nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2018‒07‒23
six papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Report for the Edinburgh Tram Inquiry By Bent Flyvbjerg; Alexander Budzier
  2. Can organisational ambidexterity kill innovation? A case for non-expected utility decision making By Mario Le Glatin; Pascal Le Masson; Benoit Weil
  3. Cultural entrepreneurship : generic tensions amplified by the small size of organisations By Philippe Henry
  4. Effects of contract governance on public private partnership (PPP) performance By Chandan Kumar
  5. Opportunism and hold-up in the incomplete public private partnership (PPP) contracts By Chandan Kumar
  6. “Do public-private partnership enabling laws increase private investment in infrastructure?” By Daniel Albalate; Germà Bel; R. Richard Geddes

  1. By: Bent Flyvbjerg; Alexander Budzier
    Abstract: This report reviews the Edinburgh tram project's risk management. Projects frequently overrun their cost and timelines and fall short on intended benefits. Cost, schedule, and benefit risk of projects need to be carefully considered to avoid this. The report describes and evaluates risk assessment and management for the Edinburgh tram. The report was produced as part of the Edinburgh Tram Inquiry. Keywords: risk assessment, risk management, infrastructure, megaprojects, optimism bias, strategic misrepresentation, planning fallacy, behavioral science.
    Date: 2018–04
  2. By: Mario Le Glatin (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Pascal Le Masson (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Benoit Weil (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The academic construction of ambidexterity articulated around notions such as exploration, exploitation (J. March 1991) has been flourishing over the years with a strong background in organisational theory to explain levels of performance and innovation. However, they have also made a call for in-depth studies to understand managerial capabilities such as decision-making (Birkinshaw & Gupta 2013; O'Reilly & Tushman 2013; Benner & Tushman 2015) supporting the tension of competing objectives. In this paper, we show that organisational ambidexterity can kill innovation as the underlying decision theories are not fully supporting the nature of decision required in regimes such as contextual ambidexterity (Gibson & Birkinshaw 2004). Two case studies from the aircraft cabin equipment industry are presented and analysed at the project management level with descriptors from organisational ambidexterity and decision-making. We propose to consider unconventional decision theories, taking into account non-expected utilities such as potential regret of imagined prospects, as a means to support management tools enabling ambidexterity at the decisional and contextual levels. First, we show that common decision models based on expected utility encoded in management tools mobilised for contextual ambidexterity can fail to support innovation. Second, we propose that a non-expected utility, such as potential regret of imagined prospects, serves the management of competing exploration/exploitation objectives. Third, the case studies help contouring a management tool extending observed attempts to sustain or extend contextual ambidexterity through unconventional decision-making.
    Keywords: decision,project management,design,ambidexterity,management tool
    Date: 2018–06–19
  3. By: Philippe Henry (Scènes et savoirs - UP8 - Université Paris 8 Vincennes-Saint-Denis)
    Abstract: In what way is the theme of cultural entrepreneurship something else than a simple societal or institutional injunction, particularly in France for micro-organisations with professional aim and other than profit-making goals in the field of culture ? While contextual developments, since the end of the last century, largely explain why this theme is currently so pregnant, it also gains to be looked at through the generic tensions of the cultural economy along with those that can be found in very small enterprises. An approach which gives its rightful place to the qualitative and collective dimensions of cultural entrepreneurship therefore seems more relevant than going no further than a conception which would be either far too economical or focused on the figure of the individual entrepreneur. The importance of non-profit-making goals is also to be underlined, even if the issue of a minimal economic viability for each project or organisation remains central. Those different elements are even more intense in very small enterprises. Attempts at cooperative arrangement between cultural micro-enterprises thus show the full interest, but also the structural difficulties, of such approaches, if only to ensure a minimal economic viability for projects whose stakes are not only economic.
    Abstract: En quoi le thème de l'entrepreneuriat culturel relève-t-il d'autre chose que d'une simple injonction sociétale ou institutionnelle, notamment en France pour les micro-organisations à visée professionnelle et à buts d'abord autres que lucratifs de ce domaine d'activité ? Si des évolutions contextuelles, depuis la fin du siècle dernier, expliquent pour une bonne part la prégnance actuelle de ce thème, celui-ci gagne aussi à être regardé au travers des tensions génériques de l'économie culturelle et de celles des très petites entreprises. Une approche donnant toute sa place aux dimensions qualitative et collective de l'entrepreneuriat culturel apparaît alors plus pertinente que d'en rester à une conception par trop économique ou centrée sur la figure de l'entrepreneur individuel. L'importance des buts autres que seulement lucratif est également à souligner, même si la question de la viabilité économique minimale de chaque projet ou organisation reste elle aussi centrale. Ces différents éléments se retrouvent comme exacerbés dans les très petites entreprises. Des tentatives d'agencement coopératif entre micro-entreprises culturelles montrent ainsi tout l'intérêt, mais aussi les difficultés en partie structurelles, de telles démarches, ne serait-ce que pour assurer une viabilité économique minimale à des projets porteurs d'enjeux d'abord non strictement économiques.
    Keywords: Cultural entrepreneurship , socioeconomic ,Entrepreneuriat culturel , socio-économie , coopération , arts
    Date: 2018–02
  4. By: Chandan Kumar (Indira Gandhi Institute of Development Research)
    Abstract: Using the basic instruments of governance as highlighted in the transaction cost economics literature, this paper empirically examines the impact of differences in contract attributes on project outcomes. The hypothesis is to test whether better incentive structure and stricter administrative controls lead to more efficient project outcomes. It compares two sets of contracts (called as toll and annuity) from Indian PPP road projects which are designed for the same task and implemented under the similar conditions, but have some differences in the contract governance attributes. It carries out this exercise using data from more than 150 projects. The empirical findings highlight how instruments of governance influence the degree of efficiency in achieving the desired results. For instance, the annuity model, that has tighter budget constraint (i.e. better incentive structure) than the toll model, performs better in terms of minimizing cost and time overruns. Moreover, the results demonstrate that changes in administrative controls also influence outcomes. Stricter the control, better is the efficiency in the desired outcomes. The empirical findings could be useful to the policymakers for designing better contracts for the road as well as other infrastructure related sectors.
    Keywords: Contracts, Transaction Cost Economics, Road sector, Public Private Partnership, India
    JEL: K12 D23 R42 L33 C20
    Date: 2018–03
  5. By: Chandan Kumar (Indira Gandhi Institute of Development Research)
    Abstract: Opportunism is a concern for contracts that are incomplete in the presence of bounded rationality and uncertainty. Since Public Private Partnership (PPP) contracts are incomplete, are these contracts prone to opportunism? This paper attempts to find the answer to this question. It examines the contract design of the Indian PPP road contracts and analyzes its strengths and weaknesses to avoid the opportunism or hold-up using the probabilistic framework. This framework suggests that each type of contract should have its own self-enforcing range to make it incentive compatible. This paper compares the risk allocated in the two types of contracts (i.e. linked and delinked contracts) for delivering the project on time. Further, it empirically tests these findings using 82 PPP projects. The low probability of timely completion and longer time overruns in the delinked projects indicate the presence of possible opportunism. A further analysis of delinked contracts shows that the same set of companies (which have both types of contracts in their portfolio) could exploit the incorrectly specified delinked contract to create a hold-up like situation. In consonance with the contract theory, the analysis suggests that extra leverage should be given with more accountability and better checks.
    Keywords: Opportunism, Hold-up, Contracts, Public Private Partnership, India
    JEL: D86 L14 L33 O22
    Date: 2018–03
  6. By: Daniel Albalate (Department of Econometrics, Statistics and Applied Economics & GiM-IREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131 Fax:34.93.4024573); Germà Bel (Department of Econometrics, Statistics and Applied Economics & GiM-IREA University of Barcelona. C/ John Keynes 1-11, 08034 Barcelona. Tel: 34.93.4031131 Fax:34.93.4024573); R. Richard Geddes (Department of Policy Analysis and Management. Cornell University 251 Martha Van Rensselaer Hall. Ithaca, NY 14853. Phone: (607) 255-8391.)
    Abstract: Rising use of public-private partnerships, or PPPs, is an important development in U.S. infrastructure delivery. PPPs are detailed contracts between a public-sector infrastructure project sponsor and a private-sector provider that bundle delivery services. PPPs represent a middle ground between pure-public project delivery and complete privatization. As of 2016, thirty-five U.S. states had enacted PPP enabling laws. That legislation defines the broad institutional framework surrounding a PPP agreement. It addresses such questions as the mixing of public- and private-sector funds, the treatment of unsolicited PPP proposals, and need for prior legislative approval of PPP contracts, among other key issues. We provide the first thorough empirical assessment of the impact of PPP enabling laws on a state’s utilization of private investment. We analyze the overall effect of having a PPP enabling law while controlling for a variety of factors, including the state’s indebtedness, its broad political disposition, union membership, per-capita income, and other variables. We then assess the impact of thirteen individual PPP enabling-law provisions. We develop an expertinformed weighted index reflecting the degree to which a state’s law is encouraging or discouraging of private investment. We find that more favorable PPP enabling laws increase private investment: when our favorability index increases by one-tenth, the proportion of infrastructure investment delivered via PPP in a state increases by 0.5-0.6. We find that PPP enabling-law provisions allowing unsolicited proposals and the comingling of public and private funds are particularly important in attracting private investment.
    Keywords: Transportation infrastructure, public-private partnerships, private investment, state public-private partnership enabling laws, fiscal constraints. JEL classification:L14, L33, L51, L92, L98.
    Date: 2018–07

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