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ACCA Strategic Professional · Strategic Business Leader · Leading and managing projects

Calder Logistics has approved a warehouse robotics project. Early in initiation the project manager discovers that the original business case assumed a supplier price that has since risen 25%, making the net present value marginally negative. The sponsor wishes to proceed because significant effort has already been spent on the proposal. Which response best reflects sound project governance?

The revised business case should go back to the approval gate so the board decides on current evidence, ignoring sunk costs. Continuing on stale approval is poor governance, automatic cancellation ignores strategic factors the board may weigh, and concealing the price rise would be unethical.

  1. ATake the revised business case back to the approval gate and decide on the updated evidence, treating effort already spent as a sunk costCorrect
  2. BProceed, since the original approval remains valid until closure
  3. CCancel automatically because any negative NPV requires termination regardless of strategic factors
  4. DHide the price rise from the board until the first stage is complete to avoid delay

Explanation

Governance gates exist so decisions use current evidence. Past effort is a sunk cost and should not drive the decision. Automatic cancellation ignores non-financial strategic benefits that the board may weigh, and concealment is unethical and undermines governance.

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