Contingent Allocation Research Articles

Contingent allocation of the agri-food budget: comparison of farmer and non-farmer preferences

Agricultural production faces diverse and often conflicting expectations, such as considerations related to environmental protection, food security and risk management, as well as strengthening the profitability and competitiveness of domestic production. In this study, we applied the contingent allocation method to a national agricultural budget to analyse the preferences of farmers and other citizens for allocating budget funds. Survey data collected from 2014 citizens and 518 farmers were used in compositional data analysis where it is considered that each spending decision bears an opportunity cost, and the decision maker faces trade-offs across budget priorities. The allocations of farmers and non-farmers were found to differ considerably. Farmers emphasized agricultural income and the economic resilience of farms as well as the self-sufficiency in food production and soil conditions. Non-farmers emphasized environmental public goods. The allocations were used to form compositional respondent clusters. The first cluster emphasised multiple objectives for agricultural policy, whereas the second cluster was clearly production oriented and the third cluster environmentally oriented. The results highlight the differences between farmers and non-farmers challenging the planning of legitimate agricultural policy.

Addressing Shortcomings in Contingency Standards of Care

Addressing Shortcomings in Contingency Standards of Care

Theory and Practice in Contingency Allocation

Although contingency allocation management is widely accepted as a proactive concept rich in theories, its applications do not seem to be well embraced in many countries due to many factors. This study aims to broadly investigate this theory-practice gap concerning contingency allocation in building projects in Sri Lanka. Twelve case studies with a desk review on seven local projects were carried out to explore the contingency allocation practice at the site level. Fifteen independent consultants were interviewed to share an understanding of the practical relevance of this research while largely eliminating the need for further justification. Code-based content analysis was used to analyze data. Nearly 44 incremental approaches were found to have theoretically evolved in a history of 35 years. It was revealed that the practice of ascertaining contingency sums is ad-hoc, informal, and subjective. More than 25 gaps were detected, while nearly 50 strategies were introduced. An impression among the practitioners is that the formal methods are overly theoretical.

Optimal contracts with contingent allocation

We study the contractual design problem of a seller that observes an ex-post signal correlated with the buyer’s valuation and can make the allocation, but not payments, contingent on it. We show that, to maximize her profit, the seller should offer a menu of contracts whereby the good is transferred to the buyer only if the signal is sufficiently low. The welfare implications of these contracts are also discussed.

Evaluating the allocation of contingency on state DOT projects based on project types and rate of cost overruns

Current state DOT policies of using a flat rate percentage for allocation of contingency assume that all projects are created equal and that an average contingency could be used across all projects irrespective of the project types. It has been suggested that the allocation of contingency should be commensurate with the risks. Hence, the objective of this research was to evaluate the allocation of contingency based on the project cost overruns or underruns associated with the different projects types. The research used publicly available secondary data and evaluated the rate of project cost overruns or underruns for the different project types. The research found that the average rate of overruns on the 452 projects evaluated is 5%. The average rate of overruns for each of the seven project types differs and ranges from 1 to 10%. The research also found a significant difference in the average overruns of three project types, which may suggest that the contingency allocation for the seven project types aligns within those three groups of 10% range, 3% range, and 1% range. The implication of this research is that it informs the need to consider project cost overruns or underruns and project types in contingency allocation.

Working more or working less? Contingent allocation of reseller effort in distribution channels

Because resellers in business markets typically represent multiple suppliers, a key variable in the study of channels of distribution is reseller allocation of effort, which involves understanding how much time and resources a reseller devotes to a supplier to help the supplier support its products. While allocation of effort is of vital importance to channel practitioners, it has been under studied in the academic literature. We propose a conceptual model based on the competing values framework, which suggests that firms balance different, changing, and incompatible challenges, making high performance outcomes difficult to attain. We suggest that these stressors, or channel concerns can be identified as an economic concern, a stability concern, a harmony concern, and an adaptation concern. Such concerns affect the allocation of reseller effort through two moderating conditions of the environment: territory volatility and territory stagnancy. An exploratory study featuring 26 semi-structured depth interviews and 162 responses from a survey of distributors in the brewing industry provide data for hypothesis testing. In general, good support is found for our model. Reseller allocation of effort is affected by the interaction of four channel concerns and two types of territory difficulties. Actionable managerial recommendations are provided.

Group incentives and rational voting

Our model describes competition between groups driven by the choices of self-interested voters within groups. Within a Poisson voting environment, parties observe aggregate support from groups and can allocate prizes or punishments to them. In a tournament style analysis, the model characterizes how contingent allocation of prizes based on relative levels of support affects equilibrium voting behavior. In addition to standard notions of pivotality, voters influence the distribution of prizes across groups. Such prize pivotality supports positive voter turnout even in non-competitive electoral settings. The analysis shows that competition for a prize awarded to the most supportive group is only stable when two groups actively support a party. However, competition among groups to avoid punishment is stable in environments with any number of groups. We conclude by examining implications for endogenous group formation and how politicians structure the allocation of rewards and punishments.

Allocation and Management of Cost Contingency in Projects

Contingency is crucial for successfully managing projects since it provides a buffer against risk development. This research introduces a new methodology to estimate and allocate cost contingency during the planning phase, as well as managing cost contingency during the execution phase of the project. The cost contingency allocation technique is based on the activity’s contribution to the overall cost variance of the project, which includes the cost, uncertainty, and whether the activity is on the critical path or not. New measures have been introduced in the proposed cost contingency management method to control the expenditure and balance of activities’ cost contingency and estimate future need. The new cost contingency management method is applied to a real-life bridge maintenance project. The result shows that the proposed cost contingency methodology is adaptive and robust enough to accommodate typical disruptions in the project environment.

Contingency modelling for construction projects using fuzzy-set theory

Purpose – The purpose of this paper is to present a newly developed fuzzy-set based model for estimating, allocating, depleting, and managing contingency fund over the life cycle of construction projects. Design/methodology/approach – Fuzzy set theory is utilized in the design and development of proposed contingency modelling framework to incorporate uncertainties associated with the development phases of construction projects. A set of developed indices, measures, and ratios are introduced to quantify and characterize these uncertainties. The developed framework is designed to incorporate expert opinion and provide user-system interaction. Findings – The results obtained from the application of the developed framework on actual project case not only illustrate its accuracy, but also demonstrate its capabilities for contingency management over life cycle of construction projects. Unlike other methods, the framework provides project managers with structured method for contingency depletion utilizing a set of depletion curves and selection factors. Originality/value – The novelty of the developed framework lies not only in its new developments for contingency estimating but also its modelling for contingency allocation and depletion. It is expected to be of direct value to industry professionals and academics interested in contingency management over the entire life cycle of construction projects. The proposed framework provides management functions and features beyond those generated through Monte Carlo simulation and even those developed using fuzzy set theory.

Optimization of Flight Contingent Procurement Considering Quantity Discounts and Contract Negotiations

Current results of revenue management and pricing policy research enable suppliers to identify and realize optimal sales strategies and decisions. In response, a corporation which has to deal with results of pricing policies is compelled to optimize its purchase. New developments in the aviation sector and airline industry along with a highly competitive flight ticket market and the importance of strategic procurement reveal the necessity of creating new decision support solutions based on quantitative models. The developed decision support system assists the decision making process of a corporation in annual contract negotiations with airlines to minimize its flight travel costs. Considering provided quantity and volume discounts with varying tiers and targets both operational and strategic decision support is provided. It combines the developed decision process with the use of a mathematical model. The proposed decision support system leads to optimal airline selection and flight contingent allocation considering traditional airlines and low-cost carriers as suppliers. It is addressed to a multinational corporation with numerous global host countries, branch offices, trading partners and customers with world-wide flight demand.

How Does Financing Impact Investment? The Role of Debt Covenants

We identify a specific channel (debt covenants) and the corresponding mechanism (transfer of control rights) through which financing frictions impact corporate investment. Using a regression discontinuity design, we show that capital investment declines sharply following a financial covenant violation, when creditors use the threat of accelerating the loan to intervene in management. Further, the reduction in investment is concentrated in situations where agency and information problems are relatively more severe, highlighting how the state contingent allocation of control rights can help mitigate investment distortions arising from financing frictions.

CONFRONTING MODEL MISSPECIFICATION IN FINANCE: TRACTABLE COLLECTIONS OF SCENARIO PROBABILITY MEASURES FOR ROBUST FINANCIAL OPTIMIZATION PROBLEMS

Despite the widespread realization that financial models for contingent claim pricing, asset allocation and risk management depend critically on their underlying assumptions, the vast majority of financial models are based on single probability measures. In such models, asset prices are assumed to be random, but asset price probabilities are assumed to be known with certainty, an obviously false assumption. We explore practical methods to specify collections of probability measures for an assortment of important financial problems; we provide practical methods to solve the robust financial optimization problems that arise and, in the process, discover "dangerous" measures.

Petroleum pipeline construction planning: a conceptual framework

A cross-country pipeline construction project is exposed to an uncertain environment due to its enormous size (physical, manpower requirement and financial value), complexity in design technology and involvement of external factors. These uncertainties can lead to several changes in project scope during the process of project execution. Unless the changes are properly controlled, the time, cost and quality goals of the project may never be achieved. A methodology is proposed for project control through risk analysis, contingency allocation and hierarchical planning models. Risk analysis is carried out through the analytic hierarchy process (AHP) due to the subjective nature of risks in construction projects. The results of risk analysis are used to determine the logical contingency for project control with the application of probability theory. Ultimate project control is carried out by hierarchical planning model which enables decision makers to take vital decisions during the changing environment of the construction period. Goal programming (GP), a multiple criteria decision-making technique, is proposed for model formulation because of its flexibility and priority-base structure. The project is planned hierarchically in three levels—project, work package and activity. GP is applied separately at each level. Decision variables of each model are different planning parameters of the project. In this study, models are formulated from the owner's perspective and its effectiveness in project control is demonstrated.

Contingency allocation and management for building projects

A theoretical approach is presented for contingency allocation and management in building projects using the quantification of uncertainty of project cost. The uncertainty of input items to a bill of quantities, namely, quantities of bill items, usage of resources and their prices are quantified as two moments. From these, two moments for project cost are evaluated. The cumulative distribution function for project cost approximated from its two moments is used to determine the contingency allocation based on a desired probability of success. The management process of this allocation is developed using an approach that establishes initial bench-marks by distributing the allocation to individual bill item costs. By using these initial bench-marks for further distribution, sophistication is introduced to the management process.

Contractor project risks contingency allocation using linguistic approximation

This paper demonstrates the application of fuzzy set theory to the subjective assessment of risks during tender preparation for the purpose of allocating contingencies. The need for contingency allocation is discussed and relevant project risk factors are identified. A hierarchical risk-breakdown structure for contractor risk assessment and a model for contractor contingency allocation are developed. A brief introduction to fuzzy set theory and the fuzzy risk analysis model to be applied is presented. A simple example is used to illustrate the application of the model in practice. The model is currently being used to develop a knowledge-based system.