Project Networks and Reallocation Externalities

Accepted to 2022 MSOM SIG Conference

43 Pages Posted: 9 Jun 2022 Last revised: 15 Jun 2022

See all articles by Vibhuti Dhingra

Vibhuti Dhingra

York University - Schulich School of Business

Juan Camilo Serpa

McGill University - Desautels Faculty of Management

Harish Krishnan

University of British Columbia (UBC) - Sauder School of Business

Date Written: May 27, 2022

Abstract

A project involves several “participants” - including agencies, contractors, and subcontractors - all working concurrently on multiple projects and allocating resources among them. This interdependency creates a network of otherwise unrelated projects. By constructing the largest project network ever mapped, we track the timelines of 2.6 million infrastructure projects involving 140,000 participants. We show that a seemingly localized disruption, affecting only one project site, eventually causes delays and penalties across unrelated projects. This is because self-interest drives participants to opportunistically reallocate resources into disrupted projects, at the expense of other projects, triggering a domino effect of further reallocations in the network. Thus, the costs of on-site disruptions end up being evenly shared by multiple participants within the network, rather than being fully absorbed by the affected project. Performance-based contracts, which reward contractors for timeliness, exacerbate these externalities by encouraging self-interested resource reallocation.

Keywords: Public procurement, project management, networks, empirical analysis

Suggested Citation

Dhingra, Vibhuti and Serpa, Juan Camilo and Krishnan, Harish, Project Networks and Reallocation Externalities (May 27, 2022). Accepted to 2022 MSOM SIG Conference , Available at SSRN: https://ssrn.com/abstract=4121748 or http://dx.doi.org/10.2139/ssrn.4121748

Vibhuti Dhingra

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://vibhutidhingra.com

Juan Camilo Serpa (Contact Author)

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada

Harish Krishnan

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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