In order to determine the reasonable concession period of PPP water supply projects, based on the traditional net present value method, the real option is proposed, the value of the guarantee given by the government is quantified, and a decision-making model for the concession period based on the real option is established. Compared with the traditional method, the private investors can obtain the expected return in relatively short time after considering the real option, and the concession period is more reasonable through case studies. At the same time, it can provide a theoretical basis for the government departments and private investors to negotiate the concession period.