How the Sunk Cost Fallacy Applies to Project Management Investments



There is no denying that decision making is not always easy; however, it becomes a lot harder when time or money has already been invested. The focus that is placed on prior investments during the decision-making process leads to an irrational thought process that taints the way a decision is made – this is known as the Sunk Cost Fallacy.

“From a logical perspective, investing money into an already failing endeavor is a mistake, but from a manager’s perspective, it may not seem so obvious.”


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.