Download or read book Uncertainty in Procurement Contracting with Time Incentives written by Wenzheng Gao and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies cost-plus-time (A+B) procurement contracting with time incentives in the highway construction industry. In the presence of construction uncertainty, the contractor's actual completion time may deviate from the bid completion time, and the A+B contract design is not ex-post efficient. Using data from highway procurement contracts in California, we show that an ex-post efficient lane rental contract would reduce the social cost by $41.39 million (43.11 percent) on average. Moreover, the average commuter cost would decrease by $62.06 million (78.96 percent), suggesting a substantial reduction in the construction externality to commuters from lane rental contracts.
Download or read book Incentives In Procurement Contracting written by Jim Leitzel and published by Routledge. This book was released on 2019-08-19 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume presents a nontechnical treatment of issues that arise in procurement contracting, with an emphasis on major weapons systems procurement. Employing the economic theory of agency as their analytical framework, contributors assess the incentives that arise, for both buyers and sellers, in different contractual settings. Procurement contra
Download or read book Procurement Contracting with Time Incentives written by Patrick Bajari and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In public sector procurement, social welfare often depends on the time taken to complete the contract. A leading example is highway construction, where slow completion times inflict a negative externality on commuters. Recently, highway departments have introduced innovative contracting methods that give contractors explicit time in--centives. We characterize equilibrium bidding and efficient design of these contracts. We then gather a unique data set of highway repair projects awarded by the Minnesota Department of Transportation that includes both innovative and standard contracts. Descriptive analysis shows that for both contract types, contractors respond to the incentives as the theory predicts, both at the bidding stage and after the contract is awarded. Next we build a structural econometric model that endogenizes project completion times, and perform counterfactual policy analysis. Our estimates suggest that switching from standard contracts to designs with socially efficient time incentives would raise commuter surplus relative to the contractor's costs by 19% of the contract value; or in terms of the 2009 Mn/DOT budget, $290 million.
Download or read book Cost Uncertainty and Time Overruns in Public Procurement written by Cesare Dosi and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Incentive Contracts Adverse Selection and Risk Transfer written by Meng Liu and published by . This book was released on 2018 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Multi-attribute auctions, designed to address multi-dimensional preference, make a good casestudy where incentive provisions interact with competition. By studying "Cost Time" highwayprocurement that aims to incentivize timely project delivery, we show that awarding incentivecontracts by bidding mechanisms can yield sub-optimal outcomes. Our theory demonstratesthat bidders, facing high-powered incentives and production uncertainty, optimally skew theirtime bids while transferring production risk to buying agencies. This gaming behavior leads toadverse selection and efficiency loss, in that a less-efficient bidder can outbid the efficient bidderdue to the misalignment between bidder types and the auction rule that determines winners.We estimate our model using data from the California Department of Transportation and findthat 18% of auctions are allocated to inefficient bidders. Counterfactual analyses suggest thatprocurement schemes with lower incentives can yield less mis-allocation with lower productioncosts and less buyer budget pressure.
Download or read book Incentives in Procurement Contracting written by Taylor & Francis Group and published by . This book was released on 2021-02-19 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Five essays on incentives in procurrent contracting written by Steinar Vagstad and published by . This book was released on 1994 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Moral Hazard Incentive Contracts and Risk written by Gregory Lewis and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Deadlines and penalties are widely used to incentivize effort. We model how these incentive contracts affect the work rate and time taken in a procurement setting, characterizing the efficient contract design. Using new micro-level data on Minnesota highway construction contracts that includes day-by-day information on work plans, hours actually worked and delays, we find evidence of moral hazard. As an application, we build an econometric model that endogenizes the work rate, and simulate how different incentive structures affect outcomes and the variance of contractor payments. Accounting for the traffic delays caused by construction, switching to a more efficient design would substantially increase welfare without substantially increasing the risk borne by contractors.
Download or read book Uncertainty and the Bidding for Incentive Contracts written by C. A. Holt and published by . This book was released on 1977 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Handbook of Procurement written by Nicola Dimitri and published by Cambridge University Press. This book was released on 2006-09-28 with total page 529 pages. Available in PDF, EPUB and Kindle. Book excerpt: How can organizations ensure that they can get best value for money in their procurement decisions? How can they stimulate innovations from their dedicated suppliers? With contributions from leading academics and professionals, this 2006 handbook offers expert guidance on the fundamental aspects of successful procurement design and management in firms, public administrations, and international institutions. The issues addressed include the management of dynamic procurement; the handling of procurement risk; the architecture of purchasing systems; the structure of incentives in procurement contracts; methods to increase suppliers' participation in procurement contests and e-procurement platforms; how to minimize the risk of collusion and of corruption; pricing and reputation mechanisms in e-procurement platforms; and how procurement can enhance innovation. Inspired by frontier research, it provides practical recommendations to managers, engineers and lawyers engaged in private and public procurement design.
Download or read book Procurement Incentives and Bargaining Friction written by John J. Horton and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: A transaction cost theory of procurement developed by Bajari and Tadelis (2001) models the buyer's choice of incentive structure as endogenous, with buyers trading off the efficiency of high-powered incentives against the ex post bargaining friction these incentives can create. The source of the bargaining friction is assumed to be asymmetric information between the buyer and seller about the true costs of adapting the project to changed conditions. Using government contract data and an instrument based on contracting-office idiosyncratic variation in preference for various contractual forms, I estimate the effect of a buyer choosing a fixed-price (i.e., high-powered) contract on the probability that the contract will lead to litigation, which proxies for bargaining failure and friction. I find that (a) fixed-price contracts are far more likely to be litigated that cost-plus contracts and (b) the instrumental variables estimate of the effect of choosing a fixed-price structure is almost twice as larges as the biased, OLS estimate. These results are consistent with the main predictions of the Bajari and Tadelis model.
Download or read book Procurement Multiple Incentive Contracting Scientific Contracting with Accent on Trade off written by Norman H. Smith and published by . This book was released on 1967 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: Incentive contracts, those contracts in which the seller is rewarded (or penalized) according to performance achieved, can work to the advantage of the seller or the buyer, to both, or to neither. The report emphasizes the need for a method of analysis of incentive arrangements so that the true relationships between cost and performance and their influence on fee earned may be known in advance of negotiation or signing of a contract. The report is written primarily for management and has little of the technical details. There are many examples with graphs showing the relationship of cost, performance and fee. (Author).
Download or read book Procurement Routes for Partnering written by Jon Broome and published by Thomas Telford. This book was released on 2002 with total page 420 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is aimed at those who want to apply or improve the application of partnering in the construction and heavy engineering industries to their projects. It focuses on procurement aspects based on the premise that unless the commercial and contractual conditions align objectives, there is little stimulus to change the culture and integrate processes and teams to achieve the outstanding results that can be attained through partnering.This invaluable book presents detailed information about the partnering and procurement process, which will lead to better delivery of construction projects.
Download or read book Use of Incentives in Performance Based Logistics Contracting written by Gregory Sanders and published by Rowman & Littlefield. This book was released on 2018-04-19 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: Traditional contracting is primarily transactional, rewarding contractors when deliveries are made or certain process milestones are met. Performance-Based Logistic (PBL) contracting seeks to base contractor incentives on ongoing performance measures to achieve reliability and cost savings. Key to the success of these arrangements are the incentives that align the interests of the customer and the vendor. This report describes the incentives used in PBL contracts, identifies best practices, and provides recommendations for effective incentives going forward. The study team interviewed PBL practitioners including defense-unique contractors, defense-commercial contractors, and experts who are knowledgeable in the government perspective in the United States and abroad. The team supplemented these interviews by analyzing a PBL dataset of U.S. Department of Defense contracts. Of the four identified categories of incentives—time-based, financial, scope, and other—interviews found that time-based incentives stood out for their reliable appeal and relative underuse in the United States.
Download or read book An Evaluation of Incentive Contracting in Government Procurement written by Gary LeRoy Whitaker and published by . This book was released on 1970 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Time Overruns in Public Procurement and Concession Contracts written by Chiara D'Alpaos and published by . This book was released on 2014 with total page 6 pages. Available in PDF, EPUB and Kindle. Book excerpt: Evidence from ongoing procurement and concession contracts shows that time overruns are widespread. Two key elements, among others, can affect the delays in the execution of the contracts: a) uncertainty over production costs; b) inefficiency in the judicial system. In this article we summarize a couple of works (D'Alpaos et al., 2013 and D'Alpaos and Moretto, 2013), in which the authors theoretically and empirically investigate some causes of time overruns in public procurement and concession contracts and determine the trade-off between the supplier's option value to delay and the penalty fee to be paid in the event of delay. The main results are tested on Italian public procurement data and show that the supplier's incentive to delay is greater the higher the volatility of production costs and the lower the "efficiency" of the judicial system.
Download or read book Price Adjustment Policies in Procurement Contracting written by Georgia Kosmopoulou and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The fluctuations in fuel prices over the past decade led a number of government agencies to introduce price adjustment clauses in procurement contracting. Those clauses were primarily designed to reduce contractors' uncertainty without considering the impact of such initiatives on bidding and the budget. We analyze a newly constructed, detailed panel of observations on bids for construction contracts and compare bidding behavior across periods and projects, and across items within projects. Estimates from a difference-in-differences approach, indicate that bidding becomes more aggressive and less dispersed after the implementation of this policy. The difference is more pronounced when we consider itemized bids than overall project bids. Alternative techniques of regression discontinuity and nonparametric estimation are applied and yield consistent results.
