Analysis of Stakeholder Involvement in Nuclear Power Plant Cost Overruns and Implications for Contract Structuring

This study introduces a novel framework to model cost overruns associated with four key stakeholders in nuclear power plant construction: equipment suppliers, construction subcontractors, the design and management team, and creditors. The framework estimates the share of overruns caused by each stakeholder and the share of overruns they receive as payment. The results show that the share of cost overruns a given stakeholder causes and the share of overruns they receive as payment are often starkly different, which can lead to profit misallocations and litigation between parties, further exacerbating overruns. The magnitude of these potential profit misallocations is examined under three common contract structures - fixed-price, cost-plus, and performance-based - revealing the advantages and disadvantages of each framework for aligning stakeholder incentives. Regardless of the contract type chosen, strong owner involvement is crucial for project success, and the study concludes with specific recommendations for project owners seeking to minimize cost overruns.

Source: arXiv:2601.14558v1 - http://arxiv.org/abs/2601.14558v1 PDF: https://arxiv.org/pdf/2601.14558v1 Original Link: http://arxiv.org/abs/2601.14558v1