How The Sunk Cost Fallacy Is Affecting Your Project Decisions

Posted by Ett DiGiovanni on Oct 2, 2017 9:30:00 AM

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The Sunk Cost Fallacy is a decision that involves continuing to invest additional resources like people, time or money into a situation because of a desire to not waste the already used, unrecoverable resources. This is a costly mistake we all make with various types of decisions.

It is important for companies to recognize the natural tendency we all have to continue on the path we have already started on instead of changing directions. Even if we know the path is longer or more treacherous – we often feel an inability to abandon the path because there is a sense that we have already traveled too far to give up now. 

This can happen when making a decision to further invest in a struggling or failing project. It can be an indredibly hard choice to cut your losses and move on, but sometimes that really is the best thing to do. 

The Sunk Cost Fallacy can also come into play when looking at project controls software. There are companies that have invested millions of dollars in developing their own in-house software solutions, or in adding functionality to an existing commercial software product, or spending months or even years configuring a commercial software product to meet what they consider unique requirements. In these situations, companies often lose sight of logic and continue to invest in substandard software solutions because they have already placed a lot of resources into it. Just as this was a mistake when making project investment decisions, it is also a mistake in relation to investing in project management software.

So, how can you know if you've fallen into the trap of the Sunk Cost Fallacy?

Simply ask yourself: could I make more money or save time if I pulled out of my current endeavor and invest in a new one? If the answer is yes, it's time to switch directions.

I encourage you to look into your project management software investments. Are you falling victim to the sunk cost fallacy? Maybe it is time to look at your options and discover what is best for your organization. If you are continuing to spend thousands of dollars on an in-house system or a customized solution, then maybe it is time to look at the ARES PRISM project lifecycle management solution which is available off-the-shelf and can be implemented quickly so that you see a swift return on investment. It may feel like a risk to abandon the sunk cost, but believe me when I tell you that you will not regret it.

Estimating Software White Paper


This white paper explores the Sunk Cost Fallacy and how it not only applies to projects but also to project management investments. Do we ignore a better situation simply because we fear wasting the time or money we have already spent? Do we sink more cost into a failing project because otherwise, it would mean admitting failure? Some companies have made significant investments into their project controls processes and tools only to realize that they are at a crossroads. While it may be tempting to include sunk costs in the decision-making process, it is important to recognize the associated repercussions.

Topics: White Paper Downloads, Project Controls