nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2018‒03‒19
five papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Why are Megaprojects, Including Nuclear Power Plants, Delivered Overbudget and Late? Reasons and Remedies By Giorgio Locatelli
  2. Do Companies Benefit from Public Research Organizations? The Impact of the Fraunhofer Society in Germany By Comin, Diego; Licht, Georg; Pellens, Maikel; Schubert, Torben
  3. Chinese development assistance and household welfare in sub-Saharan Africa By Martorano, Bruno; Metzger, Laura; Sanfilippo, Marco
  4. An Assessment of the Efficacy of Delivering the Annual Development Program in Bangladesh By Mostafa Amir, Sabbih
  5. Learning When to Quit: An Empirical Model of Experimentation By Bernhard Ganglmair; Timothy Simcoe; Emanuele Tarantino

  1. By: Giorgio Locatelli
    Abstract: In the first section, this report analyses Nuclear Power Plants (NPPs) in the context of megaprojects, explaining why they are often delivered over budget and late. In the second section, the report discusses how Small Modular Reactors (SMRs) might address these issues. Megaprojects are extremely risky and often implemented after a sub-optimal phase of project planning leading to underestimations of the costs and overestimation of short-term benefits. When considering adherence to schedule and budget, often megaprojects might be considered a failure, and optimism bias, strategic mis-rapresentation, complexity, poor planning, poor risk allocation, poor scope management are all reasons to explain their over budget and delay. For megaprojects, especially in the nuclear field, a key strategy to achieve good performances appears to be the standardization. This standardization needs to be twofold: (i) technical standardisation, i.e. the construction of very similar design over and over, and (ii) the project delivery chain standardisation, i.e. the same stakeholders involved in the delivery of a project that is replicable multiple times. Under this perspective, given their size and standardisation potential, SMRs, might be a suitable class of NPP for several countries. Yet, if the economy of scale is the only driver considered, SMRs are hardly competitive with large NPPs (or even with gas or coal power plants). However, a fleet of standard SMRs might balance the lack of economy of scale with the economy of multiples, and the delivery of several standardised SMR projects might be the key to achieve good project management performances in the nuclear sector. However, the deployment of SMRs faces a number of challenges from several perspectives, such as the licencing, supply chain and financing ones. These challenges might be enormous, but so are the potential rewards too.
    Date: 2018–02
  2. By: Comin, Diego (Dartmouth College & CEPR); Licht, Georg (ZEW); Pellens, Maikel (ZEW & KU Leuven); Schubert, Torben (CIRCLE & Fraunhofer ISI)
    Abstract: Among available policy levers to boost innovation, investment in applied research organisations has received the least attention. In this paper, we analyze the case of the Fraunhofer Society, the largest public applied research organization in Germany. We analyze whether project interaction with Fraunhofer affect the performance and strategic orientation of firms. To that end, we assemble a unique dataset based on the confidential Fraunhofer-internal project management system and merge it with the German contribution to the Community Innovation Survey (CIS), which contains panel information on firm performance. Using instrumental variables that exploit the scale heteroscedasticity of the independent variable (Lewbel, 2012), we identify the causal effects of Fraunhofer interactions on firm performance and strategies. We find a strong, positive effect of project interaction on turnover and productivity growth. We also provide evidence that a major driver of the positive performance effects is the firms increased share of sales from new products and an increase in the share of workers with tertiary education. More detailed analyses reveal, amongst others that the performance effects become stronger the more often firms interact with Fraunhofer and that interactions aiming at generation of technology have a stronger effect than interactions aiming merely at the implementation of existing technologies.
    Keywords: Innovation; R&D; diffusion; applied research; Fraunhofer
    JEL: O33 O38
    Date: 2018–03–07
  3. By: Martorano, Bruno (UNU-MERIT); Metzger, Laura (ETH Zürich, Center for Development and Cooperation (NADEL)); Sanfilippo, Marco (University of Bari, Italy and IOB, University of Antwerp)
    Abstract: By combining geocoded project-level data on Chinese development assistance with geocoded household-level data from the Demographic and Health Survey (DHS), we investigate the effect of Chinese project assistance on household welfare in 13 sub-Saharan African countries. We exploit the geographic proximity of household clusters across two different DHS survey waves (before and after the influx of Chinese aid) and use a difference-in-difference design in order to investigate the impact of Chinese aid on households' wealth and education. Our results consistently point to an overall positive effect of Chinese project assistance on household welfare: areas that receive Chinese projects are more likely to be wealthier, stay in school longer, and achieve a higher educational attainment than areas which did not receive such projects. Results are robust to various alternative model specifications.
    Keywords: OECD-DAC, Aid Allocation, aid effectiveness, China, Africa, emerging donors, project level, household welfare, DHS, geocoded data
    JEL: F35 O19 R20
    Date: 2018–02–21
  4. By: Mostafa Amir, Sabbih
    Abstract: In order to achieve the goal of reaching a middle-income country status by 2021, Bangladesh requires increased public investment, particularly in order to close severe education, health, and infrastructure gaps. The major proportion of public investment in Bangladesh is channeled through the Annual Development Program (ADP).The government takes many projects every year for implementation in the ADP but a significant proportion of these projects are revised by cost escalation with time overrun as the implementation status remains poor. This study aims to assess and diagnose the ADP execution process against a sound public investment management framework, to identify the barriers responsible for poor implementation of ADP; and to recommend policy options to raise the efficacy of delivering ADP. The assessment of this study, using secondary data, found a weak project screening and appraisal status in the project preparation stage. This is supported by the finding of inadequate independent review of project proposals (e.g. log frames and CBA), as well as the practice of pervasive and increasing allocations to symbolic (small) projects and the substantial growth in the number of unapproved new projects. Although a significant improvement has been achieved in the ADP execution rate in the last two decades particularly for GOB projects (89 per cent), the execution rate of DP assisted projects (72 per cent) lags far behind. Furthermore, the evidence of fourth quarter syndrome suggests significant potential problems regarding the spending quality, and therefore the continued presence of project preparation and implementation weaknesses. In addition, the large share of projects which were declared completed despite not being 100 per cent complete indicates the necessity of reviewing and rationalizing quality of ADP spending. Two key indicators for evaluating the PIM system effectiveness are cost and time over-run. While some the average cost overrun showed some improvement in recent years, the average cost overrun is still on an increasing trend. Weaknesses in project preparation, financing, and execution are likely to have contributed to such inefficiency. Finally, inadequate follow-up on the recommendations generated from external audits, as well as IMED impact evaluations and lack of attention to the operation and maintenance of newly created assets are the two other critically important factors which hamper the efficacy of ADP delivery of Bangladesh. Therefore, the currents study recommends that these weaknesses should be addressed in the short, medium and long term to increase the effectiveness of PIM system in Bangladesh.
    Keywords: Public investment management, annual development program, efficacy, economic growth.
    JEL: H5
    Date: 2017–12
  5. By: Bernhard Ganglmair; Timothy Simcoe; Emanuele Tarantino
    Abstract: We study a dynamic model of the decision to continue or abandon a research project. Researchers improve their ideas over time and also learn whether those ideas will be adopted by the scientific community. Projects are abandoned as researchers grow more pessimistic about their chance of success. We estimate the structural parameters of this dynamic decision problem using a novel data set that contains information on both successful and abandoned projects submitted to the Internet Engineering Task Force (IETF), an organization that creates and maintains internet standards. Using the model and parameter estimates, we simulate two counterfactual policies: a cost-subsidy and a prize-based incentive scheme. For a fixed budget, subsidies have a larger impact on research output, but prizes perform better when accounting for researchers’ opportunity costs.
    JEL: D83 O31 O32
    Date: 2018–02

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