nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2012‒04‒23
seven papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Partnership contracts, project finance and information asymmetries: from competition for the contract to competition within the contract? By Nicolas Dupas; Frédéric Marty; Arnaud Voisin
  2. Rate of return requirement for climate versus petroleum projects By Emhjellen, Magne; Osmundsen, Petter
  3. Safeguards Compliance of Medium and Low Risk Category B: Water & Sanitation Projects in the Design Phase By Oscar Camé
  4. Policy Challenges for Infrastructure Development in Asian LICs: Lessons from the Region By Fujita, Yasuo
  5. Regulated (CDM) and voluntary carbon offset schemes as carbon offset markets: competition or complementarity? By Simon Bisore; Walter Hecq
  6. Mini-perm Structures in PPP Contracts: Risks and Opportunities By Nicolas Dupas; Frédéric Marty; Arnaud Voisin
  7. Crowdsourcing patent application review: leveraging new opportunities to capitalize on innovation? By Ghafele, Roya; Gibert, Benjamin

  1. By: Nicolas Dupas (Caisses des Dépôts et Consignations - Caisse des dépôts et consignations); Frédéric Marty (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université de Nice Sophia Antipolis (UNS), OFCE - OBSERVATOIRE FRANCAIS DES CONJONCTURES ECONOMIQUES - Institut d'Études Politiques (IEP) - Paris); Arnaud Voisin (Caisses des Dépôts et Consignations - Caisse des dépôts et consignations)
    Abstract: Private finance has brought to public-private partnerships a third-party overlook on the contracts. Bringing into the appraisal of PPP deals banks and rating agencies results in outsourcing the due diligence of the project to the party best suited to perform it. This reduction in asymmetries of information can occur both in the competition for the market stage or in the competition within the market stage (yardstick competition).At the negotiation stage, funding competition helps to increase the public sector's information on the deal. Of course, the cost of collecting this information should not overweight the savings it induces. In order to maintain competitive pressure through the lifecycle of the project, value testing schemes, as benchmarking or market testing are used. However, they induce concerns about transaction costs and could reduce the certainty about the charge for the public partner.
    Keywords: Private finance initiative, asymmetries of information, funding competition
    Date: 2011–12–15
  2. By: Emhjellen, Magne (Petoro); Osmundsen, Petter (UiS)
    Abstract: Many sosio-economic rates of returns for climate projects have been used in analysing the present value of the climate benefit. However, little attention has been devoted to profitability assessments based on commercial considerations. Economic valuation of climate projects, seen from the perspective of a commercial company, is the subject of this article. In particular, we examine the required rate of return for a project where the uncertainty in the CO2 quota price is the main market uncertainty. We complement the existing climate literature by examining the required rate of return of a climate project in a Capital Asset Pricing Model (CAPM) setting. We find that the CO2 quota price has slightly more systematic risk in the period calculated than the oil price, and estimate the nominal required rate of return for the value of CO2 reduction to be 7.3 percentage points.
    Keywords: Climate Projects; Decision Analysis
    JEL: G10
    Date: 2012–04–11
  3. By: Oscar Camé
    Abstract: The objective of these notes is to provide Bank staff with direction and assistance to ensure the compliance of low and medium risk Category B Water & Sanitation (W&S) projects with the Bank's environmental and social policies and safeguards during Preparation Phase. These notes are aimed to support Project Teams -particularly W&S specialists- when ESG staff members are not part of them, so they are able to ensure compliance with the Bank's policies and environmental safeguards during the preparation phase of their projects. In this context, it is supposed that most W&S projects are Sovereign Guaranteed (SG) -or public sector- operations; for Non Sovereign Guaranteed (NSG) -or private sector- operations, some adjustments should be made to these notes.
    Keywords: Environment & Natural Resources :: Water Management, Environment & Natural Resources :: Disasters, Social Development :: Afro Descendants & Indigenous Peoples, Public Sector :: Transparency & Anticorruption, environmental compliance, low risk
    Date: 2011–06
  4. By: Fujita, Yasuo
    Abstract: This paper discusses policy issues pertaining to infrastructure development in low income countries (LICs) in Asia. Infrastructure challenges in Asian LICs have not been adequately highlighted to date mainly because the international focus has often been on African LICs and because large countries such as China, India, and Indonesia attracted more interest among the developing Asian countries. While Asian LICs have sought to improve their infrastructure over the years, the quality and quantity is generally insufficient although significant variations exist between countries and sectors. Since their fiscal space and governmental capacities are limited despite large investment needs, each possible infrastructure investment must be placed in order of priority. In Asian LICs, spatially connective infrastructure (including logistics, telecommunications, and electricity) should be given priority to generate benefits from economies of agglomeration, fragmentation of production activities, and better connectivity to fast-growing large markets, although the trade-off between economic efficiency and spatially balanced growth is a difficult issue. Particularly, some large Asian LICs have great potential to become part of sophisticated regional production networks through effective infrastructure. Climate change, both the adaptation of infrastructure and mitigation through green development, also needs to be sufficiently taken into account or mainstreamed. The fact that the investment in public private partnerships (PPP) projects in infrastructure has recently been increasing in Asian LICs is encouraging. To scale up PPP, Asian LIC governments should clarify the contributions of the private sector (in such aspects as capital investment and operational efficiency), continue to improve the investment climate, policies, and regulations, and prepare bankable projects in which the roles of the public and private sectors are defined. The public sector will continue to be the main provider and regulator of infrastructure in Asian LICs. Although public sector performance should improve, there has been no single blueprint for it, and therefore country-specific approaches are called for. Donors should continue to support Asian LICs in scaling up infrastructure investment through project-financing, technical assistance, and capacity development. Keywords: Infrastructure, low income country, economic integration.
    Keywords: Infrastructure, low income country , economic integration , public private partnership , climate change
    Date: 2012–03–19
  5. By: Simon Bisore; Walter Hecq
    Abstract: As one of the offsetting instruments, the Clean Development Mechanism (CDM) allows industrialized countries to meet their compliance objectives by undertaking and financing project activities in developing countries with certified emissions reductions (CERs) in return. Next to Kyoto mechanisms, voluntary offset markets for GHG emissions reductions that are not compliant with the Kyoto Protocol are developing quickly. Emissions offsets in this latter category are verified by official or independent agents but are not certified by regulatory authorities for use as a compliance instrument, and are commonly referred to as verified emissions reductions (VERs) which are not a standardized commodity. This paper compares the two types of projects-based carbon offset markets and analyses the question of complementarity or competition between them in their contribution to the mitigation of global warming as well as to sustainable development in the host countries.
    Keywords: Climate change; CDM carbon offset market; Voluntary carbon offset; Competition; Complementarity; Standards; Carbon credits; Sustainable development
    Date: 2012–04
  6. By: Nicolas Dupas (Caisses des Dépôts et Consignations - Caisse des dépôts et consignations); Frédéric Marty (OFCE - OBSERVATOIRE FRANCAIS DES CONJONCTURES ECONOMIQUES - Institut d'Études Politiques (IEP) - Paris); Arnaud Voisin (Caisses des Dépôts et Consignations - Caisse des dépôts et consignations)
    Abstract: Prior to the 2008 financial crisis, the economic model of PPPs benefited from a very favorable environment in terms of credit availability and cost. The high level of liquidity in financial markets allowed rising abundant and not expensive external resources, because of both the low level of interest rates and the search by investors for financial assets characterize by these kinds of risk and revenue profiles. Such context was essential to help PPP deals to achieve their value for money requirement as it allowed minimizing the additional cost of private funds, compared to public ones. Indeed, the sovereign debt is considered as immunized from default risk. As a consequence, no risk premium is charged on public debt. So, it would be automatically more expansive to finance procurement through private funds than public ones. The financial attractiveness of PPPs, despite this handicap, could be both explained by intrinsic qualities of such deals in terms of incentive capacities and by this initial financial context, which conduce to such a private funding structure to present a very limited additional cost compared to sovereign bonds. The credit crunch compromised the viability of deals, which are funded through project finance structures with high levels of debt. Funds are more and more difficult to rise and are more and more costly, even for deals for which the counterpart is a public body . Additionally, the disappearance of monoline insurers, which guaranteed to the investors the repayment of the project entity debt through their AAA financial rating, contribute to limit the capacity of project managers not only to fund them with a limited risk premium but also to obtain a debt maturity, which match with the project one. Consequently, mini-perm structures, which are not a novelty in long-term contracts, tend to be more and more frequent after the financial crisis. Our purpose, in the framework of this communication, is to assess the possible consequences of such financial structures on the opportunity of PPPs for the public contractor. After presenting in a first part the increasing use of mini-perm structures after the 2008 crisis as a consequence of the major disruption in the contract financing model, we describe, in a second one, its potential repercussions, both in favorable and unfavorable situations. Our conclusion will put the accent on the analysis of financial and budgetary consequences of the additional risk induced by such structures for the public contractor. These consequences could be put in perspective with other devices used for preserving PPP financial structure as government guarantees.
    Keywords: public-private partnerships, project finance, financial crisis, refinancing, mini-perms, public procurement, fiscal risk
    Date: 2011–12–22
  7. By: Ghafele, Roya; Gibert, Benjamin
    Abstract: This paper evaluates the value proposition of public-private partnerships to patent review by analyzing the potential impact of crowdsourced prior art search on the European patent system. This first requires outlining the current challenges patent offices in Europe face due to their tremendous workload. The worst consequence of this for the innovation system – a drop in granted patent quality - is then described. Low standards in patent quality are believed to be the result of enormous strain on, and unreasonable expectations of, patent offices. Crowdsourcing offers a solution to many of these problems and presents a valuable resource for patent offices if the process is managed efficiently. The United States Patent and Trademark Office (USPTO) and Japanese Patent Office’s (JPO) pilot projects in community patent review are presented as opportunities from which Europe can learn. Promoting public-private partnerships in the management of crowdsourced prior art search can be a valuable solution to mitigate current challenges.
    Keywords: crowdsourcing; patent quality; patent offices; innovation
    JEL: O38 O34
    Date: 2011–06

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