In the summer of 1983, the Washington Public Power Supply System (WPPSS) defaulted on $2.5 billion in municipal bonds—the largest default ever to hit the tax-free municipal bond market. Although many factors may have been involved in the WPPSS project collapse and default, the least understood and perhaps most important was inadequate management. A 1981 Washington State Senate Committee investigation of project cost increases and schedule delays concluded that "mismanagement" was primarily to blame. Why and how poor management helped lead to the WPPSS default suggests important lessons for managers in the private as well as public sectors. Although WPPSS, like other public enterprises, had the freedom and power to carry out business-like government activities, it was never managed in a business-like fashion. A recognition of this potential for failure is important for the development of good public enterprise managers, as well as for adequate state and local government public enterprise oversight mechanisms.
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