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

2026-01-21

AI Summary

This study addresses the frequent cost overruns and imbalanced benefit allocation among stakeholders in nuclear power plant construction, which often lead to profit misalignment and litigation risks. For the first time, it systematically quantifies the causal contributions to cost overruns and the divergent economic gains of four key parties: equipment suppliers, construction subcontractors, design-management teams, and creditors. Integrating empirical attribution modeling with contractual mechanism analysis, the research evaluates how three prevalent contract structures—fixed-price, cost-plus, and performance-based—affect incentive alignment. The findings highlight the critical role of active owner involvement in mitigating cost overruns and offer targeted contract design recommendations. This work provides both theoretical grounding and practical pathways for improving governance in nuclear power projects.

Technology Category

• Game Theory and Economic Paradigms: Mechanism Design
• Multiagent Systems: Mechanism Design
• Constraint Satisfaction and Optimization: Distributed CSP/Optimization

Application Category

• Economics, Online Markets and Human Computation: Incentives in network design for Web infrastructures and ecosystems
• Graph Algorithms and Modeling for the Web: Efficient manipulation of static and dynamic Web-related graphs
• Social Networks and Social Media: Media and governance, opinion dynamics, filter bubbles, polarization

Abstract

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.

Problem

• cost overruns
• stakeholder involvement
• nuclear power plant
• contract structuring
• profit misallocation

Innovation

• stakeholder incentive alignment
• cost overrun attribution
• nuclear power plant contracting
• profit misallocation
• contract structure analysis