Extant literature lacks a systematic framework addressing the mechanisms of the alliance functional process and its impacts on management activities together with performance in delivering Engineering-procurement-construction (EPC) projects. This study quantitatively investigates the cause-effect relationships among these themes by building and validating a conceptual model of contractor-designer alliance in international hydropower EPC projects. With the support of data collected from an industry survey, the results reveal the key design problems, application of contractor-designer alliance, design management level and performance, which form a sound basis for design management emphasis in EPC activities, e.g., sufficiently considering sustainability of hydropower projects by incorporating environmental, social, and economic factors into designs. The path analysis indicates that the contractor-designer alliance can not only improve design performance by enhancing design management, but also directly promote design performance. This research has significant contributions to the body of knowledge by building interdisciplinary linkages between the areas of alliance, design management, and performance, theoretically demonstrating the mechanism of how interfirm cooperation functions to achieve superior design outcomes of hydropower EPC projects. Understanding these causal relationships will be crucial for contractors and designers to optimally allocate their complementary resources for seeking better design solutions in dealing with both technical issues and sustainability factors.

Development of large-scale infrastructure projects that solicits the support of private capital is no longer a new phenomenon. This is commonly implemented using governance arrangements such as Build-Operate-Transfer and other technical variations of publicprivate partnerships. Frequently, concessions and guarantees are included in the contract in order to protect the interests of some project stakeholders. Flexibilities may also be built into the terms and conditions, thus allowing participants to react to changes that could occur during the implementation stage.• All these features essentially reallocate risks and rewards within the contract, the effects of which may not be quantified by conventional evaluation methods such as the Net Present Value method. Real option (RO) modelling has been identified as a superior approach, although the method is more complicated and cases of application to complex infrastructure projects remain to be limited.• In this paper, discrete-time RO models are used to evaluate several options found in the Dabhol Power Project in India. Limitations and challenges in modelling these options are also discussed.• Overall, the RO approach demonstrates a great promise in capturing and evaluating flexibilities. The case study however shows that some implementation issues need to be overcome before RO can be commonly and practically applied to the infrastructural context.