nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2016‒09‒25
thirteen papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Pro-Cyclical Petroleum Investments and Cost Overruns in Norway by Roy Endré Dahl, Sindre Lorentzen, Atle Oglend, and Petter Osmundsen. By Dahl, Roy Endre; Lorentzen, Sindre; Oglend, Atle; Osmundsen, Petter
  2. Selling real assets: the impact of idiosyncratic project risk in an auction environment By Di Corato, Luca; Moretto, Michele
  3. Sharing economic value between the stakeholders of a telehealth project: methodological issues? By Camille Jean; Tu-Anh Duong; Julie Stal-Le Cardinal; Marija Jankovic; Jean-Claude Bocquet; Pierre Espinoza
  4. Interclustering: innovate through diversification. The case of the Aerospace Valley competitiveness cluster in Aquitaine region By Julien Ambrosino; Jérémy Legardeur; Amélie Demanet; Philippe Lattes
  6. IdeaValuation: Encourage exchanges during a creative session by the ideas qualitative evaluation using a digital tool By Julien Ambrosino; Dimitri Masson; Jérémy Legardeur; Guillaume Tastet
  7. Prizes versus Contracts as Incentives for Innovation By Che, Yeon-Koo; Iossa, Elisabetta; Rey, Patrick
  8. A novel branch-and-bound algorithm for the chance-constrained RCPSP By Morteza Davari; Erik Demeulemeester
  9. Program for Results: The First 35 Operations - Working Paper 430 By Alan Gelb, Anna Diofasi and Hannah Postel
  10. Regulating Local Government Financing Vehicles and Public-Private Partnerships in China By Hui Jin; Isabel Rial
  11. Push or pull? By David Michael Rietzke; Yu Chen
  12. Information transmission and ownership consolidation in aid programs By Axel Dreher; Sarah Langlotz; Silvia Marchesi
  13. Aid on Demand: African Leaders and the Geography of China's Foreign Assistance By Axel Dreher; Andreas Fuchs; Roland Hodler; Bradley C. Parks; Paul A. Raschky; Michael J. Tierney

  1. By: Dahl, Roy Endre (UiS); Lorentzen, Sindre (UiS); Oglend, Atle (UiS); Osmundsen, Petter (UiS)
    Abstract: Development projects in the oil industry often have cost overruns. Through analysis of data from Norwegian development projects in the petroleum industry, this paper investigates the common effect of business cycle developments on cost overruns. Lack of capacity and expertise in a tight supplier market yield cost inflation and difficulties in managing projects. Unlike previous analyses of cost overruns, we analyse projects over a long time period to capture the cyclical effects. We document a statistically significant positive relationship between oil price developments and cost overruns, with shocks or surprises to the oil price during the project implementation having a larger impact on cost overruns than the oil price level itself. Cost overrun ultimately leads to reduced competitiveness for the industry, and we discuss consequences and policy implications for business and society of these cost overruns.
    Keywords: Cost overruns; petroleum projects; business cycle; oil price
    JEL: D22 D24 G31
    Date: 2016–09–15
  2. By: Di Corato, Luca (Department of Economics, Swedish University of Agricultural Sciences); Moretto, Michele (Department of Economics and Management, University of Padova)
    Abstract: Consider a seller auctioning a real asset among n agents. Each agent contemplates a specific investment project and the asset is crucial for its activation. Project cash flows and their volatility are private information. A first-price auction is considered and the asset is granted in exchange for a payment to be paid at the investment time. Here we determine the optimal bid function and show that the auction is efficient. The asset is assigned to the project characterized by the highest volatility in the associated cash flows. Interestingly, the bid does not depend on the time at which the project is actually executed or on the changes in post-auction cash flows. We also address concerns about the distribution of the project value among the parties and show that i) the winner always holds the largest share of the ex-post project value when projects are characterized by sufficiently high cash flow volatility and ii) negative systematic risk reduces, ceteris paribus, the share accruing to the seller. Finally, we show that cash flow volatility has an ambiguous effect on losses due to the presence of information asymmetry.
    Keywords: first-price auctions; procurement; idiosyncratic risk; adverse selection; moral hazard; continuous-time models
    JEL: C61 D44 D82
    Date: 2016–08–29
  3. By: Camille Jean (LCPI - Laboratoire Conception de Produits et Innovation - Arts et Métiers ParisTech); Tu-Anh Duong (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec, Département de dermatologie, hôpital Henri Mondor - CHU Henri Mondor); Julie Stal-Le Cardinal (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec); Marija Jankovic (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec); Jean-Claude Bocquet (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec); Pierre Espinoza (Mutualité française des Côtes d’Armor - Mutualité française)
    Abstract: Introduction: The durability of telehealth projects is too often questioned by the lack of prior development of sustainable business models allowing the finding of the equilibrium of the funding for the deployment and for the operational phases. The existing medico-economic and multidisciplinary methods do not address this problem; hence a new one is needed. Materials and Methods: The complex system design tools used in the field of Industrial Engineering are used as a base for this new method. The holistic approach adopted represents an opportunity to develop sustainable business models taking into account needs and viewpoints of each stakeholder of a telehealth project. Results: The proposed method aims at creating various scenarios of business models and offering a clear vision on how the proposed changes will impact each of the stakeholders involved as well as the overall system. An example of how this can be applied is detailed. Discussion and Conclusions: The presented method allows the design of economic value sharing scenarios between all the stakeholders of a telehealth project. Its application to a particular one can act as a basis for discussions during negotiations between stakeholders. It can also support the assessment of the overall project’s sustainability.
    Abstract: Introduction : La pérennité des projets de télémédecine est trop souvent remise en cause par l'absence de développement préalable de modèles économiques durables qui permettraient d'élaborer de nouvelles organisations à même d'équilibrer le financement de leur déploiement et de leur fonctionnement. Les méthodes d'évaluation médico-économiques et les méthodes multicritères existantes ne permettant pas de répondre à cette problématique, une nouvelle méthode est donc nécessaire. Matériels et Méthodes : Les outils d’analyse des systèmes complexes utilisés dans le domaine du Génie Industriel sont mobilisés pour créer cette méthode. La perspective holiste adoptée est l’occasion d’élaborer des modèles économiques plus durables pour chacun des acteurs d’un projet de télémédecine. Résultats : La méthode proposée permet de créer des scenarii variés de modèles économiques et offre une vision précise de ce que l’évolution projetée aura comme impact sur chacun des acteurs impliqués et sur le système. Un exemple d’application est détaillé. Discussion et Conclusions : La méthode présentée permet de concevoir des scenarii de partage de la valeur économique entre les acteurs d'un projet de télémédecine. Son application à un projet particulier permet de servir de support de discussion lors des négociations
    Keywords: design engineering,Business model,economic value sharing,complex system,Modèle économique,partage de la valeur,système complexe,innovation,conception
    Date: 2016–06–01
  4. By: Julien Ambrosino (Aerospace Valley, ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique, Agence de Développement et d'Innovation); Jérémy Legardeur (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Amélie Demanet (Agence de Développement et d'Innovation); Philippe Lattes (Aerospace Valley)
    Abstract: At the regional level, as in Aquitaine region, or at national and European levels, interclustering offers new opportunities to collaborate between clusters/clusters and their respective members. The interclustering steps identified in the literature start usually by exchanging best practices between members and cluster leaders to move towards the setting up collaborative innovation projects with a cross-sectoral dimension. In the case of major clusters, the abundance of technologies identified in the perimeter can limit the impact in its institutional scope. Technological diversification then appears as a new opportunity to foster cross-fertilization between market applications and complementary themes. The number of projects since 2010 in connection with Aerospace Valley competitiveness cluster seems to confirm our assumptions.
    Abstract: A l'échelle régionale, comme en Aquitaine, ou au niveau national et européen, l'interclustering offre de nouvelles opportunités de collaborations aux pôles de compétitivité et aux clusters et à leurs adhérents respectifs. Les étapes identifiées dans la littérature à propos de l'interclustering débutent le plus souvent par l'échange de bonnes pratiques entre membres et animateurs de clusters pour tendre vers le montage de projets collaboratifs d'innovation avec une dimension trans-sectorielle. Dans le cas des pôles de compétitivité majeurs, l'abondance des technologies identifiées au sein du périmètre peut limiter l'impact à l'intérieur de son champ d'action institutionnel. La diversification technologique parait alors comme une nouvelle opportunité pour susciter la fertilisation croisée entre des applications marché et des thématiques complémentaires. Le nombre de projets réalisés depuis 2010 en lien avec pôle Aerospace Valley semble confirmer nos hypothèses en ce sens.
    Keywords: cluster,innovation,collaborative projects,competitiveness cluster,diversification,interclustering,projets collaboratifs,clusters,pôle de compétitivité
    Date: 2016–07–07
  5. By: Laura Roa Castro (IRT SystemX, LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec); Julie Stal-Le Cardinal (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec); Laurent Gasser (IRT SystemX)
    Abstract: The research presented in this paper is part of a larger effort on collaborative design modelling, and is focused in the modelling of three main characteristics in collaborative design using simulation models: actors, activities and objects. To represent these three features, an added value process proposition for a collaborative design in early development phases using simulation models was suggested. The proposed process contributes to an added value solution at three different levels in the organization: the operational level, the tactic level and the strategic level, and was implemented during a project at the Research Institute of Technology SystemX having Renault and Airbus industries as partners of the project. After the project ends, dynamic interviews were done with the project team members in order to get a feedback regarding the process and to understand the collaborative interactions in a real use case. Afterwards, implementation and evaluation of the process conclude that collaboration in Modelling and simulation context is not a linear problem at all, but the proposed representation is highly adapted to improve global comprehension of the objectives and the context understanding in a first time. The results point out the actors as the key element on the collaborative design and raise a new research question.
    Keywords: concurrent engineer,collaborative simulation,CAE-CAE collaboration,collaborative process
    Date: 2016–05–16
  6. By: Julien Ambrosino (Aerospace Valley, ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA), Agence de Développement et d'Innovation, IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Dimitri Masson (ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA)); Jérémy Legardeur (IMS - Laboratoire de l'intégration, du matériau au système - Université Sciences et Technologies - Bordeaux 1 - Institut Polytechnique de Bordeaux - CNRS - Centre National de la Recherche Scientifique, ESTIA Recherche - Ecole Supérieure des Technologies Industrielles Avancées (ESTIA)); Guillaume Tastet (Open Decide)
    Abstract: In the context of the emergence of collaborative innovation projects, the animation of creative sessions permits to identify new opportunities. The number of ideas generated is a lot more important than the number of collaborative projects implemented. To improve this ratio, we assume that group discussions could be facilitated by the cleavage of opinions about the quality of the ideas discussed during the meeting. We support our approach with a digital tool to promote information feedback throughout the session.
    Abstract: Dans le cadre de l'émergence de projets collaboratifs d'innovation, l'animation de séance de créativité permet d'identifier de nouvelles opportunités. Généralement, le nombre d'idées générées est bien plus important que le nombre de suites données (e.g. étude, lancement et montage de projets associés). Afin d'améliorer ce ratio, nous faisons les hypothèses que d'une part les évaluations et discussions en groupe sur les idées proposées pourraient être facilitées, et d'autre part que la singularité d'opinions concernant la qualité des idées évoquées en séance peut être facilitateur d'échanges. Pour cela, nous appuyons notre démarche par un outil numérique pour réaliser le partage d'informations des évaluations tout au long de la séance de créativité.
    Keywords: creativity,innovation,ideation,evaluation,rating,creative support tool,outil support à la créativité,créativité
    Date: 2016–07–06
  7. By: Che, Yeon-Koo; Iossa, Elisabetta; Rey, Patrick
    Abstract: Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unverifiable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism resolves the tradeoff via two instruments: a monetary prize and a contract to implement the project. The optimal mechanism favors the innovator in contract allocation when the value of innovation is above a certain threshold, and handicaps the innovator otherwise. A monetary prize is employed as an additional incentive but only when the value of innovation is suficiently high.
    Keywords: Contract rights, Inducement Prizes, Innovation, Procurement and R&D.
    JEL: D44 D82 H57 O31 O38 O39
    Date: 2016–09
  8. By: Morteza Davari; Erik Demeulemeester
    Abstract: The resource-constrained project scheduling problem (RCPSP) has been widely studied during the last few decades. In real-world projects, however, not all information is known in advance and uncertainty is an inevitable part of these projects. The chance-constrained resource-constrained project scheduling problem (CC-RCPSP) has been recently introduced to deal with uncertainty in the RCPSP. In this paper, we propose a branch-and-bound (B&B) algorithm and a MILP formulation that solve the CC-RCPSP. We introduce two different branching schemes and eight different priority rules for the proposed B&B algorithm. Since solving CC-RCPSP is computationally intractable, its sample average approximation counterpart is considered to be solved. The computational results suggest that the proposed branch-and-bound procedure clearly outperforms both a proposed MILP formulation and a branch-and-cut algorithm from the literature.
    Keywords: Chance-constrained problem, Branch-and-bound, CC-RCPSP
    Date: 2016–09
  9. By: Alan Gelb, Anna Diofasi and Hannah Postel
    Abstract: The World Bank’s new Program for Results (PforR) instrument is only the third financing instrument approved since 1944. The PforR portfolio is expanding rapidly and represents an appreciable part of “results-based” development finance. This paper analyzes the first 35 operations. They account for $8.1 billion in commitments and are leveraged into programs that total $46.7 billion. The results frameworks and monitoring processes of the operations are therefore extended across a wider canvas. The paper analyzes the relative weight of “results” and institution-building using a methodology based on the different types of Disbursement-Linked-Indicators (DLIs). It also considers how the projects manage performance risk by distributing disbursements across DLIs of different types. The projects vary greatly in these and other dimensions, suggesting that the portfolio offers a laboratory for the future although it is too early to come to conclusions on implementation. A further 22 operations are in the pipeline. Unlike most other results-based initiatives, PforR loans offer no financing additionality. Client countries can still avail themselves of traditional investment or policy loans. This raises the question of why a particular country might choose to take a PforR loan (with its attendant disbursement risk) rather than either of the traditional options. The paper considers this question and the implications for the future role of the MDBs as their clients transition from LICs to MICs and their funding becomes a smaller share of overall development finance. It suggests a monitoring role related to the effectiveness of resource management that is not too dissimilar to the role played by private creditors in corporate governance. It notes that this might appeal to certain clients, and to certain interests within client countries, more than others.
    Keywords: foreign aid, international financial institutions, World Bank, results-based aid
    JEL: F35 F36 O19
    Date: 2016–07
  10. By: Hui Jin; Isabel Rial
    Abstract: In this paper, we argue that there is much room for China to strengthen its regulatory framework for public-private partnerships (PPPs). We show that infrastructure projects carried out through local government financing vehicles (LGFVs) were largely unregulated PPPs, and significant fiscal risks have already manifested themselves. While PPPs can potentially provide efficiency gains, they can also be used by governments to circumvent budgetary borrowing constraints. Therefore, effective PPP regulation is key to delivering PPPs’ benefits while containing their potential fiscal risks. The authorities have taken concrete steps in order to establish a sound regulatory framework and foster a new generation of PPPs. However, to make the framework effective, we highlight a few issues to be resolved. Based on international best practice, we propose a four-pillar regulatory framework for China, which could be implemented gradually in three stages.
    Date: 2016–09–16
  11. By: David Michael Rietzke; Yu Chen
    Abstract: We study a principal-agent model wherein the agent is better informed of the prospects of the project, and the project requires both an observable and unobservable input. We show (1) Performance pay may not be optimal, even if output is the only informative signal of an essential input; (2) Total surplus tends to be higher if one input is unobservable than if both inputs are observable; and (3) Bunching may arise amongst low and intermediate types. We explore the implications for push and pull programs used to encourage R&D activity, but our results have applications beyond this context.
    Keywords: Pay for Performance, Moral Hazard, Adverse Selection, Observable Action, Principal-Agent Problem, Grants, Prizes
    JEL: D82 D86 O31
    Date: 2016
  12. By: Axel Dreher (Heidelberg University); Sarah Langlotz (Heidelberg University); Silvia Marchesi (University of Milano Bicocca and Centro Studi Luca d’Agliano)
    Abstract: We investigate the degree of leeway donors of foreign aid should grant to recipient governments when their preferences over how to implement the aid are different, and both the donor and recipient possess some private information about the most effective policies. Intuitively, our model shows that donors should stay in control of how their aid is spent when their own private information is more important than the private information of the recipient. Less obviously, an increase in the difference of preferences between donors and recipients can increase rather than decrease the leeway that donors should grant the recipients, as the recipients’ information gains in importance relative to those of the donors, and recipients become less likely to communicate truthfully. We test the model using dyadic data for 28 bilateral aid donors and 112 recipients, over the 1995-2010 period. Our proxy for “centralized†aid is project aid, while budget aid leaves more leeway to the recipient and thus proxies for “decentralized†aid. In line with the model, misaligned interests and informational asymmetries indeed influence the shares of aid given as budget and project aid.
    Keywords: Delegation, communication, ownership, foreign aid
    JEL: C23 D82 F33 O1
    Date: 2016–08–26
  13. By: Axel Dreher (Heidelberg University); Andreas Fuchs (Heidelberg University); Roland Hodler (University of St. Gallen); Bradley C. Parks (College of William and Mary); Paul A. Raschky (Monash University); Michael J. Tierney (College of William and Mary)
    Abstract: This article investigates whether China's foreign aid is particularly prone to capture by political leaders of aid-receiving countries. We examine whether more Chinese aid is allocated to the birth regions of political leaders and regions populated by the ethnic groups to which leaders belong, controlling for indicators of need and various fixed effects. We have collected data on 117 African leaders' birthplaces and ethnic groups and have geocoded 1,650 Chinese development finance projects across 3,097 physical locations that were committed to Africa over the 2000{2012 period. Our econometric results show that when leaders hold power their birth regions receive substantially more funding from China than other subnational regions. We also find -less robust- evidence that African leaders direct more Chinese aid to areas populated by individuals who share their ethnicity. However, when we replicate the analysis for the World Bank, our regressions show no evidence of favoritism. We also evaluate the impact of Chinese aid on regional development, exploiting time variation in the amount of Chinese aid that results from China's production of steel and geographical variation in the probability that a subnational region will receive such aid. We find that Chinese aid improves local development outcomes, as measured by per-capita nighttime light emissions at the first and second subnational administrative level. We therefore conclude that China's foreign aid program has both distributional and developmental consequences for Africa.
    Keywords: Foreign aid, Favoritism, Aid allocation, Aid effectiveness, Africa, China, Official Development Assistance, Georeferenced data, Spatial analysis
    JEL: D73 F35 P33 R11
    Date: 2016–09–13

This nep-ppm issue is ©2016 by Arvi Kuura. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.