Overruns and Errors in Estimating Development Cost, Time, and Outcome

Mansfield, Edwin; Rapoport, John; Schnee, Jerome; Wagner, Samuel; Hamburger, Michael

doi:10.1007/978-1-349-01639-6_5

Cited by 8 publications

(5 citation statements)

References 2 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Empirical evidence on effort allocation in long‐term projects shows that effort rises over time. Projects within firms often run beyond deadlines and most resources are increased toward the final stages as in Marshall and Meckling () and Mansfield, Schnee, and Wagner (). Actual costs often significantly exceed cost estimates used to decide whether public projects should be built.…”

Section: Contractual Dynamicsmentioning

confidence: 99%

The Simple Microeconomics of Public‐Private Partnerships

Iossa

Martimort

2015

J Public Economic Theory

248

141

View full text Add to dashboard Cite

International audienceWe build on the existing literature in public-private partnerships (PPP) to analyze the main incentive issues in PPPs and the shape of optimal contracts in those contexts. We present a basic model of procurement in a multitask environment in which a risk-averse firm chooses noncontractible efforts in cost reduction and quality improvement. We first consider the effect on incentives and risk transfer of bundling building and management stages into a single contract, allowing for different assumptions on feasible contracts and information available to the government. Then we extend the model in novel directions. We study the relationship between the operator and its financiers and the impact of private finance. We discuss the trade-off between incentive and flexibility in PPP agreements and the dynamics of PPPs, including cost overruns. We also consider how institutions, and specifically the risk of regulatory opportunism, affect contract design and incentives. The conclusion summarizes policy implications on the desirability of PPPs

show abstract

Section: Contractual Dynamicsmentioning

confidence: 99%

The Simple Microeconomics of Public‐Private Partnerships

Iossa

Martimort

2015

J Public Economic Theory

248

141

View full text Add to dashboard Cite

show abstract

“…Projects within firms often run beyond deadlines and most resources are increased towards the final stages (see Marshall and Meckling (1962) and Mansfield et al (1995)). Actual costs often significantly exceed cost estimates used to decide whether public projects should be built.…”

Section: Related Literature and Applicationsmentioning

confidence: 99%

The Simple Micro-Economics of Public-Private Partnerships

2008

View full text Add to dashboard Cite

We build a unified theoretical framework to analyze the main incentive issues in Public Private Partnerships (PPPs) and the shape of optimal contracts in those contexts. We present a basic model of procurement in a multitask environment in which a risk-averse agent chooses unobservable efforts in cost reduction and quality improvement. We begin by studying the effect on incentives and risk transfer of bundling building and operation into a single contract, allowing for different assumptions on the contractual framework and the quality of the information held by the government. We then extend the basic model in several directions. We consider the factors that affect the optimal allocation of demand risk and their implications for the use of user charges and the choice of contract length. We study the relationship between the operator and its financiers and the impact of private finance. We discuss the trade-off between incentive and flexibility in long-term PPP agreements and the dynamics of PPP contracts, including cost overruns. We also consider how the institutional environment, and specifically the risk of regulatory opportunism, affects contract design and incentives. We conclude with some policy implications on the desirability of PPPs.JEL Classification: D8, L5, H54, H57.

show abstract

“…2 In the context of weapons development, Peck and Scherer (1962) and Marshall and Meckling (1962) discussed these issues at length, as did Mansfield et al (1971) in a study of pharmaceuticals development. Within software engineering, a still active and very influential line of research initiated by Norden (1958) and Putnam (1978) searches for mathematical formulae which fit data on development time and resource phasing (see e.g.…”

Section: Article In Pressmentioning

confidence: 98%

A theory of optimal deadlines

Toxvaerd

2007

Journal of Economic Dynamics and Control

View full text Add to dashboard Cite

This paper sets forth a model of contracting for delivery in an environment with time to build and adverse selection. The optimal contract is derived and characterized and it takes the form of a deadline contract. Such a contract stipulates a deadline for delivery for each possible type of agent efficiency. The optimal contract induces inefficient delay by using delivery time as a screening device. Furthermore, rents are increasing in the agent's efficiency. In meeting the deadline, the agent's effort is strictly increasing over time, due to discounting. It is shown that increasing the project's gross value decreases optimal delivery time, while increasing the scale or difficulty of the project increases it. Last, it is shown that the agent's rents are increasing in both project difficulty and gross project value. r

show abstract

Overruns and Errors in Estimating Development Cost, Time, and Outcome

Cited by 8 publications

References 2 publications

The Simple Microeconomics of Public‐Private Partnerships

The Simple Microeconomics of Public‐Private Partnerships

The Simple Micro-Economics of Public-Private Partnerships

A theory of optimal deadlines

Contact Info

Product

Resources

About