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on Project, Program and Portfolio Management |
| By: | Mandell, Svante (vti - Swedish National Road & Transport Research Institute); Nilsson, Jan-Eric (vti - Swedish National Road & Transport Research Institute) |
| Abstract: | Today’s dominant mechanism for infrastructure project tendering is the Unit Price Contract (UPC). While the winning bidder retains risk related to the unit price bids submitted, the Principal carries all risk related to misspecification of the activities required for having a project build. This paper reviews the microeconomic foundations for this contracting procedure and identifies situations where an alternative mechanism, Design – Build (DB) contracts, may be preferable. DB leaves the bulk of project risk with the agent and therefore requires bidders to hedge against unpleasant surprises in the implementation by increasing the demand for compensation for undertaking the job. It is argued that DB should not be used if the number of bidders is expected to be large; this is a means for reducing the duplication of design costs. Moreover, DB projects should be complex with respect to the number of sub-tasks required for construction and it should be feasible to substitute one input for another. This is a way for society to benefit from the agent’s superior information about alternative implementation techniques and relative input prices. The projects should moreover not include too many unobservable quality features and the risks for geotechnical problems should be manageable. |
| Keywords: | Procurement; Unit Price Contracts; Design build; Infrastructure |
| JEL: | H57 L98 R42 R48 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2010_013&r=ppm |
| By: | Andreu, Rafael (IESE Business School); Riverola, Josep (IESE Business School); Rosanas, Josep M. (IESE Business School); de Santiago, Rafael (IESE Business School) |
| Abstract: | The main objective of the firm in economics-based models is to maximize profit. Dropping this objective in order to make the models more realistic complicates the analysis and is seldom done, thus leaving management action out of the picture. In this paper we try to understand how management decisions give rise to aggregate results. In particular, we develop a simulation model of an economy in which emphasis is placed on managers' decision-making criteria. The key decision managers have to make is which projects their firms will undertake. Project selection has an impact on the firm, as the firm's profile may change through learning. |
| Keywords: | Management; Economics; Learning; Simulation; |
| Date: | 2010–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0886&r=ppm |
| By: | Moszoro, Marian (IESE Business School) |
| Abstract: | Opportunism, either governmental or private, may become a powerful deterrent against public-private project financing, especially considering the scale of the investment in infrastructure. The parties can secure themselves against counterparty opportunism by assigning the investor an exit (put) option and the public agent a bail-out (call) option on the private investor's shares. This paper presents a mechanism for converting natural monopolies into contestable markets using over-the-counter option contracts that combine the stability of long-term contracts and the flexibility of short-term contracts. The exit/bail-out option mechanism reduces entry barriers by streamlining incomplete long-term contracts and avoiding contractual problems related to bounded rationality and opportunism. |
| Keywords: | Opportunism; Public-Private Partnerships; Infrastructure; Natural Monopolies; Contestable Markets; Exit and Bail-out Options; Game Theory; |
| JEL: | C72 D23 D42 G32 G38 H54 |
| Date: | 2010–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0887&r=ppm |
| By: | Moszoro, Marian (IESE Business School) |
| Abstract: | This paper presents a model to assess the efficiency of the capital structure in public-private partnerships (PPP). A main argument supporting the PPP approach to investment projects is the transfer of managerial skills and know-how from the private partner to the investment vehicle. The paper shows how different managerial skills and knowledge transfer schemes determine an optimal shareholding structure of the PPP. Under the assumption of lower capital cost of the public partner and lower development outlays when the investment is carried out by a private investor, an optimal capital structure is achieved with both the public and the private parties as shareholders, i.e. a mixed public-private capital structure makes it possible to internalize the financial advantage of the public sector and the managerial advantage of the private sector. |
| Keywords: | Public-Private Partnerships; Joint Ventures; Public investment policy; Knowledge transfer; Hybrid governance structures; |
| JEL: | D23 G32 H43 H54 L19 |
| Date: | 2010–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0884&r=ppm |
| By: | De Fuentes, Claudia (CIRCLE, Lund University); Dutrénit, Gabriela (Universidad Autónoma Metropolitana-Xochimilco) |
| Abstract: | Interactions between public research organizations and industry can be conceptualized in three main stages: the engagement in collaboration, the knowledge transfer during collaboration, and the benefits perceived from collaboration. Both agents differ in terms of the incentives to collaborate and the behaviors they adopt along these three stages. Following a three stages model based on Crépon, Duguet and Mairesse (1998), this paper discusses the impact of drivers to collaborate on channels of interaction, and the impact of channels of interaction on benefits for both agents -researchers and firms, and discusses the policy implications. The study is based on original data collected by two surveys carried out in Mexico during 2008, to R&D and product development managers of firms and to academic researchers. Our results show different perceptions from both agents across the three stages of the linking process; the main drivers for firms’ collaboration are largely related to behavioral characteristics (formalization of R&D activities, fiscal incentives for R&D and openness strategy), while for researchers they are associated with individual (academic degree, members of a team, type of research -basic science and technology development) and institutional factors (affiliation to public research centres. All channels of interaction play an important role in determining benefits for researchers and firms; however, R&D projects & consultancy channel play a particular important role for long-term benefits, while the information & training channel is particularly important for short-term benefits. Usually policies do not discriminate much between agents’ perception at each stage of the linking process and introduce general programs that look for stimulating interaction by both agents; this unique incentive to promote interaction will probably fail to change agents’ behavior. Thus, a better understanding of the different perspectives will contribute to more efficient policy programs. |
| Keywords: | university-industry interactions; collaboration drivers; channels of interaction; benefits; innovation policy; developing countries; Mexico |
| JEL: | O30 |
| Date: | 2010–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2010_006&r=ppm |
| By: | Nicolas Perry (IRCCyN); Alain Bernard (IRCCyN) |
| Abstract: | Concurrent engineering taking into account product life-cycle factors seems to be one of the industrial challenges of the next years. Cost estimation and management are two main strategic tasks that imply the possibility of managing costs at the earliest stages of product development. This is why it is indispensable to let people from economics and from industrial engineering collaborates in order to find the best solution for enterprise progress for economical factors mastering. The objective of this paper is to present who we try to adapt costing methods in a PLM and CE point of view to the new industrial context and configuration in order to give pertinent decision aid for product and process choices. A very important factor is related to cost management problems when developing new products. A case study is introduced that presents how product development actors have referenced elements to product life-cycle costs and impacts, how they have an idea bout economical indicators when taking decisions during the progression of the project of product development. |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1011.5714&r=ppm |
| By: | Leo Dobes (Crawford School of Economics and Government, The Australian National University) |
| Abstract: | A factor common to all adaptation measures is the uncertainty that is the hallmark of climate change. The timing, intensity and location of climate change impacts is not known to any degree of precision. Because most deterministic analyses and policy prescriptions ignore this uncertainty, their recommendations are likely to waste community resources. Except by chance, adaptation measures will either be over-engineered, or they will be inadequate and result in harm. Applying real options thinking allows an incremental and flexible approach. Adaptation measures are implemented only as better knowledge becomes available over time. Several examples are given of real options in the Mekong Delta, with a comparison of net present values of two housing alternatives. It is essential to undertake net present value calculations when comparing different projects to ensure that the value of any options is weighed against other costs and benefits. |
| Keywords: | real options, Vietnam, climate change, adaptation |
| JEL: | Q54 Q56 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:0710&r=ppm |