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Collaborative dynamics in open source software development: Team interaction and the role of project manager.

In a recently published study, we examine the impact of communication network characteristics on project performance, measured in terms of the number of issues closed within open-source software development projects. We also examine how this project outcome is affected by project managers' active participation in these communication networks. The results obtained from analyzing 120,243 observations of unbalanced dynamic panel show that with higher team interaction the technical problem-solving capability of team initially increases but then decreases. We find that project manager's participation in team discussions increases its problem-solving capability. That is, there is a moderating effect of manager participation in flattening the curvilinear relationship between team interaction and technical problem-solving performance. In essence, project managers' active participation alleviates the reduction in weekly issue closure rate once the density of team interaction goes beyond the inflection point.

The findings have implications for project managers and developers working on OSS projects. Our research provides recommendations on the attributes of the project manager that would be best suited for improving project team performance and sheds light on aspects of team communication that a project manager may need to manage. The project manager should promote team interaction to enable the flow of ideas and information to improve the issue resolution rate of the team. However, the project manager must remain aware of the growing fatigue from information overload in teams. Our research provides evidence for the inflection point beyond which such fatigue might start to impede project performance. We identify the specific time when the project manager should intervene to reduce the negative effects of information overload. Such an understanding enables project managers to make the best use of the project management hours and add value.

As issue closure is often required for bug fixes in new product development, our study shows that overall product development will substantially improve at high team interaction by employing a manager who actively engages in team interactions, enabling faster product development to the market cycle. As team member interaction intensity can seldom be controlled, our study provides guidance how expensive project management resources can be allocated depending on the extent of team interaction to shorten the new product development cycle.

The findings of this research also have implications for how OSS platforms can be made more effective in managing software development activities. Since team
performance decreases with additional team interactions after an inflection point, OSS platforms could consider developing a system that categorizes communication notifications that a team member receives (such as a thread or message broadcast) depending on the priority level. For example, suppose a software project on GitHub has several modules based on which developers are grouped. Developers will prefer to stay updated on the messages from their colleagues working on the same inflection point identified in this study could serve as a reference point for the platform when project performance is impacted by information overload. The system developed by the OSS platform could get triggered at this reference point so that communication notification to team members can be prioritized based on the module that a developer is working on. In turn, developers can focus on a few important messages to enhance team
performance.

The OSS platform may also aid project managers to participate more in team activities as our results suggest that active participation of project managers enhances team performance by flattening the curve. For instance, the platform may provide project managers with a dashboard that summarizes project progress. Such a service may enable the manager to get a quick and accurate update of the team and may help the manager to participate in a more meaningful way. The platform may also provide a metric that measures the relevance of communication by developers, enabling managers to efficiently streamline communication within their teams.

Source: https://doi.org/10.1002/joom.1324

US federal government contracting for disaster management

 

 

In a recently published article, my co-author and I focus on the issue of contracting by US federal agencies in response to disasters. Specifically, we investigate the choice of procurement contract type (cost reimbursement vs. fixed price) by US federal agencies during disaster management operations. The research relies on 47,560 contracts issued by the US federal government in response to 14 major disasters between 2005 and 2016. While earthquakes represent the majority of disasters in our dataset (10 out of 14 disasters), we also consider other disasters (such as earthquakes, tornado, and oil spill) for which federal agencies procure products and services for relief operations. The dataset includes events that mainly affected the US; however, two events outside this geographical scope were included (Haiti earthquake in 2010 and Pacific earthquake in 2011) because they represented a significant expenditure by US Federal Government agencies. We build on agency theory to investigate the choice of the contract type made by federal agencies at the different stages of a relief operation. This research provides empirical evidence of the key factors underpinning the choice of contract in the context of disaster management, namely the amount of spend per contract and the type of acquisition (product or service), and reveals the moderating role of the stage of the relief operation.

Our finding shows that in disaster-relief operations, as spend increases, the likelihood of choosing cost reimbursement also increases. Our results indicate that government agencies tend to be more guarded in this respect by preferring cost reimbursement deals as the contract value increases. Our findings show that service contracts are more likely to be cost reimbursement. We found no significance in the direct relationship between stage of disaster (preparation, response, and recovery) and contract choice, when the response stage was operationalized as 100 days after a disaster strikes. However, the relationship was positive and significant for 200-day model. Interestingly, we expected more cost-reimbursement contracts in the Response stage. Similar logic would lead us to expect that more cost-reimbursement contracts relative to fixed-price contracts during all disaster stages relative to “normal times.” However, a report by the Government Accountability Office (GAO, 2017) reveals that the split of contract types for all government contracts across all agencies between 2011 and 2015 was 63% fixed-price; 37% cost-reimbursement. This contrasts with our dataset in that fixed-price is much more prevalent during disaster contracting, accounting for 92% of all contracts, notably driven by Hurricane Katrina contracts. It appears that the preference for fixed-price arrangements is emphasized during disasters, particularly during the response stage. One explanation may be that fixed-price contracts might be quicker to construct (and much easier to monitor) than cost-reimbursement contracts; give the hectic nature of disasters, this may dominate. This is in line with prior arguments about the ease of execution of fixed-price contracts. This also helps explain that as we expand the response-stage window to 200 days, that is, we include more contracts that are not subject to time pressure, the relationship between stage and contract choice becomes significant.

The split-sample analysis of the Katrina/non-Katrina contracts revealed that in the non-Katrina sample there is a higher likelihood of using cost-reimbursement contracts during the response stage than in the preparation and recovery stages. However, the finding was opposite and significant for the Katrina only sample. Katrina is the first and most severe event in our dataset, and the response effort was heavily criticized for handing out large contracts without competition. These criticisms resulted in an investigation by the White House and a legislation reform with extensive revisions to emergency response provisions (Post-Katrina Emergency Management Reform Act of 2006, 2006). While these recommendations and legislation do not specifically refer to fixed-price contracts, they stipulate changes to staffing, organization structure, and contract competition. In 2015, 10 years after Katrina, the GAO reported (GAO-15-783, 2015) on the changes to emergency response provisions triggered by Hurricane Katrina reported a tripling in the number of contract officers and the establishment of the Disaster Acquisition Response Team (DART) and a new rule that prevents contracting officers from issuing non-compete contracts exceeding 150 days without proper authorization. These changes to staffing, legislation, and procedures are likely to have affected contract officers' behavior post-Katrina, particularly regarding the award of service contracts, which tend to extend over time.

Interestingly, while we hypothesized that larger contracts during the response stage would lead to more cost-reimbursement contracts, the opposite was true in the whole sample. The result is driven by extremely large contracts. To explore this further, we inspected the largest contracts during the response stage, specifically those over $75 million, which is the threshold at which the senior procurement executive of the agency is required to approve the contract according to FAR 6.304. We found 39 contracts, of which 31 (79.5%) are fixed-price and eight (20.5%) are cost-reimbursement. However, this split is not homogenous across government departments. Of the eight cost-reimbursement contracts in this sub-set, seven were issued by one Agency, FEMA; the agency tasked with “helping people before, during and after disasters.” Of these seven contracts, five relate to architectural/ construction services and appear to be associated with providing accommodation for people in the aftermath of a disaster, in line with FEMA's mission. The remaining two are technical assistance contracts.

In our sample, as expected, FEMA has the largest number of contracts 13,742 (29% of all contracts), because of its mission. Even though FEMA has a larger proportion of the extremely large cost-reimbursement contracts, they predominantly award fixed-price contracts during the response stage due to the speed of awarding and monitoring them. It seems that FEMA follows a dual strategy, relying on fixed-price contracts for speed, and also using extremely large cost-reimbursement contracts for major projects. While practitioners have long recognized the benefits of fixed-price contracts in terms of speed, this is not broadly recognized in the extant literature.

We ran a sub-sample analysis for the two major agencies: FEMA and the Department of the Army, which represent over 43% of all contracts in the dataset. This analysis indicates that the findings regarding FEMA are significant and align with the results in our main model results. Even the outcome pertaining to the disaster response stage exhibits a higher likelihood of using cost-reimbursement contracts during the response stage than in the preparation and recovery stages. Conversely, in the case of the Army, we find that in disaster-relief operations, the amount of spend associated with a contract increases the likelihood of using cost-reimbursement contracts over fixed-price contracts. We also find that in disaster-relief operations, the Department of Army was more likely to consider cost reimbursement contracts for procuring services than for procuring products. In the case of the Department of Army  we couldn't find evidence of higher likelihood of using cost-reimbursement contracts during the response stage than in the preparation and recovery stages. Neither did we find evidence of higher use of cost reimbursement contracts during the response stage (as compared to other stages) to be related to (a) the amount of spend and (b) the procurement of services as compared to products. 

This indicates that while both government departments issue many contracts during a disaster, only FEMA appears to be under pressure during the response stage. This outcome corresponds to FEMA's primary mission of addressing urgent needs in the immediate aftermath of a disaster. An alternative explanation is that because agencies might have already negotiated per-unit costs with selected suppliers for services commonly needed during emergencies, such as medical care, provision of meals, and so forth, pre-positioned contracts could thus help mitigate opportunistic behavior. Policy guidelines under FAR make pre-established arrangements available to government officials, and researchers have reported on their effectiveness. For example, in 2019, the Army Corp of Engineers established a $999 million advance joint venture agreement with six contractors to provide time sensitive disaster support to repair critical infrastructure such as roads, bridges, and electric distribution systems.

Our robustness checks reveal that results regarding the amount of spend during the response stage for the two largest sub-samples regarding the type of competition, “Not Competed” and “Full and Open Competition,” (which together represent about 47% of all the contracts in the dataset) are significant and negative, in line with our main model results. These two competition categories, which are at opposite ends of the spectrum (from no competition to full and open competition), indicate that the negative interactions between the stage of the disaster and the amount remains under vastly different types of competitive environment. Finally, our results regarding the interaction between the service variable and disaster stage, show that services contracted during the response stage are more likely to use cost-reimbursement contracts than those awarded during other disaster stages, in line with agency theory predictions and our logic presented there.

Source: Mena, C., & Nair, A. (2024). US federal government contracting for disaster management. Journal of Operations Management, 70(4), 523-547.

Virtuous spillover effects of quality penalties on the continuity of health care

In a recently published article my co-authors and I examine two effects of the quality penalties on an important determinant of health-care quality, namely, continuity of care for ailments targeted (intra-ailment effects) and ailments not targeted (spillover effects) by the regulation. Continuity of care, broadly defined as enabling appropriate care across patient conditions, settings, and time, is an important part of the health-care delivery continuum that helps patients discharged after intensive hospital-based care to smoothly transition into their communities. Continuity of care can refer to relational continuity, where a patient’s care is managed by the same provider over the entire care cycle; informational continuity, where the patient’s information is transferred over care episodes; continuity of physical location, where the entirety of a patient’s care occurs in the same location; management continuity, which refers to how care is integrated across sites and episodes; or transitional continuity, which occurs when patients are discharged from intensive care to another type of care. We focus on transitional continuity, which encompasses “a broad range of time-limited services designed to ensure health-care continuity, avoid preventable poor out-comes among at-risk populations, and promote the safe and timely transfer of patients from one level of care to another or from one type of setting to another”. Transitional continuity of care can occur in hospital-based step-down or recovery units or in other facilities such as skilled nursing facilities (SNFs), inpatient rehabilitation facilities, long-term care hospitals, and home health agencies.

The findings of this study offer directions for considering routines when developing regulatory policies in the health-care context. Health-care organizations are structured around medical specialties, and the services within these specialties share strong complementarities owing to common knowledge-base, processes, and physical assets. Since it is not practically possible to devise all-encompassing regulations, information about complementarities can help in developing policies that consider potential spillovers due to the underlying complementary processes and assets. Additionally, our findings also shed light on how policymakers can consider spillovers due to these complementarities and the underlying routines to positively influence performance measures that are often difficult to regulate. Post-acute care facilities are scattered, and it is not easy to create policy instrument/regulations to directly improve the quality of transitional continuity of care. We show that current policies that focus on readmissions, bundled care, and accountable care organization can address continuity of care-related quality measures.

For health-care organizations, our study has implications for considering processual and structural routines in quality improvement efforts. Resource allocation decisions can take these routines and complementarities into account. One key criticism of regulatory policies is that they motivate organizations to redirect resources from other activities to respond to the requirement. We show that these regulations can trigger a different sequence of actions whereby organizations develop routines that can aid in not only improving the outcome required by the regulation but also of other related tasks. This finding motivates careful considerations of routines at individual, processual, and structural levels to not only fulfill the requirements of a regulation but to gain operational and strategic benefits. Based on the results of this study, large health-care organizations should invest in acute care facilities to develop necessary routines for improving transitional continuity of care.

Our study has implications beyond healthcare. Manufacturing, merchandise, and service industries can experience quality spillovers from regulatory changes owing to complementarities in production functions. For example, the department of transportation requires the disclosure of on-time performance for domestic flights. Process reengineering to improve ground turnaround times for domestic flights motivated by such focused disclosures can also benefit international flights. Our study speaks to outcomes from other types of regulations, such as environmental regulations. 

Source: Deore, A., Krishnan, R., & Nair, A. (2023). Virtuous spillover effects of quality penalties on the continuity of health care. Production and Operations Management, 32(9), 2846-2863.

Taming the Counterfeiting Epidemic

In a recently published article, we present the findings of our research that suggests that successfully combating counterfeits requires the attention of a broad collection of organizational functions. It works best with a multilayered strategy encompassing diverse methods and engaging the entire organization and its partners. We recommend that organizations tackle counterfeiting with a cohesive plan for identifying, containing, and preventing it. This comprehensive process means routinely keeping tabs on contract manufacturers and charting how products move through the supply chain. It includes scoping out what is for sale in consumer markets, deploying covert markings, reviewing warranty claims, educating customers, and partnering with key agencies and competitors.

While companies may never completely eliminate bad actors from copying products or diverting goods from authorized channels, they can significantly reduce counterfeiters’ market penetration and restore lost revenue. Successful approaches may involve cutting off counterfeiters’ access to markets, eliminating their supply of unauthorized goods, or making a product more difficult to copy. Building on insights from our case studies and discussions with practitioners, we provide details on the three activities that together help in developing a robust action plan comprises: identification, containment, and prevention. Identification helps in gaining Insight Into the extent and nature of the counterfeiting problem. Containment helps in limiting the problem’s spread. And prevention helps in stopping future counterfeit operations before they start

Source: Taming the Counterfeiting Epidemic - A multilayered approach is essential to effectively combat counterfeiting and unauthorized sales. MIT Sloan Management Review, Forthcoming (Fall 2023).

 

The mutual causality between supply chain disruption and innovation in low-income markets

In a recently published article, my co-author and I argue that low-income markets have unique constraints that trigger the co-evolution of innovation and disruption in such markets. When disruptions occur in global supply chains, and in particular, in low-income markets, they spur innovations that may be necessary to address both existing and potential future disruptions. However, such innovations in turn create disruptions to existing supply chains, and they may also create new supply chains. We highlight the unique opportunities and constraints that exist in the low-income market contexts that result in interesting and unique dynamics between innovation and disruption. Further, we identify the mechanisms through which innovation-disruption mutual causality occurs—as well as the boundary conditions for these mechanisms.

Using several case examples including Chotukool, Lagos, Nigeria Apapa port, MPesa, Momo, E-Choupal, Zipline drone technology, Dabbawallah, Danone South Africa, Kobo 360, Nestlé’s miniaturized “pure water” sachets, Barefoot College, Diagnostics for all, and Haul247 we discuss how disruption and innovation reinforce each other. Our study presents an integrated framework that considers the underlying characteristics of supply chain disruption and innovation. Supply chain disruption is characterized by impact (which can be low or high), probability (which is high), and level of control (which is low). We characterize innovation by considering whether it is affordable, available, accessible, has high level of awareness/relevance, and has low resource requirement. The mutual causality between supply chain disruption and innovation is strengthened by human and social capital that organizations in low-income markets are able to develop and creative resourcing that needs to move from autonomous to directed over time. Our study also emphasizes that weak institutions can paradoxically strengthen the force with which disruption and innovation reinforce each other. In addition to these moderating factors that strengthen the relationship between disruption and innovation, we also discuss the motivations, cognitive and social mechanisms that link supply chain disruptions to innovation, as well as information availability, structural changes and social equity that link innovation to supply chain disruption. The integrated framework presented in the paper is as follows:

This study offers directions for policy makers and managers regarding the macro-level and micro-level factors that influence innovation and disruption, as well as how to navigate the interplay between disruption and innovation in LIMs. It is noteworthy that this interplay can act as both a deterrent and an opportunity. An understanding of how LIM micro-level and macro-level factors influence disruption and innovation should help in decision-making and policy formulation. In addition, this study provides guidance to policy makers to work closely with organizations, as new innovations within these companies help to manage disruptions emanating from LIM constraints, thereby requiring innovative thinking on the policy front as well. Public-private partnerships can ensure that resource-constrained innovations at the organizational level are optimized and strengthened through policy innovations at the macro level.

Source: Goke, A., Nair, A. 2023. From Chaos to Creation: The mutual causality between supply chain disruption and innovation in low-income markets. Journal of Supply Chain Management, Vol. 59, Iss. 3, 20-41.

 

The Impacts of digital technologies on coping with the COVID-19 pandemic in the manufacturing industry

The COVID-19 pandemic’s impacts have been devastating for the global economy, and particularly for manufacturing companies. Many firms were unprepared for a crisis of this magnitude and adapted their operations in an ad-hoc manner. Some of these adaptations were facilitated by digital technologies (DTs). In a recently accepted article, my co-authors and I examine extant literature using a systematic review methodology in order to extend our understanding of what DTs have been used in manufacturing companies during the pandemic, how DTs have helped manufacturing companies cope with the pandemic, and how these innovations can be used in the post-pandemic world. The major outcome of our study is a novel classification of DT applications in the pandemic setting in the manufacturing industry. In addition, we propose an agenda for future research.

Source: Ardolino, M., Bacchetti, A., Dolgui, A., Franchini, G., Ivanov, D., & Nair, A. (2022). The Impacts of digital technologies on coping with the COVID-19 pandemic in the manufacturing industry: a systematic literature review. International Journal of Production Research, 1-24.

Adapting supply chain operations in anticipation of and during the COVID-19 pandemic

In a recently accepted article, my co-authors and I investigate the impacts of the COVID-19 pandemic and their proactive mediation by adaptive operational decisions in different network design structures in anticipation of and during the pandemic. In generalized terms, we contribute to the understanding of the effect of preparedness and recovery decisions in a pandemic setting on supply chain operations and performance. In particular, we examine the impact of inventory pre-positioning in anticipation of a pandemic and the adaptation of production-ordering policy during the pandemic. Our model combines three levels, which is not often seen jointly in operations management literature, i.e., pandemic dynamics, supply chain design, and operational production-inventory control policies.

The analysis is performed for both two- and three-stage supply chains and different scenarios for pandemic dynamics (i.e., uncontrolled propagation or controlled dispersal with lockdowns). Our findings suggest that two-stage supply chains exhibit a higher vulnerability in disruption cases. However, they are exposed to a lower system inertia and show positive effects at the recovery stage. Supply chain adaptation ahead of a pandemic is more advantageous than during the pandemic when specific operational recovery policies are deployed. We show that it is instructive to avoid simultaneous changes in structural network design and operational policies since that can destabilize the production-inventory system and result in higher product shortages. 

Source: Rozhkov, M., Ivanov, D., Blackhurst, J., & Nair, A. (2022). Adapting supply chain operations in anticipation of and during the COVID-19 pandemic. Omega, 110, 102635.

Quality penalties and continuity of health care

In a study my co-authors and I examine whether quality penalties aimed at reducing readmissions improve continuity of health care. We investigate if the quality penalty policy impacts continuity of care for services that were targeted by the policy through what we refer to as primary spillover effects. We also investigate the secondary spillover effects of the quality penalty policy on continuity of care for related ailments that were not targeted by the policy. The findings of this study show that externalities from quality penalties for readmission not only benefit continuity of care for the regulated ailments, but also allow health care organizations to adapt their existing routines and unlock continuity of care improvements for related, but non-targeted ailments. The finding that continuity of care does not diminish for unrelated services assuages concerns that hospitals respond strategically by neglecting or redirecting resources away from unrelated services. We provide novel insights as to how organizations respond to regulation by actively re-configuring their care patterns and coordinating service provision with attendant spillover effects on a variety of patients. Processual mechanisms such as the source of patient admissions and length of stay, and structural mechanisms such as system size and investments in continuity of care facilitate the spillover effects. 

Source: Ananthakrishnan, R., Deore, A., Nair, A. Virtuous Spillover Effects of Quality Penalties on the Continuity of Health Care. Working paper.

 

The Role of Social Media in Linking Corporate Social Irresponsibility with Abnormal Returns

Interest in the topic of corporate social irresponsibility (CSI) has burgeoned in recent years. CSI covers organizational activities that have an adverse impact on investors, employees, customers, suppliers, or the local communities. This set of organizations and individuals represent the stakeholders of a firm whose expectations of a certain behavioral standard are not met when firms cause harm through their actions and do not take steps to rectify the situation. Information about firm actions that may have compromised sustainability objectives can have a multifaceted outcome. Given that negative news receives more attention and deliberation, CSI can not only shape the sentiments of customers and media but also affect firm performance from the reaction of customers and stakeholders. At the same time, as stakeholders may be more focused on other performance measures such as cost and quality, instances of CSI may also end up receiving low to moderate attention, thereby reducing their negative effects. If this is indeed the case, firms can misbehave on the sustainability front with little consequences. As such, undertaking further research investigation is important to discern the impact of CSI on sentiment formation and financial outcome. Drawing on stakeholder theory and attribution theory, in this study we investigate the association of firms’ environmentally irresponsible actions with social media sentiments and abnormal stock returns.

In our research we examine how corporations’ environmental impact influences social media sentiment and firm value. To address this important question, we analyze a large-scale dataset collected from five sources (Trucost, Infegy Atlas, Center for Research in Security Prices, COMPUSTAT, and Harris Interactive). We find that environmental impact results in less favorable social media sentiment toward the firm. Natural resource usage and land, water, and air pollution have the most profound effect on social media sentiment of the various types of environmental impacts. However, brand equity helps insulate the negative effect of environmental impact and simultaneously strengthens the positive relationship between social media sentiment and the firm’s long-term abnormal returns; by contrast, market competition weakens this relationship. The results further show that social media sentiment mediates the link between environmental impact and firm value.

The research findings provide useful implications to aid firms in managing their environmental impact so as to avoid negative social media response and, in turn, enhance firm value. Ultimately, this study calls for the careful management of investments in activities detrimental to the environment, because consequent negative comments on social media can negatively affect firm value. Furthermore, firms lacking brand equity and facing intense market competition need to be especially vigilant with their activities that can be construed as socially irresponsible.

Source: Nair, A., Nguyen, H. Environmental Impact, Social Media, and Abnormal Returns: The Moderating Role of Brand Equity and Competition. Working paper.

Federal Government Contracting for Disaster Management

About 500 disasters occur every year, affecting more than 200 million people and killing around 75,000. Moreover, the number and severity of disasters are increasing.  To cope with these challenges, governments spend vast amounts of money in acquiring products and services. For example, the US Federal government spent over $20 billion for supplies needed for Hurricane Katrina, and so far, it has committed over $245 billion in acquisitions related to the Covid-19 pandemic.

During disaster relief operations, procurement can be a complex and uncertain activity, and there is ample reporting of failures.  A report by the US Senate Committee on Homeland Security and Governmental Affairs examined contracts awarded by Federal Emergency Management Agency (FEMA) during the response to the 2017 hurricane season.  The report reveals major shortcomings, such as the failure to adequately use pre-positioned contracts, the award of contracts without adequate vetting, inadequacies of the bidding process, and failures of suppliers to deliver.  

While disaster relief operations have similarities with commercial operations, there are notable differences concerning speed of response, uncertainty of supply and demand, and stakeholder’s goals.  These differences call for unique capabilities in terms of logistics – to ensure timely delivery – and procurement – to ensure efficient and effective contracting.  Despite the importance of both logistics and procurement in this context, research has tended to focus on logistical challenges. Much less attention has been placed on procurement, with some notable exceptions.  A review of the disaster management literature shows that out of 268 papers, only nine dealt with procurement, emphasizing the paucity of research into procurement in disaster relief. In the public administration literature, researchers have also noted that emergency procurement has been neglected and that more research is needed.  To frame our research, we take a multidisciplinary perspective drawing from the fields of operations management, disaster management, and public administration.

This research focuses on procurement during relief operations by investigating the use of contracts by US federal agencies during national emergencies.  The research focuses on the choice of contract type, which is an established dilemma in procurement.  Different contract types offer buyers and sellers a different balance of risks and rewards, and debate continues about their effectiveness under varying circumstances.  Thus, it is important to investigate the factors that influence the choice by federal agencies between cost-reimbursement contracts and fixed-price contracts as disaster relief operations unfold. 

Three key stages characterize disaster relief operations: preparation, response, and recovery. Each stage presents vastly different operational conditions. The response stage, in the immediate aftermath of a disaster, is particularly distinctive due to increased uncertainty, market disequilibrium, pronounced information asymmetries, and extreme time pressure; differences that increase the government’s risk exposure. For instance, the CARES Act, launched in response to the Covid-19 Pandemic, immediately attracted the attention of unscrupulous suppliers. Despite the differences across disaster stages, the dearth of research spanning across all stages has thus far prevented the evaluation of the factors influencing contracting practices. This study addresses this research gap by investigating how the type of acquisition and the amount of spend affect the choice of contract type. Furthermore, we examine how the disaster stage moderates these relationships, with a particular focus on the response stage, which presents the most extreme conditions.

Drawing from agency theory and the theory of regulatory capture, we investigate the choice of contract type in a setting that combines high uncertainty (which creates information asymmetries, adverse selection, moral hazard, and opportunism), and the need for speed and flexibility (which exacerbates problems of bounded rationality, supplier availability, and adverse selection).  Agency theory brings an economic perspective to the choice of contract type dilemma, as it seeks to determine the most efficient contract, given conditions of goal conflict, opportunism, information asymmetry, bounded rationality, risk aversion, and self-interest.  The theory of regulatory capture brings a public-private relationship perspective, arguing that private organizations can advance their interests by gaining influence over government agencies, often at the expense of the public interest.  It has been noted that in the aftermath of disasters, it is not uncommon to find corrupt suppliers exploiting the situation. 

The research relies on data made available by the US government, including all contracts deployed by federal agencies to support disaster-relief operations between 2005 and 2016, including 47,560 contracts across 14 disasters.  We evaluate the role of two key factors underpinning the choice of contract type during disasters, namely the type of acquisition and the amount of spend.

Our results indicate a positive association between contract spend and the likelihood of choosing a cost-reimbursement contract, which has significant implications for policymakers and practitioners because it indicates a higher risk exposure for government agencies in larger contracts.  Spend thresholds stipulated within FAR are intended to mitigate this type of risk, but since these thresholds are relaxed during disasters, government agencies become more exposed by accepting risk for the sake of expediency. However, federal agencies continue to have a fiduciary responsibility, which falls into the hands of contracting officers. Thus, both capacity (i.e., availability) and capability (i.e., knowledge and skills) of contracting officers are central to effective disaster response.  This emphasizes the importance of human resource aspects of public procurement. 

For contracting officers, the positive relationship between contract spend and cost-reimbursement contracts emphasizes the importance of contracting efforts in advance of a disaster, when they have more time to evaluate suppliers and negotiate contracts.  Pre-arrangements could thus help mitigate opportunistic behavior. Policy guidelines under FAR make pre-established arrangements available to government officials, and researchers have reported on their effectiveness. For example, in 2019, the Army Corp of Engineers established a $999 million advance joint venture agreement with six contractors to provide time-sensitive disaster support to repair critical infrastructure such as roads, bridges, electric distribution systems.

Our finding that cost-reimbursement arrangements are more prevalent in services contracting, particularly during the response stage, appears to be generally beneficial to suppliers, as they assume less risk and can concentrate on delivering the expected outputs from the contract without particular concern for costs.  For the government, this represents an increased risk, and contracting offices must remain vigilant and act when suppliers fail to fulfill their duties.  Potential suppliers should be mindful that cost-reimbursement contracts can involve additional monitoring costs. For federal agencies, this stresses the importance of having quick and easy onboarding as well as monitoring processes for suppliers of services in disaster situations.  Furthermore, it is important that contracting officers maintain open communications channels with suppliers and use supplier forums to allow suppliers to provide feedback on the suitability of contract types and other aspects of relief operations.

The negative moderation of response stage as spend increases means that there is a preference for fixed-price contracts involving large monetary value during the response stage when compared to other stages.  This appears to be positive news for the government, as it allows prioritizing speed over the fear of opportunism when dealing with large contracts.  However, this result does not imply that contracting officers can let down their guard against opportunistic suppliers.  While fixed-price contracts might help mitigate some risks for government agencies, it is still possible for opportunistic suppliers to take advantage of disaster situations. Therefore, government agencies should continue to maintain transparency and fairness of the procurement process before, during, and after the award. Moreover, drawbacks associated with fixed-price contracts, such as limited flexibility, potentially poor quality, and the possibility of supplier opportunism, should be taken into consideration.  For example, in 2009, FEMA reached a $4 million settlement with a supplier who failed to deliver on a contract to build and operate a base camp for first responders during Hurricane Katrina.  It is also important to consider efforts during the preparation stage to maintain the supply base for categories involving large acquisitions to preserve competition among prospective suppliers.

Source: Mena, C., Nair, A. U.S. Federal Government Contracting for Disaster Management. Working paper.