IT Consulting Ethics – Part 3 – Benefit-Cost Analysis and Government Considerations

If the principal objective of a not-for-profit organization is to maximize some aspect of its non-pecuniary mission, the marginal comparison criteria applied in the for-profit sector to revenues and costs should be equally applicable in the not-for-profit sector to the quantifiable    characteristics of the mission being pursued. “Benefit-cost” analysis may provide decision criteria for the organization manager in the government and not-for-profit sectors. The sum of all benefits (non-pecuniary as well as revenue) resulting from mission pursuit constitutes the numerator, B, of the benefit-cost ratio. Its denominator, C, consists of the sum of all costs (non-pecuniary as well as pecuniary) incurred in pursuing the mission. If the value of the ratio is a number greater than unity (i.e., B/C > 1), then the activity under analysis is justifiable; any benefit-cost ratio less than unity (i.e., B/C < 1) suggests that the activity is unwarranted.

Simple benefit-cost analysis has been extended to the concept of marginal benefit-cost analysis. This version is applicable to situations where the question is whether to do more or less of the activity which is already in progress. The numerator of the marginal benefit-cost ratio includes only the additional benefits which are expected to flow from some increment of the activity; the denominator sums only the increased costs incurred by the activity increment. The same decision criterion holds for the marginal as for the simple benefit-cost ratio: a value greater than unity warrants the activity increment while a value less than unity indicates that the activity increment should not be undertaken. While marginal benefit-cost analysis has been used most often as a decision criterion in the not-for-profit sector, it is apparent that the for-profit criteria of marginal revenue and marginal costs are special cases of marginal benefits and costs where the benefits and costs are pecuniary values (or equivalents).

Both simple and marginal benefit-cost analyses are subject to bias and fraught with the potential for abuse. The bias follows from the requirement to include all benefits (psychic and other non-pecuniary benefits as well as any revenues resulting from the activity) and all relevant costs (non-pecuniary psychic and opportunity costs as well as explicit money costs). The problem is that a decision maker who is has a predisposition favoring a proposed activity tends to exhaustively identify all possible benefits and also tends to overestimate their money value equivalents. A decision maker with such a predisposition also tends to be more casual about identifying the relevant costs, and may also be inclined to underestimate their money value equivalents. By the same token, a decision maker with a predisposition against an activity tends to do the opposite, i.e., to casually overlook some benefits and underestimate the values of those identified, while exhaustively finding all relevant costs and carefully estimating their full money-value equivalents. Because of the subjectivity involved, it is entirely possible for two decision makers, confronted by precisely the same prospects and with the same information, to estimate widely divergent benefit-cost ratios and reach opposite decisions about whether to proceed with the activity.

Because capitalism (or market economy) is the form of economic organization to which the world seems to be drawn, I shall presume its general characteristics in subsequent discussion of the role of government. Given this presumption, there are six principal points of contact between firms and the government.

(1) Along with other entities in the economy, the government is a demander of goods and services from private-sector business firms; i.e., firms function as suppliers to the government. Since the government is likely to be the single largest economic entity in any economy, the prospect of supplying the government should provide market opportunities for a great many firms in the economy. However, firms seeking to function as suppliers to government should be aware of becoming too highly dependent upon government orders.

(2) Firms pay taxes to the government. The taxes may be related to the firms’ profits, their sales, their inventories or other assets, or the wages which they pay to their employees. Tax-related record keeping and reporting often become burdensome to business firms, and tax liabilities and rates are subject to change at the dictatorial or parliamentary whims of the state.

(3) Depending upon the government’s particular political, social, and military programs, various firms in the economy may become objects of support by the government. Such support may take the forms of subsidies, approval of licenses, preferential contracts, or other encouragements. The government may attempt to structure such activity as a coherent industrial policy for the promotion of international competitiveness of domestic companies.

(4) In pursuit of its agenda, government’s interests in firms may extend beyond support to efforts to control the activities of firms. Objects of governmental controls may include directions of research and development efforts, determination of product mixes and item specifications, selection of capital investment alternatives, eligibilities for import or export licenses, and employment practices. These activities may become elements in a more comprehensive industrial policy.

(5) The private sector may become an object of regulation by the government in the interest of employees, consumers, or other interests in the economy. Such regulation almost always imposes additional costs upon business firms, and consequently squeezes profits or results in higher market prices.

(6) And finally, the private sector may become the object of efforts either to promote and encourage competition, or to stifle or prevent competition. In the former case, “antitrust” or “antimonopolies” laws may be enacted and enforced; in the latter case the government may become the prime mover in the effort to “rationalize” or cartellize industry (also a possible component of industrial policy).

In their extreme manifestations, points (1) and (4) above may devolve to the characteristics of fascism. I may also note that the government can effect a ready transformation to the characteristics of socialism simply by nationalizing private-sector firms so that they become government-owned and directed enterprises. Our purpose in making these observations and otherwise identifying the various points of contact between firms and the government is to note that the operation of government in a capitalistic economy may pose threats to private sector firms as well as provide opportunities which they may attempt to exploit.

The most fundamental role for government to play in the market economy is the maintenance of an environment which is hospitable to the functioning of market economy and the exercise of entrepreneurship. At very minimum this means establishing the rules for holding, transferring, and arbitrating disputes over the possession of private property, determining weights and measures, providing a stable money supply, insuring the sanctity of contracts, and otherwise maintaining law and order. John Stuart Mill during the nineteenth century referred to these minimal roles for government as the “night-watchman” functions.

Beyond the night-watchman functions are four other significant rationales for governmental involvement in the market economy: to maintain competition, to reallocate resources, to redistribute incomes, and to stabilize the economy. Each of these rationales is founded upon some fault, shortcoming, or failure in the functioning of the market.

From this perspective it may be noted that any problem in the functioning of a market may invite some response from government to address the perceived problem. And if market mechanisms exhibit traumatic failure or become fundamentally distrusted by the political leadership of the society, these constitute the rationales for shifting to fascism by conferring product-mix decision making upon a central authority, or to socialism by nationalizing privately-owned productive resources and imposing central planning and direction. By the same token, failure of authoritarian socialism constitutes the rationale for shifting from authoritarian control to some form of market economy. It appears that this latter phenomenon is being widely experienced in the Eastern Europe even as some economies of the West experiment with more statist orientations.

Viable competition among business firms in each market is the sine qua non of market capitalism. It is competition which ensures that firms efficiently produce only those goods and services demanded by the consumers of the society. But there is an inherent divergence of interest between the firms in an industry and their customers. Although customers surely benefit from adequate competition (lower prices, higher quality merchandise, greater product variety), firms might achieve greater profits in cooperation with each other or as sole monopolists of their respective markets.

Governments of democratic societies then find rationale to undertake the promotion and preservation of competitive conditions in their economies. This is usually done by enacting legislation which declares the existence of monopoly to be unlawful (in the U.S. this is accomplished by Section 1 of the Sherman Antitrust Act) and the perpetrator of monopoly to be guilty of an unlawful act (Sherman, Section 2), or which enumerates specific acts or activities which diminish competition and which are thus unlawful (the Clayton, Robinson-Patman, and Wheeler-Lea acts). But the enactment of legislation alone is not enough. The government must further establish an enforcement authority (in the U.S., the Federal Trade Commission and the Antitrust Division of the Department of Justice) and resolve to make effective the enforcement of the relevant legislation. This resolve may differ significantly according to the political party in office and the particular agenda which it is attempting to implement.

The managerial implications of the determined enforcement of laws which are intended to preserve and maintain competition are that managers of business firms must make themselves knowledgeable of the pertinent laws, and they must make calculated judgments as to whether to risk violating such laws in any of their sourcing, producing, or marketing activities. It may also be worthwhile to note that in a society governed by law (as is the U.S.), innocence is presumed until guilt has been established. The significance of this is that no act undertaken by the management of a business firm is necessarily in violation of the law until it has been tested in the courts.

In a legal environment of presumed innocence, even though a law may declare a certain act unlawful and other firms engaging in the act have been indicted and successfully prosecuted, the act may be repeated by yet another firm. In order for the firm to be penalized under the law, the act must be detected, indicted by an appropriate legal authority, and successfully prosecuted in court. Because failure may occur at any of these stages, the management of a firm may behave rationally to assess the probability of detection, the probability of indictment if detected, the probability of successful prosecution if indicted, and the magnitude of the penalty if found guilty under the law. Then if the “expected value” of the penalty (i.e., the conditional probabilities multiplied by the likely penalty) is judged small enough, the management may deliberately assume the risks of detection and prosecution by engaging in the act. Indeed, it is not uncommon for business firms to maintain legal staffs or contingency funds to cover legal fees and any penalties which are actually assessed.

Two cautionary notes are appropriate at this point. First, even though the behavior described in the paragraph above may be rational, the reader should not take this acknowledgement as an advocacy of the assumption of risk in knowingly breaking the law. And second, although the liability of corporate shareholders is limited to their investment in the firm, corporate managers should beware of the possibility of both criminal prosecution and civil liability suits when their firms have been found guilty of violation of the law.

Suffice it to say at this point that the rationale is based upon the conclusion that the particular allocation of resources resulting from the normal functioning of the market economy is not satisfactory and needs adjustment. This conclusion may emerge if there are so-called “public goods” desired by society but not producible in response to market incentives, or if there are positive or negative externalities (or “spillovers”) resulting from the market production of goods or services. The managerial implication of this rationale is that declining profits or losses will likely emerge in industries from which resources are diverted, but profitable opportunities should be found in industries toward which resources are reallocated.

The income redistribution rationale follows from a social and political judgment that incomes are being inequitably distributed across the population of the society by the normal functioning of the market economy. There is little doubt that any market economy distributes incomes unequally because of the fundamental reward mechanism of capitalism: to each according to his or her contribution to the process of production of demanded goods and services. Since members of any population possess differential abilities and experience varying intensities of drive and motivation, there will occur different contributions to the production process, and as a consequence an unequal distribution of income.

Social action becomes warranted only when it is judged that the inequality of distribution is also inequitable. The governmental vehicles for redistribution include progressivity of income and profits taxation, the taxation of capital appreciation, and any of a wide range of possible transfer payments. One managerial implication of governmental redistribution is that business net incomes, assets, and wages paid are likely to be objects of taxation to raise revenue for redistribution to lower-income members of society. Another is that businesses catering to transfer recipient clienteles may benefit from the redistributions. However, there may be little hope for managements of business firms to exert significant control or influence upon the political process which determines how incomes are to be redistributed.

The rationale for bringing the offices of government to bear upon the stability of the economy is based upon the view that market economies are naturally unstable, that the degree of instability is intolerable, and that some force must be applied to counteract the natural instability of the market economy. Of course, the only entity in the economy which can possibly bring enough force to bear upon the problem of instability is the government.


Department Of Defense SharePoint Architecture Guide (DSAG) Part 12 Understanding NetOps Agility

There are business rules and principles that have to be followed. They are in place to make sure help with reducing the complexity of the set up. They also work to help reduce the overall cost. Yet you have a system that is very reliable and that can accommodate future changes that need to be implemented into the GIG technical direction.

NetOps Agility NetOps offers a vision for changing the existing capabilities into a multiplier. It offers a way for the Department of Defense to be able to use the power of the GIG. The mission is to offer a unified GIG that is:

Oriented for the mission The information has to be processed in a way that will always support the mission.
User friendly The users need to be able to access the necessary information from anywhere. The GIG should offer this quickly even if the needs of the user happen to be unanticipated.

Global access The mission needs to offer plenty of agility regardless of the user being local or globally positioned.

The GIG NetOps has to be delivered to the organization in a way that varies based on function. It also depends on the type of information to be accessed. The independent management systems of them rarely share information about the status of the managing domain.

The Joint NetOps Concept of Operations allows the Department of Defense to improve the way in which the GIG operated as well as how to secure it. The NetOps is very effective when it comes to the role for net centric operations to be completed. The major changes that have to be addressed include:

Awareness of the information available to commanders.

GIG command and control that can offer quick decision making.

Policies for operating the NetOps have to be clear.

The electromagnetic spectrum of the NetOps needs to be addressed.

The metrics should measure the health and mission readiness of the GIG.

The development of the capabilities needs to have a central governing location
Coordinating the independent NetOps and field activities.

The challenges offer improvement for the operations of the defenses within the GIG. This is completely supported with the ongoing efforts of the mission. There is also a multi partner environment in place.

The NetOps has an environment that allows for the organizational and geographic boundaries to be put in place. For this to work though the Department has to embrace a new method of thinking. They also have to accept new processes which means some new polices. To help with this process the NetOps agility has several goals:

Enable trusted information for the enterprise the premise is for NetOps to be seamless and for the information to flow from one end to the other of the enterprise. This is all in response to what the needs of the user happens to be with the GIG resources in place and allocated parallel with the mission requirements.

To achieve this goal there are two things that have to be considered. First, the NetOps data must be visible and it needs to be accessible for all of the authorized users. Second, the NetOps needs to be understood and then shared for that information to cover all of the missions of the Department of Defense.

Command & Control of the GIG is united The Department of Defense will have a strong dependence on the GIG. This means that it has be able to deliver a variety of commands and controls to all levels of those responsible for making decisions. It is crucial that the Department of Defense is able to take the NetOps and increase the speed of it. At the same time they can take the policy based structure of the GIG domains to coordinate them.

Evolution of the NetOps Time phasing will have to define and develop the net centric portfolio. The policies will help with the overall structure and implementing of plans for a very effective transformation in the beginning as well as additional needs emerge.

There are several rules and principles that need to be established for the foundation of the NetOps to work for the department. These guidelines are very important so it is vital that all of them are implemented successfully for the Department of Defense IT investment to be one that will offer the best benefits.

The Department of Defense needs to operate and defense the GIG as an end to end information resource. They need to create a structure that offers centralized directions so that unanticipated needs can be addressed. This includes but isn’t limited to the possibility of cyber attacks.

The function of the enterprise needs to be integrated across the many management domains. This will allow for the GIG NetOps functions to be operational at different levels. They include operations, tactics, and strategies. The program has to address training and leadership materials.

The application of the GIG program will require the services to offer automation in many areas. At the same time though it has to account for an adjustment to be made so that the resources are fully allocated based on such configurations.

The vision of shared NetOps is one that calls for shared awareness to be in place. All of the applications should be visible and accessible. This allows for the various authorized users to be able to understand all of it. The GIG resources need to have an infrastructure for computing and communication that will be centralized.

Both performance and security are key issues that have to be addressed. The information system has to make it possible for situational awareness and the management of performance to be possible. The NetOps is allows to make the health and readiness of the Department of Defense the opportunity for the services and applications to be supported by the missions of the department.

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Department Of Defense SharePoint Architecture Guide (DSAG) Part 11 Communication Readiness

Since the net centric vision needs to be dependable the network has to eliminate problems. It must be responsive to the various scenarios that can bring power to the edge. This information transporting is vital so a close relationship needs to develop between the infrastructure of the computing and the operations of the network. This is a priority for the support of the GIG services.

The transporting of data for all of the users from various secure domains can be challenging even with today’s technology. The seamless access that needs to be across the GIG is a goal and a priority. The data has to be available for any authorized user at all times and from all locations. The ability to deploy and expand the infrastructure is important.

Recovery of various systems that have been damaged or that have failed is important. The maintenance and availability of the elements is a requirement. The systems and technology that is used need to be seamless between them. The priority is on the communication for the infrastructure. The support ensures that the information can be transported and available to both fixed and mobile users.

This includes the physical networks, the protocols, transmission systems, facilities, and the management throughout the GIG framework. For this to happen though there needs to be a wireless line of site, SATCOM line of sight, and a fiber option traditional wire line. The priority should be on a core foundation being established that will transport all of the elements with such advanced technology. It must be able to successfully support the network for voice, data, and video with multiple levels of security in place.

For the concepts of the net centric environment to be transported, the environment requires a great deal of planning across the departments. Changes have to reflect the policies, procedures, and guidance that are in place. The planning has to take the capacity and equipment into consideration so that it is completely supported. The focus needs to include:

Modularization the design solutions should be IP based and modularized. They need to be able to identify patterns of use, location, and the mission that is being focused on. The configurations emerge so that they can be mixed and matched depending on the mission. Standardized materials have to be used in order to offer faster deployment for all users. This also cuts down on the amount of training necessary in the architecture.

Uniqueness is limited The technologies out there do offer plenty of great opportunities. They replace non standard equipment and their requirements for support. This will allow for the network to be operational with less maintenance or repairs. Therefore the cost of it is going to be reduced but you get more benefits.

The GIG communications infrastructure needs to be supportive of the IP traffic. The layered design if the IP for the transport needs to be connective at end points. Supporting the migration of the Cipher Text core is required so that the classified and unclassified traffic that is encrypted can be transported. The communications system has to provide for flexibility within the support network to all of the GIG node users. This includes the areas where they have more than one network domain.

The GIG communication system has to be designed and configured so that it is adaptable as well as reliable. This is accomplished with a network that is configured for management and has diverse paths including the cable routing. There are automatic routes offered too that can be applied. The spectrum management has to be flexible as well as dynamic.

Rapid deployment With the infrastructure equipment being configured you will be able to have the rapid deployment of the GIG abilities. This will be responsible to any mission requirements that are in place including tactical needs. The understanding of the requirements will be embedded in the resources so that the deployment is fast and enhanced from any site.

Evolution of technology There will be new types of technology that offer testing and that can increase the functions of the existing system. Once approved they can be implemented in the network. This technology has to be supportive of Internet Protocol Version 6 and of Simple Network Management Protocol Version 3.

The guide for the decisions made will be those that include anticipated opportunities for the tiered network. The security has to be considered with every step. This is why completely testing the equipment configuration both internally and with interconnections has to be done. There can be pilot programs that offer chances the deployments to be fully evaluated.

The elements of them will be embedded for the Department of Defense processing. This is a critical factor of the entire process that needs to be looked at. The ability of the department to realize that the transport of the information and the support goals of the net centric community have been realized is essential.

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