nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2023‒05‒15
four papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Scaling Auctions as Insurance: A Case Study in Infrastructure Procurement By Bolotnyy, Valentin; Vasserman, Shoshana
  2. A Test of Hirschman’s Hiding Hand Principle in World Bank-Financed Hydropower Projects By Glenn Jenkins; Godwin Olasehinde-Williams
  3. Cost of water reuse projects in MENA and cost recovery mechanisms By Gebrezgabher, Solomie; Kodua, T.; Mateo-Sagasta, Javier
  4. T20 Indonesia 2022 Policy Brief: International Financing Framework To Bridge The Climate Financing Gap Between Developed And Developing Countries By Alvin Ulido Lumbanraja; Teuku Riefky

  1. By: Bolotnyy, Valentin (Hoover Institution, Stanford U); Vasserman, Shoshana (Stanford U)
    Abstract: Most U.S. government spending on highways and bridges is done through “scaling†procurement auctions, in which private construction firms submit unit price bids for each piece of material required to complete a project. Using data on bridge maintenance projects undertaken by the Massachusetts Department of Transportation (MassDOT), we present evidence that firm bidding behavior in this context is consistent with opti- mal skewing under risk aversion: firms limit their risk exposure by placing lower unit bids on items with greater uncertainty. We estimate the amount of uncertainty in each auction, and the distribution of bidders’ private costs and risk aversion. Simulating equilibrium item-level bids under counterfactual settings, we estimate the fraction of project spending that is due to risk and evaluate auction mechanisms under considera- tion by policymakers. We find that scaling auctions provide substantial savings relative to lump sum auctions and show how our framework can be used to evaluate alternative auction designs.
    Date: 2023–03
  2. By: Glenn Jenkins (Queen's University); Godwin Olasehinde-Williams (Department of Economics, Istanbul Ticaret University, Turkey)
    Abstract: This study is an attempt to determine whether the need to get hydropower project appraisals perfectly right during the pre-construction phase so as to prevent significant overruns along with benefit shortfalls should supersede the need to deliver projects at the earliest possible time so as to meet the needs of the people. To achieve the study objective, we test whether the Hiding Hand principle is predominantly benevolent or malevolent. We argue that if the Hiding Hand is benevolent, then project stakeholders are better off focusing on quick delivery of power projects, but if it is malevolent, then more attention should be given to perfecting project appraisals. It transpires from the statistical analysis that the Benevolent Hiding Hand dominates the Malevolent Hiding Hand in the selected World Bank-financed hydropower projects (33% v. 21%) and that ultimately 75% of projects were even more successful than anticipated—while 25% of projects failed. Our findings further showed that while a total loss of 2.335 billion USD in the sampled dams was caused by the Malevolent Hiding Hand, 11.259 billion USD was gained as a result of the Benevolent Hiding Hand. The predominance of the Benevolent Hiding Hand justifies placing some weight on proceeding with hydropower projects that shows significant promise even if all the implantation risks are not fully quantified at the appraisal stage, especially in developing countries.
    Keywords: Albert O. Hirschman, Hiding Hand principle, Ignorance, Hydropower, World Bank
    JEL: D61 D91 O13
    Date: 2023–04
  3. By: Gebrezgabher, Solomie (International Water Management Institute); Kodua, T.; Mateo-Sagasta, Javier (International Water Management Institute)
    Keywords: Water reuse; Projects; Cost recovery; Economic analysis; Cost benefit analysis; Wastewater treatment plants; Agriculture; Landscaping; Investment; Potable water; Prices; Aquifers; Groundwater recharge
    Date: 2022
  4. By: Alvin Ulido Lumbanraja (Northwestern University – Kellogg School of Management); Teuku Riefky (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI))
    Abstract: To tackle climate change, countries need to channel more capital to green projects. Additionally, typical green projects tend to have a lower return and/or higher fixed costs relative to brown investment projects. This, along with the higher cost of capital and limited fiscal spaces, means that the state budget of developing countries will not be enough to fulfil the financing needs of climate-related projects. Furthermore, shallow domestic financial markets also limit the available domestic funds for green projects in developing countries. This policy brief proposes an actionable framework to promote the flow of private capital from developed countries into green projects in developing countries.
    Keywords: international finance — t20 — financing gap — private capital — developing countries — developed countries
    Date: 2022–03

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