Then the inventive is to add $50million of unnecessary budget one year, and cut $50million the next year to get the EOY bonus.
The same dynamic can occur with hedge funds, where the incentive is to increase variance (because high volatility pays the fund managers a lot more on average) or increase risk (example swing for the fences if underwater).
That sounds like a great way to get "deciders" to override good uses of money from the people below who actually have an understanding of when it needs to be spent.
It is a trust problem because organizations generally aren't worried about losing money they don't spend that year or the next. They're worried about never getting it back. When you use a ratchet approach to budgets it doesn't allow organizations to respond to responsibilities which may be cyclical in nature. This leads to permanent worst case thinking which leads to hording.
I wouldn't go for it. Suppose my budget is Y and I could reduce it to Y/2 and get X%*Y/2 as a bonus. But in subsequent years I would only get a budget of Y/2. With half the budget I can only employ half the staff and be half as important. I don't think it works out.
edit: on the other hand: If I'm going to quit the job next year and I don't like my successor I'm definitely going to cut corners and budget.
Since the original context here is an army procurement, I don't think that hypothesis works out. Civil servants are not going to get that type of monetary incentive structure.
Then we're no longer making evidence-based policy. That's just hypothesis-based policy. And unfortunately, humans are reallllly good at rationalizing whatever hypothesis suits their biases.
