scholarly journals Cost overruns and delays in infrastructure projects: the case of Stuttgart 21

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bertram I. Steininger ◽  
Martin Groth ◽  
Brigitte L. Weber
Keyword(s):  
Early Stage ◽  
Hyperbolic Discounting ◽  
Theoretical Explanation ◽  
Hyperbolic Function ◽  
Exploratory Research ◽  
Cost Overrun ◽  
Infrastructure Projects ◽  
Content Type ◽  
Geological Conditions ◽  
The Cost

PurposeWe investigate causes for the cost overrun and delay of the railway project Stuttgart 21. Besides, we try to forecast the actual costs and completion date at an early stage.Design/methodology/approachThe results of exploratory research show the causes for the cost overrun and delay of Stuttgart 21; we compare our findings with other railway projects. To estimate the costs at an early stage, the reference class forecasting (RCF) model is applied; to estimate the time, we apply an OLS regression.FindingsWe find that the following causes are relevant for the cost overrun and delay of Stuttgart 21: scope changes, geological conditions, high risk-taking propensity, extended implementation, price overshoot, conflict of interests and lack of citizens' participation. The current estimated costs are within our 95% confidence interval based on RCF; our time forecast underestimates or substantially overestimates the duration actually required.Research limitations/implicationsA limitation of our approach is the low number of comparable projects which are available.Practical implicationsThe use of hyperbolic function or stepwise exponential discount function can help to give a clearer picture of the costs and benefits. The straightforward use of the RFC for costs and OLS for time should motivate more decision-makers to estimate the actual costs and time which are necessary in the light of the rising demand for democratic participation amongst citizens.Social implicationsMore realistic estimates can help to reduce the significant distortion at the beginning of infrastructure projects.Originality/valueWe are among the first who use the RCF to estimate the costs in Germany. Furthermore, the hyperbolic discounting function is added as a further theoretical explanation for cost underestimation.

scholarly journals Uncertainty under hyperbolic discounting: the cost of untying your hands

2019 ◽  
Vol 24 (48) ◽  
pp. 176-193
Author(s):  
Christian Diego Alcocer ◽  
Julián Ortegón ◽  
Alejandro Roa
Keyword(s):  
Hyperbolic Discounting ◽  
Self Control ◽  
Experimental Designs ◽  
Content Type ◽  
Agent Based ◽  
Present Bias ◽  
Healthy Habits ◽  
Ex Ante ◽  
The Cost ◽  
Practical Implications

Purpose The relevance of present consumption bias on personal finance has been confirmed in several studies and has important theoretical and practical implications. It has important, measurable implications when analyzing commitment or self-control, adherence to healthy habits (e.g. exercising or dieting), procrastination tendencies or savings. The purpose of this paper is to contribute to our understanding of these issues by postulating a model of income uncertainty within a hyperbolic discounting framework that measures the cost of financial intertemporal inconsistencies related to this bias. The emphasis is on the analysis of this cost. We also propose experimental designs and consistent estimation methods, as well as agent-based modelling extensions. Design/methodology/approach The authors develop a finite-horizon model with hyperbolic preferences. Individuals have a present bias distinct from their discount rate so their choices face intertemporal inconsistencies. The authors further extend the analysis with uncertainty about future incomes. Specifically, individuals live for three periods, and the authors find the optimal consumption levels in the perfect-information benchmark by backward induction. They then proceed to add biases and uncertainty to characterize their implications and measure the costs of the intertemporal inconsistencies they cause. Findings The authors measure how an agent's utility is greater when they “tie their hands” than when they are free to re-evaluate and change their consumption schedule. This “cost of being vulnerable to falling into temptation” only depends (increasingly) on the measure of the present bias and (decreasingly) on the discount factor. They analyze the varying effects on utility and consumption of changes in impatience and optimism. They conclude by discussing theoretical and practical implications; they also propose agent-based simulations, as well as empirical and experimental designs, to further test the relevance and applications of the results. Practical implications This model has important, measurable implications when analyzing commitment or self-control, adherence to healthy habits (e.g. exercising or dieting), procrastination tendencies or savings. Social implications The results enhance the estimation of the costs of present biases such that employers can better identify the incentives required to acquire and retain human capital. The authors provide evidence that workers are vulnerable to contract renegotiations and about the need for a regulator that restores ex-ante efficiency. Similarly, in the private sector, firms could recognize the postulated consumer profiles and focus their resources on anxious, too-optimistic or potentially addictive consumers; this, again, provides some justification about the need for a regulator. Originality/value In traditional exponential discounting, the marginal rate of substitution of consumption between two points depends only on their distance; thus, it allows none of the intertemporal inconsistencies we often observe in real life. Therefore, hyperbolic discounting better fits the data. The authors model choice under uncertainty and focus on the costs caused when present biases (ex-post) push behaviour away from ex-ante optimality. They conclude by proposing experimental designs to further enhance the estimation and implications of these costs. The postulated refinements have the potential to improve previous analyses on commitment devices and commitment-related regulation.

Hosting the Olympics: why are we always getting the cost wrong?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Maroula Khraiche ◽  
Abhinav Alakshendra
Keyword(s):  
Los Angeles ◽  
Olympic Games ◽  
International Olympic Committee ◽  
Cost Overrun ◽  
Review Of Literature ◽  
Content Type ◽  
Constant Cost ◽  
The Cost ◽  
The Olympic Games

PurposeIn the last 50 years, every Olympics has experienced a major cost overrun. This paper explores the reasons for this cost underestimation and looks into the occurrence of the winner's curse. We also forecast the spending pattern of future host cities. Finally, we discuss the role of the International Olympic Committee in making the Olympic Games more efficient and sustainable.Design/methodology/approachThe review of literature on the topic of constant cost overrun in the Olympic Games is surprisingly very thin. We comprehensively review the existing literature to understand the scholarship in this area. This paper also produces future cost trends for the host cities.FindingsWe argue that cost underestimation is resulting from the outdated bid process which encourages spectacle over efficiency. A no-bid environment is more efficient and allows the host city to negotiate effectively with the International Olympic Committee. The Los Angeles Games of 1984 was profitable and has shown reusing the infrastructure can save a lot of money which could help make the Olympic Games economically sustainable.Originality/valueThis paper adds to the existing knowledge on the cost overrun aspect of Olympics financing. We also forecast the cost trends of hosting future Olympics.

Impact of foreign workforce on productivity in foreign-funded infrastructure projects

2014 ◽  
Vol 19 (2) ◽  
pp. 168-183
Author(s):  
Nayanthara De Silva ◽  
R. Darmicka ◽  
Elmo Fernando
Keyword(s):  
Foreign Workers ◽  
Infrastructure Projects ◽  
Structured Interviews ◽  
Construction Sites ◽  
Content Type ◽  
Construction Productivity ◽  
Negative Impacts ◽  
Employee Characteristics ◽  
The Cost ◽  
The Impact

Purpose – The aim of this study is to explore the impact of using foreign workers on construction productivity in project situations. Generally, foreign-funded projects use both native and foreign workers. Foreign workforce entering into the construction industry may affect the productivity positively or negatively, depending on the migrants’ attributes, institutional arrangements and native workers’ responses, thereby impacting the cost of the project. In Sri Lanka, large construction sites have become multicultural and depend on foreign workers brought in by foreign contractors for infrastructure projects. Design/methodology/approach – A survey-based approach was used to collect data. Structured interviews were conducted to explore the characteristics of the foreign workforce and their impact on productivity. Further, potential strategies were analyzed to establish industry motivators (IM) to enhance productivity. Findings – The study on the foreign workforce identified ten employee characteristics that may impact project’s productivity either positively or negatively. Further, 16 significant strategies were compiled to establish six IM to enhance productivity. Originality/value – These proposed motivators will be useful for construction practitioners in mitigating negative impacts and proactively managing the foreign workforce in a way to enhance construction productivity.

Enhancing sustainability of Indian PPP procurement process using system dynamics model

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nilesh Agarchand Patil ◽  
Nicola Thounaojam ◽  
Boeing Laishram
Keyword(s):  
Sustainable Development ◽  
System Dynamics ◽  
Infrastructure Development ◽  
Cost Overrun ◽  
Infrastructure Projects ◽  
Sustainable Infrastructure ◽  
Content Type ◽  
Procurement Process ◽  
Body Of Knowledge ◽  
Sd Model

Purpose Increasingly adopted by various governments for infrastructure development, public-private partnerships (PPPs) have become a popular procurement delivery system, outperforming other systems. However, PPPs have been especially criticised due to the lack of sustainability aspect during the development and implementation of the projects. In India, similar critiques have been raised, as these qualities have inhibited the development of society and increased the time and cost overrun in the development of PPP projects. This paper, therefore, aims to address the sustainability issues in PPPs and systematically analyses from the perspective of the principles of sustainable development. Design/methodology/approach Based on literature review and focussed interviews with stakeholders in India, a qualitative system dynamics (SD) model using causal loop diagramming is developed to propose the inclusion of various strategies in the PPP procurement process, which can enhance the sustainability of the PPP process. Finally, the integration of these strategies in the current PPP procurement process has been highlighted in the form of the introduction of new mechanisms and policies and modification of the existing mechanism and procurement policies. Findings The paper first highlights key sustainability issues in the PPP procurement process and suggests 34 strategies to address the issues. The modelling approaches and the proposed strategies, along with their interrelationships, could help the PPP decision makers in implementing responsive policies in bringing sustainable development in the PPP procurement process. Research limitations/implications The SD model developed is based on limited data, primarily focussed on PPP procurement practices in the context of infrastructure development in India. Developing the model with the analysis of a wider range of data and constructing a customised model can take broader perspectives into account. Social implications Adoption of the identified strategies can facilitate the inclusion of sustainability practices in the development of infrastructure projects, which are even procured using private finance. Originality/value Studies on how to promote sustainable infrastructure development when procured through the PPP route are in the nascent stage. This study, therefore, extends the current body of knowledge on infrastructure projects implementation through PPPs from financial engineering and risk management to a sustainability perspective.

scholarly journals Procedural rationality in supplier selection

2017 ◽  
Vol 55 (1) ◽  
pp. 32-56 ◽  
Author(s):  
Luitzen de Boer
Keyword(s):  
Supplier Selection ◽  
Selection Criteria ◽  
Early Stage ◽  
Selection Process ◽  
Empirical Studies ◽  
Qualitative Assessment ◽  
General Notion ◽  
Procedural Rationality ◽  
Content Type ◽  
The Cost

Purpose The purpose of this paper is to present three heuristics for choosing supplier selection criteria. By considering the balance between the expected relative effort and benefit of using different selection criteria, the heuristics suggest which criteria should be prioritized. The heuristics serve to develop our understanding of the search and evaluation heuristics used in supplier selection and to facilitate further research. Design/methodology/approach The research is primarily theoretical, yet draws on empirical studies of supplier selection. The theoretical basis is Simon’s notion of procedural rationality (Simon, 1976). The author makes the general notion of procedural rationality more concrete for supplier selection by formally describing three heuristics for choosing selection criteria. The heuristics share the same logic but differ in terms of the precision of the input information required from the purchaser. The paper provides illustrations of the heuristics. Findings It appears that procedural rationality can be specified for the process of designing the supplier selection process by explicitly recognizing the cost and value of selection criteria. There is no one way of doing this, but at the most basic level, it requires an ordinal ranking of criteria. Already such a rudimentary, qualitative, assessment can help identifying suitable criteria. The heuristics developed appear compatible with established approaches for the subsequent selection of suppliers. Originality/value The paper addresses the early stage of supplier selection which has been largely ignored in the literature.

scholarly journals Why RMB should be more flexible

2017 ◽  
Vol 9 (02) ◽  
pp. 156-173 ◽  
Author(s):  
Yoke Yue Kan
Keyword(s):  
Exchange Rate ◽  
Early Stage ◽  
Exchange Rate Regime ◽  
Correlation Study ◽  
Flexible Exchange Rate ◽  
Theoretical Explanation ◽  
Exchange Rate Policy ◽  
Chinese Economy ◽  
Content Type ◽  
Rmb Internationalization

Purpose This report examines the recent developments and trends relating to the Chinese government’s policy actions and the key issues that determine the choice of exchange rate regime in China. An up-to-date “stock-take” of the economic indicators is conducted to determine what is suitable for China in light of the rapidly evolving nature of the world economy and trading environment. This paper discusses the role of economic development, trade competitiveness, capital flow, foreign exchange reserve, and RMB internationalization in the determination of the RMB exchange rate regime. Design/methodology/approach This research uses an inductive approach to gain a fine-grained understanding of the complex, multifaceted aspects of China’s exchange rate policy. A combination of statistical analysis, including basic descriptive statistics, trend analysis, and a correlation study are used to explore the association between various indicators and their implications. The report also draws on analysis of a broad range of data sources and the work of numerous researchers and research institutions. Findings A more flexible exchange rate regime can play a complementary role towards rebalancing the Chinese economy by raising the buying capacity of families, rebalancing growth towards domestic consumption, and reducing reliance on export. China’s price elasticity of the demand for exports was relatively low that the appreciation of the Chinese currency has almost no influence on optimizing China’s trade balance. A more flexible two-way flow in RMB would be suitable under the current cash flow scenario in China. Reduced intervention will facilitate further adjustment in reserves. Lastly, in the early stage of RMB internationalization, flexibility in the exchange rate is one of the factors that influences its growth prospect as a reserve currency. Research limitations/implications The findings and conclusion are derived based on the latest empirical information, statistical evidence, and economic theory. This inquiry does not build on a theory, and aims to neither verify a theory, nor test hypotheses. Rather, it aims to demonstrate, assess, and explain significant roles that various economic factors play in shaping the future exchange rate regime of China. Originality/value This paper presents the rationale behind a more flexible two-way exchange rate, by assessing the latest empirical data and theoretical explanation that support such a move.

Stakeholder competency in evaluating the environmental impacts of infrastructure projects using BIM

2017 ◽  
Vol 24 (5) ◽  
pp. 718-735 ◽  
Author(s):  
Martina Elizabeth Murphy ◽  
Maja-Marija Nahod
Keyword(s):  
Environmental Impacts ◽  
Early Warning ◽  
Cost Management ◽  
Technical Skills ◽  
Management Plan ◽  
Infrastructure Projects ◽  
Content Type ◽  
Early Warning Indicator ◽  
The Cost

Purpose Building information modelling (BIM) literature reveals a growing interest in the development of a competency-based approach to manage the long-term goals of BIM implementation in infrastructure projects. One long-term goal is mitigation of environmental impacts (EIs). It is proposed that by integrating environmental systems within the BIM model, the technology can act as an early warning indicator to assist stakeholders identify and evaluate EIs before they become critical to delivery. The purpose of this paper is to assess the effectiveness of BIM in identifying EIs on infrastructure projects and investigate the correlation between stakeholder competency and evaluation of EIs. Design/methodology/approach In all, 71 informants that have relevant experience in infrastructure projects were investigated using a two-stage methodology comprising a questionnaire to determine the BIM indicators used to identify EIs and the stakeholder competencies required to assess and evaluate EIs and Behavioural Event Interviews (BEIs) to validate the competencies identified. Findings The findings showed that risk assessments are the most critical early warning indicator in identifying EIs specifically when implemented within the cost management process. The key stakeholder competencies required to successfully evaluate EIs were identified as project organisation and building equitable relationships. BEIs showed these stakeholders to also have high levels of behavioural and contextual awareness. This suggests that, contrary to perceived perception, successful management of EIs is more dependent on collaborative working than the acquisition of technical skills. Findings also indicated that Croatian BIM stakeholders are less experienced than UK BIM stakeholders in project implementation and delivery and that less experienced BIM stakeholders require more emphasis on technical knowledge whilst the importance of “soft skills” is more apparent in experienced stakeholders, notably amongst the UK participants. Originality/value The implications for infrastructure projects show that effective management of EIs can be achieved through alignment of the BIM model with the cost management plan implemented by stakeholders working collaboratively. Hence, the strategic focus for AEC companies working on infrastructure projects should be the development of staff interpersonal competencies rather than solely on project goals and/or an over-emphasis on technical skills.

scholarly journals Determinants of bank loan spread in project finance

2019 ◽  
Vol 12 (1) ◽  
pp. 161-186 ◽  
Author(s):  
Wouter Thierie ◽  
Lieven De Moor
Keyword(s):  
Bank Lending ◽  
Policy Implications ◽  
Bank Loan ◽  
Economic Environment ◽  
Project Finance ◽  
Cost Of Debt ◽  
Infrastructure Projects ◽  
Content Type ◽  
Pricing Decisions ◽  
The Cost

Purpose The purpose of this paper is to develop a better understanding of the pricing decisions of banks for project finance (PF) loans and the main drivers affecting the cost of debt in infrastructure deals. As infrastructure projects are typically highly leveraged, the cost of bank lending is an important driver of the overall funding costs for the project. Design/methodology/approach First, the paper provides a general review of the drivers of the cost of funds in PF. Second, the paper develops a regression analysis of the loan’s spread on four categories: project, loan, bank characteristics and the economic environment. By using a new data set of InfraDeals containing data on bank spreads of more than 700 infrastructure projects worldwide from 2006 to 2016. Findings The results show that the cost of debt is predominantly affected by the market and the business cycle, rather than the structuring of the project. This implicates that the timing when the deal is closed weighs more heavily than the specificities of the project itself. Practical implications The results have important policy implications. As PF deals are often paid for by taxpayers, this paper could help policymakers to use public funds for infrastructure in the most efficient way. Originality/value One weakness of existing studies in PF loan pricing is that they undervalue the role of the economic environment in the cost of debt. Few studies in the literature include macroeconomic control variables in their model and the others do not seem to find significant results. This paper reveals new insights on the pricing decisions of banks for PF loans.

Mobile claim management adoption in emerging insurance markets

2016 ◽  
Vol 34 (1) ◽  
pp. 110-130 ◽  
Author(s):  
Chupun Gowanit ◽  
Natcha Thawesaengskulthai ◽  
Peraphon Sophatsathit ◽  
Thitivadee Chaiyawat
Keyword(s):  
Technology Acceptance ◽  
Consumer Preferences ◽  
Early Stage ◽  
Research Approach ◽  
Exploratory Research ◽  
Structured Interviews ◽  
Content Type ◽  
Tam Model ◽  
Motor Insurance ◽  
Practical Implications

Purpose – The purpose of this paper is to explore the adoption of a mobile insurance claim system (M-insurance) and develops a framework for the adoption of M-insurance by consumers. Design/methodology/approach – This study assesses mobile technology for claim management through the lens of the technology acceptance model (TAM) and diffusion of innovation (DOI) models as a major guideline, using exploratory research through in-depth interviews with four executive experts who are first movers in mobile claim motor insurance in Thailand. Semi-structured interviews and open-ended questions were used to conduct group interviews of insurance consumers who mostly use smartphones. The data were collected in a qualitative research approach from Thai insurance consumers (n=177), and contents were classified and analysed to gain strong insights into respondent opinions, comments, attitudes, behaviour, and experiences. Findings – The results indicate that the external (social) factors influence attitude and behaviour of consumers which link to their intention to adopt M-insurance. These external factors include: preference for face-to-face service; confidence of insurers in accepting claim; and risk of claim knowledge that might cause legal issues among others. In application, the findings shall meaningfully enhance insurer firms’ improvement of adoption rate and development of future features and functions of M-insurance. Research limitations/implications – This study is based on insurance consumers in each region of Thailand but focuses only on mobile claim management for motor insurance. Although the findings bring new insight and understanding of consumer preferences and behaviours, they were not tested statistically. Practical implications – The study has practical implications for motor insurance claimants who are concerned over the complicated policy conditions, the perspective risk of claim knowledge and fault admission, and the on-site investigation by surveyor for another party. These are the guidance impediments to overcome M-insurance adoption improvement. Originality/value – Previously, TAM and DOI approaches have been employed to study general adoption of M-banking by quantitative research which confirmed descriptive data and tested the hypothesis, but neglected crucial data. However, M-insurance is different from M-banking in term of features and functions, purpose and process of usage, and legal liability. Therefore, this study is one of a few empirical studies that attempt to identify insightful factors to consumer uptake of M-insurance which is in its early stage and lacks an underpinning TAM model. This study contributes by identifying insights of “pull” factors to successfully develop M-insurance in Thailand.

Key driving factors of cost overrun in highway infrastructure projects in Nigeria: a context-based perspective

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abba Tahir Mahmud ◽  
Stephen O. Ogunlana ◽  
W.T. Hong
Keyword(s):  
Project Management ◽  
Social Issues ◽  
Small Sample ◽  
Driving Factors ◽  
Cost Overrun ◽  
Infrastructure Projects ◽  
Highway Projects ◽  
Content Type ◽  
Highway Infrastructure ◽  
Key Drivers

Purpose Extensive research towards identifying the attributable cost overrun factors globally has been conducted predominantly from a survey-oriented perspective, which disregard the contextual basis on which these triggers manifest. This study aims to explore the driving factors of cost overrun in highway projects, specific to the Nigerian context. Design/methodology/approach The research used a context-based approach to seek project stakeholders’ perspectives on the key drivers of cost overrun in highway projects in Nigerian. Semi-structured interviews were conducted with client, contractor and consultant organisations involved in the provision of highway infrastructure projects in Nigeria. The collected data was analysed using a developed coding framework grounded on a case study approach, principles of inductive thematic analysis and saliency analysis to identify the key drivers. Findings Findings from the analysis identified triggers from macroeconomic, societal, leadership and project management perspectives with synergistic relationships with each other based on prevalence and significance. Among the key triggers is a delay in work progress, political instability, adverse weather, social issues, delay in progress payment to contractors and modification of project scope. In conclusion, the triggers of cost overrun in highway projects are contextually driven by the complex nature of the project management, societal, macroeconomic and leadership triggers specific to the Nigerian context. Research limitations/implications The research was limited to only highway infrastructure projects in Nigeria. Furthermore, the findings are based on a small sample size, and thus, caution must be taken before applying the outcome of this study in a generalised way to other contexts. Practical implications Practically, the stakeholders i.e. client, contractors and consultants should acknowledge the contextual circumstances in which each of the triggers takes place, which will aid in developing pragmatic measures and make the right decisions towards addressing these triggers during any highway construction project in Nigeria and enhance the chances of project success. Originality/value The context-based approach applied in this study is expected to provide a new insight in understanding the triggers of cost overruns, especially in highway projects in Nigeria and indeed other developing countries with similar governance characteristics

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