nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2017‒10‒29
eight papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Procurement with Unforeseen Contingencies By Herweg, Fabian; Schmidt, Klaus M.
  2. Operation, Administration and Maintenance of Municipal Fiber Networks By Januschke, Oskar; Egg, Jakob; Mairhofer, Michael; Wimmer, Thomas; Reichl, Wolfgang; Ruhle, Ernst-Olav
  3. Does Voluntary Risk Taking Affect Solidarity? Experimental Evidence from Kenya By Renate Strobl; Conny Wunsch
  4. The Political Economy of International Finance Corporation Lending By Axel Dreher; Katharina Richert
  5. Development NGOs: Basic Facts By Gani Aldashev; Cecilia Navarra
  6. Public works procurement in the new code: a legal and economic assessment of the main measures By Anna Peta
  7. Government involvement and learning in business model experimentation: NGA deployment in rural areas in the Netherlands By Lelie, T.; Sadowski, B.; Brennenreadts, R.; Smits, J.
  8. The importance of value creation in smart city initiatives: An ecosystem approach By Oomens, Ivette M. F.; Sadowski, Bert M.

  1. By: Herweg, Fabian; Schmidt, Klaus M.
    Abstract: The procurement of complex projects is often plagued by large cost overruns. One important reason for these additional costs are flaws in the initial design. If the project is procured with a price-only auction, sellers who spotted some of the flaws have no incentive to reveal them early. Each seller prefers to conceal his information until he is awarded the contract and then renegotiate when he is in a bilateral monopoly position with the buyer. We show that this gives rise to three inefficiencies: inefficient renegotiation, inefficient production and inefficient design. We derive the welfare optimal direct mechanism that implements the efficient allocation at the lowest possible cost to the buyer. The direct mechanism, however, imposes strong assumptions on the buyer's prior knowledge of possible flaws and their payoff consequences. Therefore, we also propose an indirect mechanism that implements the same allocation but does not require any such prior knowledge. The optimal direct and indirect mechanisms separate the improvement of the design and the selection of the seller who produces the good.
    Keywords: Adaptation Costs; auctions; Behavioral Contract Theory; Design Flaws; Procurement; Renegotiation
    JEL: D44 D82 D83 H57
    Date: 2017–10
  2. By: Januschke, Oskar; Egg, Jakob; Mairhofer, Michael; Wimmer, Thomas; Reichl, Wolfgang; Ruhle, Ernst-Olav
    Abstract: The region of Lienz in Eastern Tyrol is a pioneer in municipal broadband networks and the activities take place in a state which itself also has a pioneering role in terms of how the public sector understands broadband issues. Over the last years, the 15 municipalities in the area of Lienz have initiated a project against the background of the following setting: 1. The municipalities in the region have taken the responsibility for deploying the passive network (ducts and fibers) based on a FTTB(H concept, partly supported by state aid. 2. The municipalities are confronted with a large number of tasks for the deployment and the operation and maintenance of the network. The selection of network providers for the active network and the provision of services has attracted wider interest. 3 active operators ensure competition in the end user market. The key aspects that remain as tasks for the municipality are network operation, maintenance, installation, fault repair, inspection and documentation. A number of lessons learnt can be listed especially with respect to processes for network deployment, maintenance, inspection etc. Municipalities have to dive into detailed operational details in order to achieve successful project results. Such detailed aspects of the project contain e.g. the fiber concept, the connections to the buildings, a delineation between tasks of operators and municipalities, inspection, documentation and operation and maintenance. A key factor is that projects tend to be small and struggle to achieve economies of scale
    Date: 2017
  3. By: Renate Strobl; Conny Wunsch
    Abstract: In this study we experimentally investigate whether solidarity, which is a crucial base for informal insurance arrangements in developing countries, is sensitive to the extent to which in-dividuals can influence their risk exposure. With slum dwellers of Nairobi our design measures subjects’ willingness to share income with a worse-off partner both in a setting where partici-pants could either deliberately choose or were randomly assigned to a safe or a risky project. We find that when risk exposure is a choice, willingness to give is roughly 9 percentage points lower compared to when it is exogenously assigned to subjects. The reduction of solidarity is driven by a change in giving behaviour of persons with the risky project. Compared to their counterparts in the random treatment, voluntary risk takers are seemingly less motivated to share their high payoff with their partner, especially if this person failed after choosing the risky project. This suggests that the willingness to show solidarity is influenced by both the desire for own compensation and attributions of responsibility. Our findings have important implications for policies that interact with existing informal insurance arrangements.
    Keywords: solidarity, risk taking, Kenya
    JEL: D81 C91 O12 D63
    Date: 2017
  4. By: Axel Dreher; Katharina Richert
    Abstract: The bulk of International Finance Corporation (IFC) lending benefits companies from rich countries, and projects in countries with middle income. Large conglomerates such as Lidl or Mövenpick have been among its direct beneficiaries. This contrasts to some extent with the IFC’s official mandate, which is to finance poverty-reducing projects for which private capital is not available on reasonable terms. We investigate the drivers of this mismatch. According to our theory, the governments of industrialized countries where borrowing companies are based form coalitions with governments of middle-income countries where the projects are implemented. We therefore expect preferential treatment to be most pronounced when the representatives of both the recipient’s and the company’s countries are best able to collude in exerting their influence. We argue that this will be the case when both countries’ governments are represented among the IFC’s Board of Executive Directors, and when they have extraordinary clout with major IFC shareholders. Using data for more than 3000 IFC projects over the 1995-2015 period we show that the (joint) influence of these countries helps them to receive a disproportional share of IFC funding.
    Keywords: international finance, international bureaucracies, political economy
    JEL: F33 F53 F34 F35
    Date: 2017
  5. By: Gani Aldashev; Cecilia Navarra
    Abstract: This paper systematically reviews the empirical literature on development nongovernmental organisations (NGOs), drawing both on quantitative and qualitative analyses, and constructs a set of basic facts about these organisations. These facts concern the size of the development NGO sector and its evolution, the funding of NGOs, the allocation of NGO aid and projects across beneficiary countries, the relationship of NGOs with beneficiaries, and the phenomenon of globalisation of development NGOs.
    Keywords: non-governmental organisations; aid effectiveness; non-profits; charitable giving; north-south partnership
    Date: 2017–10
  6. By: Anna Peta (Banca d'Italia)
    Abstract: In the light of the economic literature, this paper provides an analysis of the main measures for public works, introduced by the new Public Contracts Code, in order to assess whether they could help to solve the problems of the Italian market, characterized by fragmented public demand and a high level of cost overruns and delays in the execution phase. The paper highlights both the progress made, also thanks to the recently approved corrective decree, and the remaining shortcomings, such as the inconsistencies in the definition of the contracting authorities’ qualification requirements and firms’ rating factors, as well as the uncertainties affecting the wider margins of autonomy and flexibility granted to the contracting authorities. Overcoming these problems will also depend on the ANAC as a regulatory body that supports the functioning of the system. Moreover, both before and after the execution phase of works, the legal framework still needs to be completed with the introduction of independent reviews of the projects’ ex-ante appraisals and the definition of a systematic process for ex-post evaluations of finished projects.
    Keywords: procurement, professionalization, quality
    JEL: H57 H83 K19
    Date: 2017–10
  7. By: Lelie, T.; Sadowski, B.; Brennenreadts, R.; Smits, J.
    Abstract: The paper analyses the effects of governmental policy in the Netherlands on the formation and development of rural broadband projects. Rural internet access speeds are increasingly falling behind. As a result, the vast majority of Dutch urban households use internet connections faster than those available to their counterparts in remote areas. As demand increases rapidly over time, the experienced deficit will grow rapidly without improvements to rural net-works. This issue has received attention at different levels of government in the Netherlands, where regional and municipal actors have stimulated new broadband network deployment. In this context, the article explores the role of the governmental policy in the rise of these projects and in stimulating new business model development. The paper studies 191 projects in the Netherlands and uses publicly available reports on government spending. The study than focuses on 28 projects in greater detail by using quantitate information gathered via a survey. The analysis shows that a large number of small projects use differing network construction methods and a variety of business models, allowing for some experimentation. In addition, a combination of financial support and actor network build-ing is found to provide advantages to these projects.
    Date: 2017
  8. By: Oomens, Ivette M. F.; Sadowski, Bert M.
    Abstract: Within the growing literature on smart cities, much research has focused on issues related to the formation stage and the roles of different actors in these initiatives. The large number of failures of smart city initiatives, however, points at an existing gap between the understanding of the formation of these initiatives and the practice of their management. In this context, the purpose of this paper is to address this research gap by discussing determinants of smart city initiatives and the experiences in smart city management. By taking an innovation ecosystem perspective, the paper focuses on the management experiences of four smart city initiatives (WoonConnect, Mobilty Portal, Vehicle2Grid, Straatkubus) in the Netherlands. The empirical research has been undertaken during the period May and June 2016. In linking to the discussion on smart cities, the research shows that most studies on smart cities have focused on the formation stage of the initiative and the roles of partners in these initiatives. In order to better understand problems surrounding smart city projects, it is necessary to examine the fundamental business model underlying these initiatives (i.e. processes of value creation and appropriation) and the role of business partners in these ventures. By using an innovation ecosystem perspective, the paper is able to identify shortcomings of existing approaches in smart city research related to the (static) form of analysis and the firm-level type of analysis. For smart city managers, key issues related to smart city projects are rooted in the second stage of managing these ventures (i.e. the coordination stage) and the role of private firms in this stage.
    Date: 2017

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