nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2020‒10‒26
six papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Cost overruns and delays in infrastructure projects: the case of Stuttgart 21 By Steininger, Bertram; Groth, Martin; Weber, Birgitte
  2. Improving the accuracy of project schedules By Lorko, Matej; Servátka, Maroš; Zhang, Le
  3. Green Hydrogen: the Holy Grail of Decarbonisation? An Analysis of the Technical and Geopolitical Implications of the Future Hydrogen Economy By Rossana Scita; Pier Paolo Raimondi; Michel Noussan
  4. A stakeholder analysis of investments for wind power electricity generation in Ontario By Pejman Bahramian; Glenn Jenkins; Frank Milne
  5. Development of methodological approaches to assessing the effectiveness of investments in infrastructure, taking into account foreign experience By Melnikov, Roman (Мельников, Роман); Koptelov, Matvey (Коптелов, Матвей); Ginoyan, Agrishti (Гиноян, Агришти); Krasnoshchekov, Valentin (Краснощеков, Валентин); Spitsyna, Tatiana (Спицына, Татьяна)
  6. Risk assessment of projects with R&D using the risk measure VaR and ES By Minasyan, Vigen (Минасян, Виген)

  1. By: Steininger, Bertram (Department of Real Estate and Construction Management, Royal Institute of Technology); Groth, Martin (RWTH Aachen University); Weber, Birgitte (RWTH Aachen University)
    Abstract: Cost overruns and delays in infrastructure projects are not a recent problem. They have systematically occurred globally, in different sectors, and over time. We find that various causes are relevant for the cost overrun and delay of Stuttgart 21 – one of the largest railway projects in Germany in the last 100 years. Among them are project scope changes, geological conditions, high risk-taking propensity, extended implementation, price overshoot, conflict of interests, and lack of citizens’ participation. To estimate the costs at an early stage, we apply the reference class forecasting model and thereby forecast the current estimated costs within a confidence interval. To estimate the time, we apply an OLS regression for the different subsections and underestimate or substantially overestimate the duration actually required.
    Keywords: Cost overrun; time overrun; infrastructure; reference class forecasting; hyperbolic discounting; principal-agent theory
    JEL: H54 O18 R42
    Date: 2020–10–12
  2. By: Lorko, Matej; Servátka, Maroš; Zhang, Le
    Abstract: How to avoid project failures driven by overoptimistic schedules? Managers often attempt to mitigate the duration underestimation and improve the accuracy of project schedules by providing their planners with excessively detailed project specifications. While this traditional approach may be intuitive, solely providing more detailed information has proven to have a limited effect on eliminating behavioral biases. We experimentally test the effectiveness of providing detailed specification and compare it to an alternative intervention of providing historical information about the average duration of similar projects in the past. We find that both interventions mitigate the underestimation bias. However, since providing detailed project specification results in high variance of estimation errors due to sizable over- and underestimates, only the provision of historical information leads to more accurate project duration estimates. We also test whether it is more effective to anchor planners by providing historical information simultaneously with the project specification or to provide the historical information only after beliefs regarding the project duration are formed, in which case planners can regress their initial estimates towards the historical average. We find that the timing of disclosing information does not play a role as the estimation bias is mitigated and the accuracy is improved in both conditions. Finally, we observe that the subjective confidence in the accuracy of duration estimates does not vary across the interventions, suggesting that the confidence is neither a function of the amount nor the detail of available information.
    Keywords: project management, project planning, duration estimation, historical information, project specification, experiment
    JEL: C91 D83 O21 O22
    Date: 2020–10–07
  3. By: Rossana Scita (Fondazione Eni Enrico Mattei); Pier Paolo Raimondi (Fondazione Eni Enrico Mattei); Michel Noussan (Fondazione Eni Enrico Mattei)
    Abstract: Hydrogen is currently enjoying a renewed and widespread momentum in the energy market. In the last years, demand for hydrogen has substantially increased worldwide, with several countries developing hydrogen national strategies, and private companies investing in the development of hydrogen related projects. Green hydrogen’s environmental sustainability and versatility contribute to its representation as the holy grail of decarbonisation. This working paper challenges this definition, by analysing the historical process which contributed to hydrogen’s rise, showing the current uses of hydrogen and the major obstacles to the implementation of a green hydrogen economy, and assessing the geopolitical implications of a future hydrogen society. Particularly, the paper shows that the hydrogen economy is still far from becoming reality. Even though investments in green hydrogen technologies and projects have increased over the last decade, there still remains a high number of unresolved issues, relating to technical challenges and geopolitical implications. Nonetheless, a clean hydrogen economy offers promising opportunities not only to fight climate change, but also to redraw geopolitical relations between states. The energy transition is already taking place, with renewable energies gradually eroding the global energy system based on fossil fuels. A global transformation, set in motion by the need to decarbonise the energy system, will have the potential to redraw international alliances and conflicts. In this context, hydrogen may play a crucial role. By 2050, hydrogen could indeed meet up to 24% of the world’s energy needs, thus highly influencing the geopolitical landscape. In this regard, the choice over which pathway to take for the creation of hydrogen value chains will have a huge geopolitical impact, resulting in new dependencies and rivalries between states. Conclusively, if national governments are willing to spur the emergence of a green hydrogen economy, they should heavily invest in research and development, encourage the development of a clean hydrogen value chain, and promote common international standards. Moreover, they should also take into account hydrogen’s geopolitical implications. If the hydrogen economy is well-managed, it could indeed increase energy security, diversify the economy, and strengthen partnerships with third countries.
    Keywords: Green Hydrogen, Decarbonization, Energy, Energy Policy
    JEL: Q4 Q42 O14
  4. By: Pejman Bahramian (Department of Economics, Queen's University); Glenn Jenkins; Frank Milne (Queen's University)
    Abstract: This study uses an ex-post evaluation of the grid-connected wind projects in Ontario, Canada, to quantify the stakeholder impacts of such renewable energy projects. Our study includes a financial, economic and stakeholder analysis of these wind farms. The analysis sheds light on the distributional impacts that arise when there is a significant gap between the incentives created by the financial price paid for electricity generation and the economic value of the electricity generated. The analysis shows that the negotiated power purchase agreements (PPAs) have resulted in a negative outcome for the economy in all circumstances. It is found that the present value of the economic costs is at least three times the present value of the economic benefits, including the global benefits from the reduced CO2 emissions. This loss is borne by all the stakeholders of the electricity system, except the private owners of the wind farms. The losers are primarily the electricity consumers followed by the governments. The Ontario Electricity Rebate (OER) programme, which is financed by increased government borrowing, has the effect of transferring a large share of the costs incurred to promote investments in wind power to future generations of taxpayers in Ontario.
    Keywords: economic analysis, electricity, Ontario, wind power
    JEL: O55 D61 Q42
    Date: 2020–10
  5. By: Melnikov, Roman (Мельников, Роман) (The Russian Presidential Academy of National Economy and Public Administration); Koptelov, Matvey (Коптелов, Матвей) (The Russian Presidential Academy of National Economy and Public Administration); Ginoyan, Agrishti (Гиноян, Агришти) (The Russian Presidential Academy of National Economy and Public Administration); Krasnoshchekov, Valentin (Краснощеков, Валентин) (The Russian Presidential Academy of National Economy and Public Administration); Spitsyna, Tatiana (Спицына, Татьяна) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The study proposes methods of infrastructural investments evaluation at macroeconomic and project levels. The impact of infrastructure development on economic growth in Russian regions has been studied using methods of spatial econometrics and panel data. The impact of high-tech perinatal centers opening on reducing infant and maternal mortality has been evaluated considering the effect of learning curve. The techniques to assess information risks and risks of deviation of actual electricity generation from the projected level of nuclear power plant construction projects have been developed
    Keywords: effectiveness of investments, methodological finance
    Date: 2020–10
  6. By: Minasyan, Vigen (Минасян, Виген) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The preprint was prepared on the basis of research work carried out at the RANEPA under the President of the Russian Federation in 2019. This paper proposes a model for assessing the risks of projects of companies in which there is R&D (Research & Development) - research and development work (R&D), a set of measures that includes both scientific research and the production of prototypes and small-scale samples products prior to the launch of a new product or system into industrial production. In this work, a method for assessing the corresponding risks was developed using a modified VaR measure for this application. The constructed model makes it possible to assess the risks of projects with R&D using the risk measure VaR with all possible parameters present in the model. At the same time, the paper analyzes the level of influence of projects with R&D on the economy as a whole.
    Date: 2020–05

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