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Time is Money: Optimal Investment Delay in Procurement (and Concession) Contracts AgEcon
D'Alpaos, Chiara; Moretto, Michele; Valbonesi, Paola.
Procurement (and concession) contracts are agreements granting the right to construct public works, operate and provide a service/good. The main advantage of a procurement contract is that it passes full responsibility for investment and operations to the private sector and consequently provides incentives for efficiency. Although most contracts include penalty/premium clauses to avoid construction risks (i.e. delays), evidence from ongoing procurement contracts shows that there are many delays in making investments. Actually these clauses introduce the flexibility to decide when it is optimal to invest and consequently increase the contract’s value for the contractor. Therefore if the contracting authority underestimates penalty/premium fees, these may be...
Tipo: Conference Paper or Presentation Palavras-chave: Procurement/concession contracts; Premium/penalty fee; Investment timing flexibility; Public Economics; L33; H57; D81.
Ano: 2006 URL: http://purl.umn.edu/6642
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