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"Jim," I hesitantly start, "there is something else I've noticed, going through the reports." I rifle through the pile trying to find Fred's pages. "Where is it?"

As Jim is about to lose his patience, I find it and hand it over. "Read the financial status."

He locates it quickly. "Okay. ‘Due to budget overruns (sixteen point two percent) and delays in production, the original estimate of three years payback is now modified to five.' Typical. What's your point?"

"The budget overrun, being only sixteen point two percent, cannot possibly change the original estimate for the payback period by more than half a year."

"So?"

"But they had to increase the estimated payback period from three years to five. By the way, the person writing it is a project auditor and he claims that his friends are already pushing to change the official estimate to seven years."

Jim still doesn't get it. It's not like him. Patiently, I continue, "If the budget overrun can't possibly cause such a change in the payback period, it must be caused mainly by the delays in completing the project."

"So it seems." He starts to pace again. "So it seems," he repeats. "Let me see. What you claim is that the major, negative financial ramification does not stem from spending too much money."

"Financially, the overruns are much less important than the overdue," I stress.

"In this particular case you are right."

"I found it in six more cases."

"What about all the others?" Jim isn't overly enthused.

"I don't know," I admit. "As you said, for many cases we don't have the numbers for the overruns and overdues, not to mention the payback period."

"Pity," he says, and puts back Fred's report. "It could be an interesting addition, but never mind, we have enough."

"Jim, forget the article for a minute. I think that it is an important point. Important enough to highlight it to the students."

"Peculiar maybe. But important? In what way?"

"In the same report," I don't give up, "it's indicated that they chose the cheap vendors over the more reliable ones. How much do you think they saved?"

"How do I know? Maybe five percent. Can't be much more."

"You can also see," I continue, "that delays in getting the machines from those vendors was the prime reason for the delay in completing the project."

"I see what you mean." He picks up Fred's report again and looks at it intently. Finally, he says, "So they saved about five percent on the machines, which is, probably, less than three percent of the total investment in the project." Very slowly he continues, "And this savings caused them to turn a three-year payback project into..." He stops.

"Saving a miserable three percent caused them to turn a very good project into a loser," I summarize.

"Rick, calm down. We have made a lot of assumptions. It's not so simple."

I don't know what he is talking about. The effect is clear. Companies are so immersed in the mentality of saving money that they forget that the whole intention of a project is not to save money but to make money.

Out loud I say, "It's a simple fact that they try to cut the budget by a few percent and cause the payback period to double."

"Yes, I give you that, but it's not so simple. We have to assume a distribution of investment throughout the lifetime of the project. Then we have to assume another distribution of net income from the result of the project, the profit of the Malaysian plant in this case. We should also factor in interest and inflation. Depreciation of the machines and the lifetime of the products that the plant in Malaysia produces. The mathematical modeling will be quite involved." He raises his hand to stop me from replying.

Then he sits down and says, "Tell you what. It's a good idea. Too good to let it pass without checking. Find out what is already published on that subject and if we can find a crack I'll persuade Johnny to do the mathematical work. You know