IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v135y2005i1p127-15310.1007-s10479-005-6238-4.html
   My bibliography  Save this article

Managing Cost Overrun Risk in Project Funding Allocation

Author

Listed:
  • Chung-Li Tseng
  • Kyle Lin
  • Satheesh Sundararajan

Abstract

This paper discusses decision making of project funding allocation under uncertain project costs. Because project costs are uncertain and funding allocations may not necessarily match the costs required, each project is inherently subject to a cost overrun risk (COR). In this paper, a model is proposed in which project cost is treated as a factor with a probability density function. The decision maker then allocates the total funding to the projects while minimizing a weighted sum of mean and variance of the COR of the project portfolio. Some properties of project COR are derived and interpreted. Optimal funding allocation, in relationship to factors such as various project sizes and riskiness, project interdependency, and the decision maker’s risk preference, is analyzed. The proposed funding allocation model can be integrated with project selection decision-making and provides a basis for more effective project control. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Chung-Li Tseng & Kyle Lin & Satheesh Sundararajan, 2005. "Managing Cost Overrun Risk in Project Funding Allocation," Annals of Operations Research, Springer, vol. 135(1), pages 127-153, March.
    • Handle: RePEc:spr:annopr:v:135:y:2005:i:1:p:127-153:10.1007/s10479-005-6238-4
    DOI: 10.1007/s10479-005-6238-4
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s10479-005-6238-4
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10479-005-6238-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Börge Obel & James Vander Weide, 1979. "On the Decentralized Capital Budgeting Problem under Uncertainty," Management Science, INFORMS, vol. 25(9), pages 873-883, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eckhause, Jeremy & Herold, Johannes, 2014. "Using real options to determine optimal funding strategies for CO2 capture, transport and storage projects in the European Union," Energy Policy, Elsevier, vol. 66(C), pages 115-134.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.

      Corrections

      All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:135:y:2005:i:1:p:127-153:10.1007/s10479-005-6238-4. See general information about how to correct material in RePEc.

      If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

      If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

      If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

      For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

      Please note that corrections may take a couple of weeks to filter through the various RePEc services.

      IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.