Understanding Project Performance with Stochastic Interruption

Kazuaki Okubo and Makoto Okumura
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Kazuaki Okubo: Graduate School of International Cultural Studies, Tohoku University, Kawauchi 41, Aoba-ku, Sendai 980-8576, Japan
Makoto Okumura: International Research Institute of Disaster Science, Tohoku University, Aramaki-Aoba 468-1, Aoba-ku, Sendai 980-8572, Japan

Sustainability, 2022, vol. 14, issue 5, 1-20

Abstract: It is becoming increasingly important to implement projects with care on environmental conditions. Some projects can be carried out only during the allowable season and interrupted during other seasons. Such a project interruption is expected to affect the quality of the project’s outcome through the decision-making of the stakeholders. This paper investigates the impact of interruption on the decision-making of the project owner and the contractor. We consider a project with some work after the interruption period (two-year project), the owner can select another option (one-year project) where all work is completed before the interruption period. If the fixed cost is higher relative to the benefit, our results show that the contractor prefers the one-year project, even when the owner selects the two-year project. We also represent the two threshold values of the interruption length that determine the owner’s selection and relative quality of outcomes, respectively. It was found that a range of interruption length where the selected project does not provide the higher quality outcome.

Keywords: project management; stochastic interruption; dynamic optimization (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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