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.