Seems to me that the actual "lower the budget if nobody uses it" part works just fine — the problem is that the people affected by it are aware of it and form a feedback loop with it (i.e. "the measure becomes the target.")

If you could hide the budgeting effects from anyone with the ability to 1. start projects or 2. add scope to projects, then it seems like it'd work out just fine.

(Of course, actually doing that would require splitting "planning" roles into separate, almost-adversarial "defining projects + increasing scopes for projects" and "feasibility-analyzing + cost-optimizing + decreasing scope for projects" roles. But that seems like exactly the sort of thing the DHS would be fond of. War-games for the project managers; and separate levers for both kinds of sitting presidents to pull on to satisfy their bases, where building up one capability doesn't tear down the other.)

This is a trust problem. Trust problems don't usually get better when you start hiding more shit. Isn't the real solution to make organizations feel confident that they can let unused funding go because they can get it back in the future if they need it?

If you pre-approve but not fund certain desirable projects, and allow unused funding or surpluses gained through efficiency to spent on those, you get the double-win of maintaining trust and making efficiency organisationally desirable.

I agree that trust is part of it, but I don't think it's the whole story. A lot of this is also due to cognitive biases. For example, optimism biases make public works project managers continually underestimate cost and schedule. Then sunk-cost biases make funding managers scramble to find additional money to make up the difference. Often, those funds come in the form of "unspent" funds from other projects.

That's the generous interpretation. There's also the case when project managers deliberately low-ball their project estimates to take advantage of the phenomenon. I'd put that in the trust problem category.

It seems more like an incentive problem. I'd be interested to see what happens if you give the deciders X% of any unused budget as an EOY bonus.

Then the inventive is to add $50million of unnecessary budget one year, and cut $50million the next year to get the EOY bonus.

The same dynamic can occur with hedge funds, where the incentive is to increase variance (because high volatility pays the fund managers a lot more on average) or increase risk (example swing for the fences if underwater).

That sounds like a great way to get "deciders" to override good uses of money from the people below who actually have an understanding of when it needs to be spent.

It is a trust problem because organizations generally aren't worried about losing money they don't spend that year or the next. They're worried about never getting it back. When you use a ratchet approach to budgets it doesn't allow organizations to respond to responsibilities which may be cyclical in nature. This leads to permanent worst case thinking which leads to hording.

I wouldn't go for it. Suppose my budget is Y and I could reduce it to Y/2 and get X%*Y/2 as a bonus. But in subsequent years I would only get a budget of Y/2. With half the budget I can only employ half the staff and be half as important. I don't think it works out.

edit: on the other hand: If I'm going to quit the job next year and I don't like my successor I'm definitely going to cut corners and budget.

Since the original context here is an army procurement, I don't think that hypothesis works out. Civil servants are not going to get that type of monetary incentive structure.

> It'd be interested to see what happens if you give the deciders X% of any unused budget as an EOY bonus.

We already know the answer to this, on average at least the system will be gamed to put money in their pockets, to overall detriment of service.

How do we already know this? Is there actual studies that show this impact?

I don't think we need a study to show the obvious outcome when you set up incentives in certain ways.

Then we're no longer making evidence-based policy. That's just hypothesis-based policy. And unfortunately, humans are reallllly good at rationalizing whatever hypothesis suits their biases.

I’ll need evidence for that claim.

In academia, behavioral psychology is rife with examples if you want to dig deeper. In culture, so is religion.

I think we have a real world test case with the Russian military

The lower the budget if nobody uses it is a perverse incentive. Costs at units are variable, but the budget model does not reflect that which incurs silly expenditure so that you can ensure that next year when New variables occur (radios, weapons, etc are a year older, new climate changes, solar flares, etc) will not hinder the progress of unit affairs.

Zero based budgeting is the answer. But nobody wants to do it.

That problem isn’t unique to government. most sufficiently large public companies do the same thing.

Sharepoint is similarly entrenched at DOE when I worked with them in 2009. Any project that gets a bid contract can't say specifically that it must use Sharepoint, but the requirements will be written in such a way that Sharepoint is literally the only system that fits all of them.

While SharePoint is not the best choice for many applications, it has enough features to make it work. Since there are plenty of SharePoint experts already in the organization, it could be cheaper to just leverage them to build some SharePoint site that just barely works well enough for whatever application. It would cost a lot more to bring in some consultant that knows how to setup the proper software to do whatever new thing the project needs to do along with whatever new service contracts that need to be signed and paid for to cover the software for years. Do you jump into the new software that might be better or do you just use the same old SharePoint that you've already invested heavily in? The efficiencies of both solutions are probably intangible and it would be difficult to price either of them. Eventually someone out there will be the evangelist to convince program management that the new software really is the best choice (Jira, Confluence, Teams, Salesforce, Trello, etc).

Of course, Teams uses SharePoint for file storage, so it’s basically the same thing for Microsoft, build on the things you have already.

When I lived in the USSR we had the this system where money must be spent no matter what or the next year budget will be cut. I thought it is insane and borderline crime and thing like these are impossible in free Western world. Boy was I in for a surprise when I emigrated.

I suspect it happens wherever you have a centralized economy, the government sector, internal corporate divisions, and if your corporations are run by the government, as found in the ussr.

A market economy does not really help, that just means you don't have a budget to cut in the first place.

> … no one seems interested in fixing.

It’s more the opposite, that many people have a strong financial interest in maintaining the system.

That's not very different from big corporations also.