Zero Base Budgeting ZBB

ZBB came into favor in the 1970s as a reaction to the automatic budget increases^ given year after year to government agencies. As a form of program budgeting, the J' goal of ZBB was to link the level of funding directly to the achievements associated ' with specific programs. As opposed to making incremental changes in programs and their accompanying budget allocations, the philosophy of ZBB is that the fundamental desirability of every program should be reviewed and justified each year before the program receives any funding at all. The objective is to cut waste by culling out projects that have outlived their utility and are continuing simply because of the inertia of policymakers.

The ZBB procedure is to describe each project/program, evaluate each one, and rank them in terms of cost-benefit or some other appropriate measure. Funds can then be allocated in accordance with this ranking.

As PPBS is associated with Robert McNamara, ZBB is associated with President Jimmy Carter. He employed ZBB as governor of Georgia and promised (threatened) to do so as president. Like PPBS, ZBB has had no great success. Whereas PPBS . volved difficult implementation problems, particularly in the area of measuring costs and benefits (see [30], among many other critiques), ZBB raises a different problem. The primary effect of ZBB is to challenge the existence of every budgetary unit every budget period. Any project that cannot justify continued funding is sentenced to administrative death. The threat of ZBB is so great that organizations subjected to this budget process tend to devote more and more of their energies to defending their existence.

ZBB has a great deal of opposition and little support from the people who must supply the data for the analyses. Few governments have sufficient political clout to adopt and operate a true ZBB system, but some executives employ the logic of ZBB to challenge the continuation of projects they see as inefficient or ineffective. We feel this use of ZBB has considerable merit. For most cases, we feel that use of ZBB is rarely a cost-effective means of project budget control, but the concept is useful for helping to make decisions about whether or not to terminate projects. In Chapter 13 we illustrate an approach to the termination decision based on ZBB. Please note, however, that ZBB is not applied to projects that are clearly successful or are obvious failures, but to projects that cannot be identified as belonging to either group.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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