2026/01/31 by Christopher Forsyth, Levi M. Larsen, Ryan Spangler +6
Economics, Econometrics and Finance · #econ.GN #q-fin.EC
arxiv created 2026/08/02 · arxiv updated 2026/08/04
Existing evidence on nuclear power plant construction suggests that individual stakeholders involved in project delivery are often not responsible for all of the cost overruns in their scope of the project, which can lead to costly and time-consuming litigation to determine who is truly at fault for overruns. This study introduces a framework to model the share of overruns caused and received as payment by five stakeholders in a nuclear construction project: equipment suppliers, construction subcontractors, the design and management team, creditors, and the nuclear regulator. We then perform a contract analysis under three common contract structures - fixed-price, cost-plus, and performance-based - to show the profit misallocations that can result, revealing the advantages and disadvantages of each contract type for aligning stakeholder incentives. Regardless of the contract type chosen, strong owner involvement is crucial for project success, and we conclude with specific recommendations for project owners seeking to minimize cost overruns.