Competition and cost overruns. Optimal misspecification of procurement contracts

Most cases of cost overruns in public procurement are related to important changes in the initial project design. This paper deals with the problem of design specification in public procurement and provides a rationale for design misspecification. We propose a model in which the sponsor decides how much to invest in design specification and awards competitively the project to a contractor. After the project has been awarded the sponsor engages in bilateral renegotiation with the contractor, in order to accommodate changes in the initial project s design that new information makes desirable. When procurement takes place in the presence of horizontally differentiated contractors, the design s specification level is seen to affect the resulting degree of competition. The paper highlights this interaction between market competition and design specification and shows that the sponsor s optimal strategy, when facing an imperfectly competitive market supply, is to underinvest in design specification so as to make significant cost overruns likely. Since no such misspecification occurs in a perfectly competitive market, cost overruns are seen to arise as a consequence of lack of competition in the procurement market.

Optimal contracts, adverse selection and social preferences: An experiment

It has long been standard in agency theory to search for incentive-compatible mechanisms on the assumption that people care only about their own material wealth. However, this assumption is clearly refuted by numerous experiments, and we feel that it may be useful to consider nonpecuniary utility in mechanism design and contract theory. Accordingly, we devise an experiment to explore optimal contracts in an adverse-selection context. A principal proposes one of three contract menus, each of which offers a choice of two incentive-compatible contracts, to two agents whose types are unknown to the principal. The agents know the set of possible menus, and choose to either accept one of the two contracts offered in the proposed menu or to reject the menu altogether; a rejection by either agent leads to lower (and equal) reservation payoffs for all parties. While all three possible menus favor the principal, they do so to varying degrees. We observe numerous rejections of the more lopsided menus, and approach an equilibrium where one of the more equitable contract menus (which one depends on the reservation payoffs) is proposed and agents accept a contract, selecting actions according to their types. Behavior is largely consistent with all recent models of social preferences, strongly suggesting there is value in considering nonpecuniary utility in agency theory.

Database construction and Peptide identification strategies for proteogenomic studies on sequenced genomes.

Since the advent of high-throughput DNA sequencing technologies, the ever-increasing rate at which genomes have been published has generated new challenges notably at the level of genome annotation. Even if gene predictors and annotation softwares are more and more efficient, the ultimate validation is still in the observation of predicted gene product( s). Mass-spectrometry based proteomics provides the necessary high throughput technology to show evidences of protein presence and, from the identified sequences, confirmation or invalidation of predicted annotations. We review here different strategies used to perform a MS-based proteogenomics experiment with a bottom-up approach. We start from the strengths and weaknesses of the different database construction strategies, based on different genomic information (whole genome, ORF, cDNA, EST or RNA-Seq data), which are then used for matching mass spectra to peptides and proteins. We also review the important points to be considered for a correct statistical assessment of the peptide identifications. Finally, we provide references for tools used to map and visualize the peptide identifications back to the original genomic information.

Causes of subcontracting: Evidence from panel data on construction firms

This paper examines factors explaining subcontracting decisions in the construction industry. Rather than the more common cross-sectional analyses, we use panel data to evaluate the influence of all relevant variables. We design and use a new index of the closeness to small numbers situations to estimate the extent of hold-up problems. Results show that as specificity grows, firms tend to subcontract less. The opposite happens when output heterogeneity and the use of intangible assets and capabilities increase. Neither temporary shortage of capacity nor geographical dispersion of activities seem to affect the extent of subcontracting. Finally, proxies for uncertainty do not show any clear effect.

Wild bids. Gambling for resurrection in procurement contracts

This paper analyzes the problem of abnormally low tenders in theprocurement process. Limited liability causes firms in a bad financialsituation to bid more aggressively than good firms in the procurementauction. Therefore, it is more likely that the winning firm is a firm infinancial difficulties with a high risk of bankruptcy. The paper analyzesthe different regulatory practices to face this problem with a specialemphasis on surety bonds used e.g. in the US. We characterize the optimalsurety bond and show that it does not coincide with the current USregulation. In particular we show that under a natural assumption the USregulation is too expensive and provides overinsurance to the problem ofabnormally low tenders.

Moral hazard and non-exclusive contracts

This paper studies equilibria for economies characterized by moral hazard(hidden action), in which the set of contracts marketed in equilibrium isdetermined by the interaction of financial intermediaries.The crucial aspect of the environment that we study is thatintermediaries are restricted to trade non-exclusive contracts: theagents' contractual relationships with competing intermediaries cannot bemonitored (or are not contractible upon). We fully characterize equilibrium allocations and contracts. In thisset-up equilibrium allocations are clearly incentive constrainedinefficient. A robust property of equilibria with non-exclusivity isthat the contracts issued in equilibrium do not implement the optimalaction. Moreover we prove that, whenever equilibrium contracts doimplement the optimal action, intermediaries make positive profits andequilibrium allocations are third best inefficient (where the definitionof third best efficiency accounts for constraints which capture thenon-exclusivity of contracts).

Financing constraints and fixed-term employment contracts

This paper studies the interactions between financing constraints and theemployment decisions of firms when both fixed-term and permanent employmentcontracts are available. We first develop a dynamic model that shows theeffects of financing constraints and firing costs on employment decisions. Oncecalibrated, the model shows that financially constrained firms tend to use moreintensely fixed term workers, and to make them absorb a larger fraction of thetotal employment volatility than financially unconstrained firms do. We testand confirm the predictions of the model on a unique panel data of Italian manufacturingfirms with detailed information about the type of workers employedby the firms and about firm financing constraints.

Iowa Department of Transportation Office of Contracts Letting Summary - Fiscal 2008

Report of the letting activity of the Iowa Department of Transportation's Office of Contracts required by Iowa Code Section 307.12(15).

Waste Reduction, Construction and Demolition Debris: Guide for Building, Construction and Environmental Professionals, Revised November 2008

This document is intended to lay the foundation for resource reduction strategies in new construction, renovation and demolition. If you have an innovative idea or information that you believe should be included in future updates of this manual please email Shelly Codner at scodner@region12cog.org or Jan Loyson at Jan.Loyson@Iowalifechanging.com. Throughout this manual, we use the term “waste reduction” to define waste management initiatives that will result in less waste going to the landfill. In accordance with the waste management hierarchy these practices include reducing (waste prevention), reusing (deconstruction and salvage), recycling and renewing (making old things new again) - in that order. This manual will explain what these practices are and how to incorporate them into your projects.

Construction Code, November 25, 2008

Construction codes establish minimum standards for structural integrity, life safety, accessibility and energy conservation in construction of buildings and facilities intended for human occupancy. These requirements affect all of the major systems of buildings and facilities.

Ecole et construction du sens

Peut-on continuer à invoquer la neutralité abstentionniste de l'État pour proscrire un enseignement sur la religion à l'école ? Cet argument qui a eu sa légitimité historique vaut-il encore aujourd'hui ? En d'autres termes, l'existence d'un tel enseignement ne pourrait-il pas s'avérer compatible avec un régime de séparation Églises-État ? Qu'en pensent les acteurs directement concernés ? Refusant de rejeter la religion du côté du privé, les enseignants en nombre croissant déplorent le peu de place accordé à la « spiritualité » en classe. Quant aux élèves, reflétant l'attitude incertaine de leurs parents quant aux valeurs à transmettre, ils expriment des besoins plus difficiles à déchiffrer. Mais derrière ce débat relatif à l'inscription d'une case religieuse dans les programmes scolaires, ne s'en cache-t-il pas un autre touchant directement aux objectifs du système éducatif et au rôle des enseignants ?