With rapid socioeconomic development, an increasing number of megaprojects are being undertaken or have been implemented in China since 1998 (Tai et al., 2009). The “megaproject” plays a growing important role in the national economy and social development (Kardes et al., 2013). Megaprojects usually cost over US$1bn and attract significant public and political attention because of their significant impact on the environment, society and economy (Hu et al., 2016). Considerable challenges exist for the management of megaprojects. Due to the high complexity with fragmental and diversified traits, the practices in megaprojects significantly differ from those in conventional projects (Biesenthal et al., 2017; Flyvbjerg, 2014; Li et al., 2017). Diverse stakeholders are involved in megaprojects (Hu et al., 2013; Oraee et al., 2017), which presented significant demands on coordination (Hu et al., 2016). It is important to coordinate heterogeneous stakeholders through a contracting process to resolve potential conflicts, such as unfair competition and inefficient resource allocation (Brookes et al., 2017; Ma et al., 2016). Indeed, megaprojects can be seen as sites of conflicting institutional logics brought to bear on their processes (Biesenthal et al., 2017; Fahri et al., 2015). Managing megaprojects inevitably involves designing contracts between the project owner and one or more specialized contractors. Under such context, contract plays a crucial role to manage megaprojects. These contracts have significant impacts on the economic success of contracting parties (von Branconi and Loch, 2004). Due to the inherent nature, contracts of megaprojects are featured as long term, incomplete and complex. The contractually limited lifespan and temporary characteristic of megaprojects may lead to disputes or conflicts between contracting parties (Zaghloul and Hartman, 2003; Zeng et al., 2015). Similarly, contracts can lead to time and cost overruns if a mechanism is not in place to resolve emerging conflicts on projects (Luo et al., 2017a, 2017b; Olaniran, 2015; Olaniran et al., 2016). It is not unusual that megaprojects experience 50 per cent, or even nearly 100 per cent, of cost overruns (Brady and Davies, 2014). In addition, high levels of project complexity are positively associated with contract incompleteness and thus with an increased number of unexpected project changes (Tadelis, 2002). The changing and complex environmental conditions associated with megaprojects require flexible contractual terms to address predictable uncertainties (Meyer et al., 2002; Pich et al., 2002). Contractual flexibility helps to achieve greater efficiency, lower costs and minimize project risk (Wang et al., 2017; White et al., 2007). Flexibility in contractual terms tends to provide a framework for cooperation, rather than a hard framework based on risk and allocation. Flexibility in contracting process enables an effective response to the everchanging circumstances by implementing flexible terms. It is a paradox that flexibility is frequently needed in megaprojects, but flexibility is rarely anticipated (Olsson, 2006).