (2017) [29], and Shahzad et al. (2020) [30]. ERO helps the relationship governance mechanism in the project play a role. However, the direct effect of ERO on CG and PS is not significant.

It may be because ERO mainly promotes the flexibility of contract governance, and has little effect on the completeness and strictness of contract performance, leading to the positive effect of ERO on CG is not significant; starting from the practice of PPP projects, with the development of PPP standardization, the quality of external emotional relationships will not directly affect whether the contract is complete and strict, so the path of action is not passed. Furthermore, the direct impact of ERO on PS is not significant, and the hypothesis is not supported. This may be because, under ERO, the sincere treatment and frank communication between the public and the private parties will make the project management process easier and smoother, and will not directly improve the project cost, quality, and progress [15]. The satisfaction of all parties to the project should also be determined by the actual completion of the project, and the improvement of satisfaction will not be guaranteed because of the good attitude of the public sector, so the direct effect is not significant.

Second, IRO plays a role mainly by influencing CG and also has a direct impact on the improvement of PS. This further proves the view of Byoun and Xu (2014) [31], David et al. (2020) [32], and Lu et al. (2019) [33]. However, IRO does not promote RG, this may be because under IRO, whether it is the support and assistance provided by the government to the social sector or the communication and cooperation with the social sector, they all adhere to the attitude of “business is business” and are more in the spirit of contract [34]. Behavior under the direction of project performance will not deepen the trust and sincere communication between the two parties, so the impact on RG is not significant.

On the contrary, the negative effects of RRO have been verified, which is consistent with the research of Guillermo Takano (2017) [20]. RRO will destroy the effect of RG and CG, and is not conducive to the realization of PS.

5.2. Discussion on the Mediating Role of CG and RG

In the empirical research, the direct and indirect effects of CG and RG on project sustainability have been effectively verified, which is consistent with the previous research conclusions of most scholars on project governance, such as Tokede et al. (2021) [35], Ngai et al. (2015) [19] and Pilar et al. (2021) [36].

The PPP project has a long time, heavy tasks, and a complex and changeable project environment. The uncertainty of the project makes all participants have more excuses to compromise in terms of cost, quality and progress, resulting in the project performance falling short of expectations [31]. Signing a contract is a way to effectively allocate project resources and curb opportunistic behavior. Among them, the completeness of the contract is reflected in the detailed contract terms. For complex projects, the more complex the formal contract is, the clearer the division of responsibilities and rights of both parties to the transaction, which is conducive to the settlement of conflicts and disputes; contract flexibility is an effective supplement to the completeness of the contract. Because the PPP project is highly dynamic and uncertain, the contract cannot cover the possible situations in the future. At this time, contract flexibility is needed to adapt to future changes and maintain consistency with the external environment, such as price adjustment procedures, reasonable distribution of control rights, dispute resolution, etc., so as to play the role of flexible adjustment of the contract; the strictness of performance can effectively guarantee the rigid constraint of project objectives through the cooperation of incentive and punishment mechanisms. Therefore, the integrity, flexibility, and strict performance of contract governance can effectively promote the sustainability of the project and ensure the success of the PPP project.

RG can strengthen the expectation, trust, commitment, and other elements generated in the transaction process, promote the formation of coordination, communication, and other mechanisms, and then effectively solve problems and reduce risks. Specifically, a high degree of trust between the public and private parties helps to improve the enthusiasm to participate in the project and reduce conflict and opportunistic behavior; the two sides maintain good and close communication, which is conducive to the transmission and feedback of key information of the project, effectively reduce differences between the two sides and reduce communication costs. By jointly solving problems, we can give full play to our respective advantages, complement each other and support each other, so as to truly achieve a win-win situation of cooperation. Therefore, a good relationship governance mechanism can effectively improve the sustainability of the project.

6. Conclusions

This study explores the mechanism of government’s relation orientation on project governance and PS in PPP projects. Through the literature review and theoretical analysis, combined with the reality of the PPP project and expert interviews, a measurement scale of the government’s relation orientation in the PPP project is developed. Then, we enriched the connotation of PPP project sustainability and developed a PS measurement scale including economic sustainability, social sustainability, and environmental sustainability. Afterward, hypotheses were proposed to construct a structural equation model of the government’s relation orientation, RG, CG, and PS. In the verification of the model, one used AMOS software to verify the direct effect of each variable; the other used Smart PLS software to verify the intermediary role of project governance. The following research conclusions were drawn:

• First, different government relation orientations have different effects on project governance and PS, among which IRO and RRO will directly affect PS.

ERO has a strong influence on project governance. In PPP projects, ERO is committed to the maintenance of long-term partnerships. Therefore, more friendly information will be released in the process of cooperation with the social capital party, such as giving sufficient trust to the private sector, being sincere when communicating with the social capital party, being willing to share project experiences and feelings, respecting the professionalism and ability of the private sector, etc. These friendly tendencies will help RG mechanism in the project to play a role.

IRO directly affects the CG process and PS. The government with IRO pays more attention to the spirit of contract and emphasizes mutual benefit in cooperation with social capital. For the purpose of successfully completing project goals and improving PS, the government will complete the tasks according to the contract and bear the risks reasonably. In case of emergencies, it is more inclined to negotiate with the private sector on an equal footing and give some support, rather than blindly transfer the risks and responsibilities to the social capital side. Under IRO, the two parties restrict and cooperate with each other, which is conducive to the full role of CG, and the two parties can more smoothly reach an agreement on the project objectives, which is conducive to improving the PS.

RRO has obvious negative effects on project governance and PS. RRO is the product of the non-standard institutional environment of PPP projects. Due to the scarcity of resources and public attributes of PPP projects, the public sector is endowed with innate choice, supervision, and decision-making rights. If this inherent advantage is used by the public sector for personal interests, such as taking whatever it wants in the selection of investors or the setting of project cooperation conditions, setting an inappropriate threshold for the entry of social capital, setting an unreasonable approval process, etc. These behaviors are not conducive to the establishment of a good relationship between the public and the private parties. They are also contrary to the equal subject status of both parties, are not conducive to the smooth implementation of the contract terms, destroy the binding nature of the contract, and are likely to erode the development foundation of the PPP project, damage the public interest and cause the failure of the project.

• Second, RG and CG play different mediating effects on the impact of the government’s relation orientation on PS: RG plays a complete mediating role in the impact of ERO on PS, and plays a partial mediating role in the impact of RRO on PS; CG plays a partial mediating role in the impact of IRO and RRO on PS.

Through the verification of the mediation effect, RG plays a complete mediating role between ERO and PS. The reason why RG can be closely related to the relationship between ERO and PS can be explained from the following aspects. Firstly, the trust relationship between public and private parties in a PPP project is not invariable and achieved overnight. Under ERO, the initial level of trust between the two parties is high, the positive sincerity, trust, and communication are continuously strengthened in the process of cooperation, the relationship is more stable, and the effect and level of RG are improved. Secondly, the role of RG in improving PS has been verified by many scholars. Trust, communication, and joint problem-solving in relationship governance can improve the cooperation satisfaction of both sides and are an effective way to achieve PS. Finally, the complete mediating role of RG also shows that RG is a necessary mediation way for ERO to affect PS. ERO can effectively improve PS only if it is reflected in action and effectively improve the effect of project relationship governance.

CG plays a part of mediating role in the positive impact of IRO on PS. This process further improves the path and mechanism of IRO on PS. On the one hand, IRO will directly affect the PS. On the other hand, IRO will play a role through the project contract governance mechanism and then affect the PS. IRO can improve the supply efficiency of public projects through direct interaction with the social capital, such as providing additional help to achieve more cost-effective public goods/services. It can also affect the setting and implementation of contract terms through the principles of “contract spirit” and “mutual benefit”, thereby improving PS.

On the one hand, RRO will directly have a negative impact on PS; on the other hand, it will also destroy RG and CG, which is not conducive to the establishment of a good relationship and formal contract between both parties, thus damaging PS. Therefore, the negative effect of RRO has a wide range of influence paths. In the actual project, rent-seeking behaviors should be prevented and avoided as much as possible.

7. Practical Implications, Limitations, and Future Research

7.1. Practical Implications

• First, improve the top-level design of the PPP project and strengthen project life-cycle management.

Chinese policy environment and economic environment are different from those in western countries. Chinese legislation often needs to provide specific and micro implementation plans for certain issues in order to effectively solve problems that should be solved spontaneously by society or the market. Therefore, PPP legislation related to performance and sustainability can be more abundant and detailed, which can not only improve the top-level design but also be applied to project practice. For example, further enrich the necessary contents and terms related to sustainability in the PPP project agreement. On the one hand, according to the principle of incentive compatibility, scientifically design the contract terms, match the risks and interests, and clarify the key links such as project output descriptions, performance requirements, and profit return mechanism. On the other hand, strengthen performance supervision covering the life-cycle of the PPP project to match the performance appraisal with project appraisal, price adjustment, and consideration payment, so as to create conditions for social capital to obtain reasonable return while realizing effective supervision. In addition, strengthen performance audits and third-party evaluation. Combined with the characteristics of PPP projects, improve relevant audit systems, procedures, methods, and methods, so as to make performance audit an important link for improving the sustainability of PPP projects. At the same time, select experts in law, economy, accounting, audit, engineering, environmental protection, agriculture, forestry and water conservancy, and other industries, set up a third-party performance evaluation organization, give full play to the expertise of experts and implement performance evaluation of PPP projects.

• Second, the government should pay attention to the mechanism of ERO and IRO, and reasonably grasp its own positioning.

In PPP projects in China, the government is often in a strong position because of its resource advantages, so it is difficult to completely treat the private sector as an equal subject, which is not conducive to the healthy and sustainable development of PPP projects. The empirical results show that ERO and IRO are conducive to the improvement of project governance and PS, and the direct effect of IRO is more significant. Therefore, the government should pay attention to the mechanism of government’s relation orientation in the whole life cycle of PPP projects. Firstly, the government should establish the concept of equal consultation and fully understand the existing laws and policies. In the project start-up stage, it should be good at using the expert advice of the external brain to clarify its own goal positioning. In the process of signing the contract, be honest with each other to reduce unnecessary conflicts and frictions. The second is to clarify the boundary between the two parties based on the contract signed by both sides. The more standardized the contract is, the better the contract governance can play its role. In the process of project implementation, the government should honor its promise to perform the contract, restrict its own behavior according to the principle of equal responsibility and rights, and realize reasonable benefit distribution and risk-sharing. So as to give full play to their respective advantages, establish a good partnership and jointly promote the development of PPP projects.

7.2. Limitations and Future Research Directions

This study puts forward a new dimension and connotation of the government’s relation orientation in PPP projects. On this basis, through empirical research to explore the impact mechanism of government’s relation orientation on PS, the conclusions are creative, but there are also some limitations, which can be further enriched and improved in future research. One is that this study focuses on the impact of the government’s relation orientation on project governance mechanism and PS, without considering the response and role of the private sector. In the future, the behavior of the private sector can be included in the research scope to further explore the mechanism and path of the government’s relation orientation. Second, PPP projects face a complex external environment, and project characteristics such as uncertainty and complexity will also have a great impact on the government’s relation orientation and PS. In future research, project characteristics can be incorporated into the research model to make the project research closer to the actual situation. Third, we can further reveal the dynamic influence process of government’s relation orientation through case studies to see whether we will draw more rich and creative conclusions.