Sunk Cost

A sunk cost is money, time, or effort already spent that cannot be recovered or changed by any option still open. The UK Treasury’s Green Book excludes it from appraisal of what to do next. The comparison concerns the future costs and benefits that differ between choices, including the opportunity cost of resources already owned. SAFe’s public WSJF definition likewise describes ignoring sunk costs in prioritization.

A past payment does not decide whether to use the product

Suppose a nonrefundable, nontransferable license has already cost 100. Over the remaining decision period, using it would cost another 10 and produce a benefit valued at 30; leaving it unused would cost and produce nothing further. Assume these are the only differences and required conditions are met. Using it has an incremental net benefit of 30 − 10 = 20. Its additional cost is higher than non-use, but so is its benefit. The past 100 belongs in the historical accounts, not in the comparison of the remaining options.

Conversely, the payment is not a reason to continue if future costs exceed the benefits relative to an acceptable alternative. A cancellation fee, refund, or resale right that changes with the decision is relevant; do not label it sunk merely because the contract already exists. Obligations and mandatory service conditions can also constrain which alternatives are available.

What remains may have an alternative use

An owned server may be sold or assigned to another service. Using it here can forgo the best feasible alternative, net of the costs of pursuing that alternative. Already employed staff may displace other valuable work even when this assignment adds no payroll payment. Record resource opportunity cost separately from the cash budget and avoid counting the same resource twice. If no valuable feasible alternative is displaced, do not invent a positive opportunity cost just because the resource exists.

A fictional council must compare the future costs, outcomes, and constraints of retaining or replacing a service. The amount spent developing the old system cannot justify keeping it by itself. Five Verbs and One Question develops that comparison. Ninety-Four Projects, Every One Approved applies the same distinction when reviewing continuing programs.

References:

• HM Treasury, The Green Book (2026) — Sunk costs (OGL v3.0).
• Scaled Agile Framework, Weighted Shortest Job First — public definition.