There is an old British expression – “don’t throw good money after bad” which captures a similar sentiment, and we see examples of it all the time. “I’ve spent a lot of money on my old car. I can’t just scrap it now – I will pay for that new gearbox”. (We should ignore the past expenditure and look simply at the business case for the new gearbox). Or in terms of time – “I’ve sat in this traffic jam for an hour trying to get to the shopping
In business terms, it means continuing with a project because of the time, effort and, money already invested rather than looking at the costs and benefits from where we are today. It often applies in software and technology implementation projects – including those of a procurement nature. “We’ve invested a lot in this spend analysis system we’ve been building for the last four years – we can’t just stop it now”! Well, yes, you probably should. Ignore the four years and look simply at the options, the costs, and benefits, from today into the future.
In the public sector, it is probably even more of an issue than in private business, because other issues do come into play, in particular, prestige and political implications. In particular, we still see it as an admission of failure if a politician cancels a project – particularly if it is “their” project. So if they have invested their reputation in it, that becomes an even more difficult project to stop.
I’ve had personal experience of such
Let’s be honest – there is not always the opportunity for procurement professionals in government to do much to affect such high-profile cases. But sometimes in terms of more day-to-day issues, we can have an influence. So we can and should be aware of the sunk-cost fallacy, and work to avoid getting caught out by it ourselves. And we can at least gently point it out to colleagues and stakeholders if we think they are falling into the trap themselves.
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