CPM in prudence reviews

a perspective

Critical Path Method (CPM) systems are typically thought of in terms of prospective management of a project's cost and schedule. These same systems, however, are also being used to settle disputes concerning the outcome of projects through retrospective application. One of the most visible examples of this has been the number of prudence investigations in the 1980s by state public utility commissions. These investigations were an effort to deal with the unprecedented rate increases that utilities were seeking to recover for their nuclear construction programs. The size of these capital programs made apportioning costs among rate payers and shareholders extremely delicate. Many long-standing utility/commission relationships were refashioned in the process. With huge stakes involved, the prudence standard provided the commissions an accepted legal precedent and an equitable framework for determining the reasonableness of the utility's actions. Under this standard, management's decisions are measured in terms of a "reasonable person or manager test."
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