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Project Management: A Managerial Approach, 9th
edition Instructor’s Resource Guide
Copyright ©2015 John Wiley & Sons, Inc. Chapter 7 - 1
Chapter 7
Budgeting: Estimating Costs and Risks
CHAPTER OVERVIEW
Overview – This chapter describes the process of estimating and then assembling the
project budget. The budget is an important part of the planning process as it describes
the plan for allocating project resources. Once the budget is set, it is used as part of the
project control mechanism during execution.
7.1 Estimating Project Budgets – The budgeting process involves the forecasting of the
level and type of resources needed to complete the project. Many organizations will
have well worn (and reasonably accurate) methods for creating the initial project
estimate based on past experience. It is important to remember, however, that
because every project is unique the estimating process always has some level of
uncertainty associate with it. The PM must understand the organization’s accounting
practices to the extent that they are imposed on the project budgeting and control
process.
• Top-Down Budgeting – This is the technique of developing a budget by
comparing this project to past ones using the judgment and experience of top
and middle management. Typically an overall budget is assigned to the project to
be distributed to the individual tasks. If the projects being used for comparison
are similar enough, this process can result in a fairly accurate total number. The
process of distributing the total can create a lot of conflict among the
management team.
• Bottom-Up Budgeting – This is the process of developing budgets by asking the
people who will perform the individual tasks for their estimates. These individual
numbers are then rolled up to a summary for presentation to management. It’s
important in this process to follow a good WBS to ensure that no tasks are
overlooked. Unfortunately, this process can lead to game playing when
individuals pad their estimates in anticipation of management cuts.
• Work Element Costing – Using the bottom-up estimates, costs can be applied t o
each WBS element. These are typically calculated by taking the labor hour
estimate and “dollarizing” it using appropriate labor and overhead rates. To be
accurate, the estimator needs to understand the relationship between the labor
estimate and the actual number of hours that will be charged to the project
because of personal time and inefficiencies. A similar process must be used if
machine time or other resources are charged to the project.
• An Iterative Budgeting Process – Negotiation-in-Action – Typically the budgeting
process requires some negotiation between the subordinate, who develops the
WBS plans for the tasks for which he is responsible, and the supervisor who
reviews these plans. This is a time-consuming process. At the same time the PM

is negotiating with the several subordinates responsible for the pieces of the
PM’s WBS. It is worth emphasizing that ethics is just as important in negotiations
within an organization as in negotiations between an organization and an outside
party.
• Comments on the Budget Request Process – The bottom-up process differs from
the departmental budgeting process many organizations use. The primary
difference is that the departmental process typically comes with guidelines (either
formal or informal) on how much budget change is considerably acceptable.
• Cost Category Budgeting vs. Project/Activity Budgeting – Organizations may
budget and collect cost by functional activity. This makes it very difficult to
monitor project costs when they are distributed among a variety of different
organizational units. Project budgeting on the other hand collects project cost
using the WBS. This allows the PM to monitor cost in a manner that supports
overall project objectives.
7.2 Improving the Process of Cost Estimation – Estimates by nature are always wrong.
It’s important to build contingencies into the process or to account for uncertainty in
some other way. One way to do this is to use the PERT process of developing likely,
optimistic, and pessimistic estimates. In addition, the PM must understand whether
overhead cost is part of the estimate or not.
• Learning Curves – Studies and common sense have shown that as people
repeat a task they get better at it. This idea is formalized in the concept of the
learning curve, which states that each time the output doubles the worker hours
per unit decrease to a fixed percentage of their previous value. This effect is
important because the estimator must determine the impact learning had on past
projects (and their rates) and predict its impact on the one being estimated.
• A Special Case of Learning – Technological Shock – Projects that involve new
technologies or processes are very difficult to estimate because past
performance is not a useful guide. This is true not only because the rates are not
applicable, but because there is typically a lengthy startup process before steady
state performance is achieved.
• Other Factors – A number of other factors influence the project budget:
i) Changes in resource costs due to factors like inflation
ii) Waste and spoilage
iii) The fact that people, as resources are not freely interchangeable with each
other. The project may require five people, but if they are not the right people,
the number available is irrelevant.
iv) Projects cannot be put back on schedule by adding an infinite number of
resources. For intellectual projects like software development, the addition of
more people may actually slow the project down. Even for more mundane
tasks like painting a building there is a limit as to how many people can be
added to the project with benefit.
• On Making Better Estimates – Data can be collected on the quality of project
estimates by using statistical techniques. The estimate is compared to the actual,

and statistics like the Mean Absolute Ratio (MAR) and the Tracking Signal can
be calculated. These are all used to detect bias or nonrandom error in the
estimate.
7.3 Risk Estimation – Project aspects such as duration of activities, amount of resources
to utilize, value estimation etc., are very uncertain in a typical project. It is important
to manage this ambiguity to allow the project manager to make better decisions
when the situation arises. This is done through risk estimation and analysis, a
technique that describes uncertainty in a way, that it becomes possible, although
with a few reasonable assumptions, to make project activity decisions in an insightful
manner.
• General Simulation Analysis – A very useful tool to evaluate projects in
conceptual stage is simulation combined with sensitivity analysis. A through
estimation of the various tasks is made and the uncertainty associated with each
task is included. Simulation runs then show the likelihood of realizing various
levels of costs and benefits. Investigation of the model may also expose the
major sources of uncertainty.
TEACHING TIPS
Estimating and budgeting are dry subjects. Students who actually have to perform this
process on real projects, however, will be very interested in practical guidance beyond
the scope of this chapter. Here are some tips based on my experience.
The estimating process has to be defined in writing in advance of preparing the estimate.
The definition needs to include:
• Key project parameters and assumptions.
• Rules for how to allocate cost among different categories to ensure everything is
covered and nothing is duplicated. This is necessary even if there is a WBS, as
different people will interpret it differently.
• A sound method for identifying each “official” version of the estimate. It will
change and it’s easy to get confused as to what the current issued version is
versus the current working version.
• An airtight method of documenting the data and assumptions that serves as a
backup for each element of the estimate. The sound logic used during
development will quickly be forgotten. A year later someone will ask about a
number and nobody will know.
The estimating process for the next project must be considered in the collection of actual
data from the current project. This is particularly true if any kind of rate-based estimate is
used. As silly as it sounds, people discover that during a project they did not collect the
data necessary to develop or update rates. This discovery is usually made during the
estimating process for the next project when it is too late.

An excellent source of very practical advice on the estimating process is the NASA Cost
Estimating Handbook, available on the web at: http://ceh.nasa.gov/
PROJECT MANAGEMENT IN PRACTICE
Pathfinder Mission to Mars—on a Shoestring
Question 1: How did a change in philosophy make such a drastic difference in
project cost?
In 1976, cost was not a constraint, performance was. In the subsequent project,
performance was subordinated to the project’s cost goals.
Question 2: Why was the mission scope so limited? Why even spend the money
to go to Mars with such limited objectives?
Due to economic considerations and political realities, the mission was expected to hold
costs down to a minimum level while still achieving a level of performance that would be
a public relations success with at least some science accomplished. This project serves
as an example of why projects sometimes are selected for nonfinancial reasons. A low-
cost project was viewed as having the potential to demonstrate to the political
stakeholders that NASA could launch cost-effective space missions.
Question 3: Describe their “de-scope,” “lien list,” and “cash reserve” approaches.
1) De-scope: Performance objectives were ranked and could be cut from the
bottom, if necessary, to meet the cost objectives set for the project.
2) Lien list: This was a list of potential changes to the project that were anticipated
or discovered along the way. By recognizing these as potentially costly changes,
and managing the list, cost growth could be controlled.
3) Cash reserve: Costs would be squeezed at the start of the project. The intention
was to release funds, only if they could not be squeezed out of the project.
Question 4: Recent design-to-cost interplanetary projects have also had some
spectacular failures. Is this the natural result of this new philosophy?
NASA has done considerable soul searching on this subject after the loss of the Mars
Climate Orbiter. The excellent white paper (available at
ftp://ftp.hq.nasa.gov/pub/pao/reports/1999/MCO_report.pdf) concluded that the drive to
reduce cost was definitely a contributing factor in the incident. The danger is (and was)
that scope vital to the success of the mission could be ignored in the name of cost
cutting. This is not the result of underhanded scheming, but a natural consequence of
overworked people believing that, what they can’t get to will probably come out okay just
the same.
Convention Security: Project Success through Budget Recovery
Question 1: How is a project for an event like a multi-day convention different
from a project like building a house?
Managing a convention is different from managing the construction of a house, since
there are fewer chances of changes in the architecture of a house than in the

requirements of a convention. Managing a convention usually requires ad-hoc changes
in the plans, since there is no primary decision maker and there had to be compromises
and disagreements. This is unlike building a house which is much simpler to manage in
comparison to a multi-day convention.
Question 2: Does 72 different risk factors seem like a lot to plan for? How
important was CSP’s contingency planning for this project?
Planning for 72 different risk factors is indeed a humungous task. It usually happens that
managing one risk factor changes the risk level of some other factor. Managing so many
factors to an acceptable level at the same time requires a lot of careful attention,
exercise, and experience. CSP’s contingency planning was very important in this case
since it was not the primary decision maker. The team knew in advance that they will
have to work with other agencies and they planned accordingly to take care of any
changes. If they wouldn’t have planned for this, the convention was surely at risk.
Question 3: How does not being in control of decisions and plans affect the
project manager?
It is very difficult for a manager to not be in control of decisions and plans, since that is
what the task of manager is. He is used to taking actions and decisions based on his
experience, but certain situations demand more control of oneself than that of the
situation. When there are multiple parties and stakeholders, one person is not
responsible for everything and the manager is aware of this. He carefully makes his
plans and modifies his activities to be able to meld his decisions with others, if the need
arrives. A project manager not only manages a project but also manages a team and
knows what decisions are to be taken in different circumstances.
Question 4: Does being off by 150% in the estimate for human resources required
for a project surprise you? What do you think happened? How do you think they
managed to accommodate this change without exceeding the budget?
It is definitely surprising to being off by 150% in the estimate. I believe that CSP under-
estimated the number of troopers that were required or was not aware of the level of
security required. However, they did think of multiple plans with alternate contingencies
to account for different types of changes in their plan of action. When the need arrived,
they were able to make these changes by careful use of project management tools and
practices to avoid any budget increases. Indeed, one of the major reasons for not
exceeding the project budget was the development of multiple plans with alternate
arrangements for different situations.
Managing Costs at Massachusetts’ Neighborhood Health Plan
Question 1: Wouldn’t higher eligibility requirements for subscribers cut NHP’s
health care costs? Why did this exacerbate NHP’s situation?
Reducing the patient load did not reduce the providers’ fixed cost for insurance and
facilities. Therefore, fewer patients had to absorb the same costs, but the revenues were
reduced. Profit therefore is dependent on changes in volume of demand. This made it
difficult for them as volume decreased.
Question 2: Explain the trade-off between hospital utilization and contract rates.

This scenario can be a complex one to evaluate financially. Visualize a scenario where a
patient’s stay generates sufficient revenue to cover the variable costs associated with
the stay. Once variable costs have been met, the remaining revenue can be used to
offset fixed costs. Once the level of utilization has covered the fixed costs, the hospital
begins to make a profit. However, suppose that the patient does not pay enough
revenue to cover the variable costs associated with the treatment received, any level of
hospital utilization will create a loss of profit.
Question 3: How did changing from a line item pay plan to an episode plan allow
comparisons and save costs?
The pay-per-episode plan establishes a standard cost that can be easily audited. In a
pay-by-line-item plan, it is much more difficult to detect and disallow inappropriate
additions to the bill being issued by the hospital. The hospital has an incentive to add
line items to help offset its fixed expenditures, so that it can recognize an operating
profit.
Habitat for Humanity Wins a Big One
Question 1: Did LHH seem to have a “de-scope” plan?
LHH did not seem to have a plan to de-scope, or reduce the scope of the plan. They
seemed to only consider that they would get all of the money from the LCHTC that was
proposed or nothing at all.
Question 2: Did LHH seem to understand the County Committee’s budget
allocation process?
It seems apparent that LHH did not understand the time issue with the County
Committee’s budget allocation process. LHH appeared to do everything else correctly,
but as shown by their strategy to contact the committee members individually when they
didn’t hear a response soon, they may not have understood how long budget allocations
take.
Question 3: How did the concept of partnering (Chapter 4) apply in this example?
Why do you think the Committee was insensitive to this opportunity?
LHH should have considered partnering with the County, which would have provided the
County with more incentive to approve the request.
The Emanon Aircraft Corporation
Question 1: How did inflating the material costs solve purchasing’s “lateness”
problem?
By inflating the estimated cost of the materials, the purchasing official may be ordering
extra material in the inventory to avoid any scarcity. This didn’t actually solve the
purchasing lateness problem, but increased the working capital requirements and the
financing costs associated with sustaining the extra capital as raw materials inventory.
The working capital appears to be chargeable to the project as an indirect cost (bulk
purchase allocated over the period’s units of output). In reality, the project is only seeing
a portion of the net impact to net free cashflow.
Question 2: What alternatives were available to Emanon besides demoting the
purchasing manager?

Rather than demoting the manager, Emanon could have issued warnings to the
purchasing official to avoid such issues in the future. Also, they could have penalized the
official monetarily in proportion to the penalty paid by the corporation. Another option
could have been to affect his yearly appraisal.
Question 3: What should Emanon do now?
Emanon now knows that the reason behind losing the competition was the increased
expected material costs. It should now work with its purchasing department to bring the
cost down to what is required and ensure that multiple checks are performed at different
levels of the purchasing department, so that the costs estimated are as close to actual
costs as possible with a minimal overhead for unexpected circumstances.
Simulating the Failure of California’s Levees
Question 1: What would be involved in changing the simulation threat from
hurricanes to earthquakes?
In order to change the simulation threat from hurricanes to earthquakes, the simulation
model would have to be modified by the scientists to account for the movement of the
ground in addition to the influx of water. The base model from New Orleans would be a
good start for the simulation, but additional parameters would need to be included.
Question 2: What process do you think would be used to analyze the simulation
results?
Hopefully the engineers could take historical data to run through the simulation to see
how accurately the simulation output matched historical results. Students may come up
with a variety of answers.
MATERIAL REVIEW QUESTIONS
Question 1: What are the advantages of top-down budgeting? Of bottom-up
budgeting? What is the most important task for top management to do in bottom-
up budgeting?
Refer to Section 7.1 in the text.
1) Advantages of top-down budgeting include:
a) Management can develop aggregated budgets that are reasonably accurate if
they are based on comparable projects.
b) It is not necessary to know about each task in order to develop a top-down
estimate.
2) Advantages of bottom-up budgeting include:
a) Individuals closer to the work are apt to have a more accurate idea of resource
requirements than their superiors or others not personally involved.
b) The resource requirements needed to complete tasks within work packages will
be more accurate than when other budgeting techniques are used.
c) Active participation of the stakeholders will tend to increase the acceptance and
support for the budget. The act of participating in bottom-up budget preparation

can help increase the emotional investment of stakeholders for adhering to the
cost baseline.
d) Bottom-up budgeting can help train managers to understand important
dimensions of project success. For example, junior managers will learn more
about how resource consumption will affect profitability and future cash flows.
3) Senior management should check to ensure that all major cost elements have been
included in the bottom-up budget.
Question 2: In preparing a budget, what indirect costs should be considered?
Refer to Section 7.2 in the text. An indirect cost is a cost that cannot be directly traced
back to the production of an output. For accounting purposes, two rules of thumb are
often used when classifying a cost as direct or indirect. In order to fall into the direct cost
category, the cost must be physically observable (it can be seen and measured when an
output is made) and it must be economically feasible to track the cost during production
of each output. If this is not true, then the cost will usually be captured in bulk as an
indirect cost and allocated back to the units of output that were created during a fixed
period of time (accounting period, for example). Examples of indirect costs that a project
manager should consider include:
1) Sales, general, and administrative expenses (SG&A)
2) Contract penalties
3) Contingency allowances
4) Waste and reduction to fair market value (defects, spoilage, and obsolescence)
5) Turnover costs (replacement and training of personnel)
Question 3: Describe the purpose and use of a tracking signal.
Refer to Section 7.2 in the text. The tracking signal is used to measure an estimator’s
relative (to the MAD or MAR) bias. Bias is detected as patterns of variation that are not
random. The textbook provides two examples of a tracking signal (TS).
Question 4: Describe the top-down budgeting process.
Refer to Section 7.1 in the text. Initially, few details may exist regarding how the work
should be accomplished. In such cases, senior management sets a top-down budget by
comparing the new project with similar ones done in the past. Then the budgets can be
cascaded to and validated by the lower levels of management. During this process of
cascading, the decomposition of required outputs into families of related work packages
should help to confirm the feasibility of the initial estimate.
Question 5: What is a variance?
Refer to Section 7.2 in the text, Table 7-1, and the glossary. There are many potential
perspectives that can be used to explain the concept of variance. At the most basic
level, a variance is the difference between a planned value and an actual value.
Because variances measure the uncertainties that are present in a management system
such as a project plan, variances may be random or nonrandom. If the project manager
observes random variation, the variance may be acceptable. If the project manager

observes nonrandom variation, it should be treated as an exception and investigated to
see if corrective action is required to restore stability to the performance levels observed
while executing the project plan.
Question 6: Describe the learning curve phenomenon.
Refer to Section 7.2 in the text. There is a cliché that “practice makes perfect.” In the
basic learning curve, each time the number of repetitions for a task is doubled, a
predictable percentage of improvement in productivity will be observed. If 100 hours
were required to complete task “A” on the first cycle, a 90% learning curve would mean
that only 90 hours would be necessary on the second cycle. On the fourth cycle, only 81
hours would be needed to complete that repetition of task “A.”
Question 7: How might you determine if cost estimates are biased?
Refer to Section 7.2 in the text. With respect to a cost estimate, it is not desirable to
either over or underestimate costs. When a distribution of estimates is unbiased, the
over estimates and the underestimates will tend to cancel each other out, resulting in
little bias. The text provides a very good explanation of mean absolute ratio (MAR) and
mean absolute deviation (MAD). A tracking signal (TS) is used to detect if estimates are
biased, and how much relative are the estimates to the natural variation (or error), that
is, the MAD.
Question 8: What is “program budgeting”?
Refer to Section 7.1 in the text. Program budgeting describes the process of developing
and maintaining budgets that are broken down by actual task in a specific project. A
variant is to show budgets for a series of projects that are related to a specific program.
Question 9: What is the difference between project and category oriented
budgets?
This question is meant to make the students understand the distinction between
“categories” and “activities.” Categories are generic groups of activities such as
“transporting materials,” while activities are specific tasks in a project/program such as
“move steel rods from location A to location B on Sept. 3.”
Refer to Section 7.1 in the text. In category-oriented budgets, expenses are categorized
into cost sub-accounts such as supplies, labor, electricity, gas, and telephone, and
grouped for the organizational level being reported, even sometimes a specific project.
In project-oriented budgets, expenses are categorized into the project tasks that
consume various types of resources.
Question 10: How does a risk analysis operate? How does a manager interpret the
results?
To perform risk analysis, a manager makes certain assumptions about the parameters
and variables associated with a project decision. This is then checked with the risk
profile or the uncertainty that is present with these variables. This helps in the estimation
of risk profiles or probability distributions of the outcomes of the decisions. Generally a

project involves multiple parameters and variables and thus simulation is preferred over
tedious analytical methods. This simulation/analytical process reveals the distribution of
various outcomes and this risk profile is used to assess the value of the decision along
with various other factors.
CLASS DISCUSSION QUESTIONS
Question 11: Discuss ways in which to keep budget planning from becoming a
game.
Refer to Section 7.1 in the text. This is a tough issue which should be able to generate
an interesting class discussion. The process is a “game” when the participants perceive
it as a zero sum game with management decisions made in an arbitrary and capricious
manner. Management can try a few things to defuse the situation such as:
1) Use open and honest discussions about resource allocation decisions that are
based upon principles of shared interest and collegial management.
2) Refrain from mandating across-the-board budget cuts when faced with cost
containment problems.
3) Use the four dimensions of project success to foster rational and consistent
resource allocation decisions in a manner that links project management
strategies to overall business success.
Question 12: List some of the pitfalls in cost estimating. What steps can a
manager take to correct cost overruns?
Refer to Sections 7.1 and 7.2 in the text.
1) Uncertainty: By nature projects are unique; therefore, any estimate made beforehand
about project outcomes is uncertain. Estimates are just that; they are always wrong.
2) Assumptions: An assumption is the answer to a question that is otherwise unknown
or too expensive to get a timely answer. There is nothing wrong with assumptions;
they are a part of the game in creating estimates in the face of uncertainty. One
danger with assumptions is that they present an opportunity for biases to be
embedded in the project. One particularly dangerous assumption is that the data
from past projects can be blindly applied to the estimates for new projects. If the new
project is different enough in process or product, old data can only be used with a
grain of salt. It’s important to keep in mind that using old data uncritically can make
the estimate too high as well as too low.
3) Learning Curves: Experience can influence productivity. The estimator may need to
consider the effects of experience using techniques such as the learning curve.
4) Bad Data: Data about past performance may have been captured incorrectly and/or
reported inaccurately. The estimator should validate the accuracy of historical data
with respect to representing what the data should represent.
5) Missing Scope: The most accurate estimate will be fatally flawed, if it does not
account for all the work the project has to do. This could be due to a poor estimating
process or uncertainty about the actual work scope.

Before managers can correct cost overruns, they must detect them. This means that
there has to be a detailed plan that is measured on a regular basis. When overruns are
detected, the manager needs to evaluate the root cause with the help of the team.
Corrective action may include reducing staff, reducing scope, or increasing the budget.
Question 13: Why do consulting firms frequently subsidize some projects? Is this
ethical?
Refer to Section 7.2 in the text. It’s ethical for companies to take a deliberate loss on a
project for several reasons:
• The company is investing in a new business area.
• The company is sharing costs with a partner in support of a future big win-win
situation. For example this might be undercharging on a project supporting
another company’s proposal preparation.
• The project represents a charitable donation.
• The company would otherwise have no work at all, but wishes to retain its staff.
It is unethical for a company to knowingly underbid a contract with the intent of making
the money back through later changes. The U.S Government has named this practice as
“defective pricing” and goes to great length to prevent it and punish the perpetrators.
Question 14: What steps can be taken to make controlling costs easier? Can these
steps also be used to control other project parameters, such as scope?
In order to control costs, it is essential to have a project plan that is organized according
to the way the project actually will be managed. To develop such a plan, use the WBS to
decompose project deliverables from the scope statement into sets of deliverable-
oriented work packages linked to cost centers in the project’s budget. By linking the
control mechanisms to the work packages, the manager will have a much better chance
of detecting overruns when something can still be done about them. This is also true for
other parameters such as schedule and progress (performance). As painful as it sounds,
it is better to measure cost, schedule, and progress more frequently than less. The
longer it takes to detect a variance, the bigger it will be and the harder to correct.
Question 15: Which budgeting method is likely to be used with which type of
organizational structure?
Refer to Section 7.1 in the text. Functional organizations will tend to prefer activity-
oriented budgets. Project based organizations would prefer to have program-oriented
budgets. In these two forms, the vertical hierarchy is the driving factor behind budgeting
tendencies. However, the matrix form may exhibit tendencies toward using both types of
budgets. The weak matrix form would be expected to exhibit functional preferences,
while the strong matrix (project matrix) would tend to exhibit project preferences more
predominately.
Question 16: What are some potential problems with the top-down and bottom-up
budgeting processes? What are some ways of dealing with these potential
problems?

Refer to Section 7.1 in the text.
1) Top-Down Budget Problems: Top-down budgets are often developed from
analogies, parametric models, and/or business intuition. Budgets based on
analogies are only useful, if the new project is similar enough to the old ones. If
parametric models are used, the estimator may neglect to include important cost
elements and/or the parameters in the model may not reflect the current process.
If the model is derived from business intuition, the estimates will tend to be overly
optimistic. In all cases, the use of bottom-up estimating techniques to confirm the
top-down estimate is recommended.
2) Bottom-up Budget Problems: Bottom-up budgets should be developed using the
WBS to organize estimates by cost center. However, the WBS format may make
it difficult to capture indirect costs in a manner that will be credible to members of
the various functions actually doing the work. Moreover, the bottom-up estimate
is even more likely than a top-down estimate to leave out some important cost
elements. This could be because the estimating process is poorly organized or
because the project is different enough that the scope is “unknown” to the
estimators. Bottom-up budgets should be compared with top-down budgets as a
sanity check.
Question 17: How is the budget planning process like a game?
There are natural differences between management and workers. Managers are often
measured by cost performance, which may be tied to bonuses. Workers on the other
hand do not like their performance to be monitored, particularly in a direct and frequent
manner. When asked how long it will take to do something, they will typically give a
“comfortable” answer, especially if they are experienced. Workers who have been
around the track a few times become firm believers in Murphy’s Law and give estimates
based on the worst case. One other factor that I have observed is technical folk’s
reluctance to accept the realities of the capitalist system. They will insist till the cows
come home that a project will take so many hours, regardless of whether anybody can
afford the deliverable at the resulting price. The game part comes in when the two
parties begin to anticipate each other’s actions. The workers inflate their estimates in
anticipation of management cutting them. Managers cut the estimates because they
know that (surprise!) they have been inflated, and the vicious circle starts.
Question 18: Would any of the conflict resolution methods described in the
previous chapter be useful in the budget planning process? Which?
Refer to the answer of Question 16 in this book and to Chapter 6 in the textbook. The
technique used during conflict resolution (budget planning process) will be contingent
upon the situation. Confrontation (interdisciplinary problem-solving) would be the
preferred approach for this author. However, compromises may be appropriate in
scenarios where both parties have equal power and an acceptable outcome can be
attained. The other conflict resolution strategies should see infrequent use during
budgeting processes. For example:

1) Avoidance: The project is an operating necessity and the process being fixed
produces benefits that far exceed the execution costs of the project. Failure is not
an option. Consider the project initiated when the Apollo 13 astronauts had to
abort the planned lunar landing and return to Earth.
2) Withdrawal: The budget issue is unimportant to one of the stakeholders. For
example, a contractor, as a conscious strategy to invest in maintaining a client
relationship, may absorb a minor scope change. Such decisions would be based
on the total lifecycle value of the relationship rather than the costs associated
with a single scope change transaction.
3) Forcing: In cases where cost constraints (market pressures) could jeopardize
business survival, unless preferred approaches of the performing organization
are modified, forcing budgets on a single project may be an appropriate albeit
risky response necessary to get the job done.
Question 19: How does the fact that capital costs vary with different factors
complicate the budgeting process?
Refer to Section 7.1 in the text. Cash flows for capital costs are managed differently than
the cash flows for operating costs. Each industry may use different assumptions and
procedures as to how capital costs should be treated in budgets. Moreover, since capital
costs are associated with future business capacity, they have a greater degree of
uncertainty than the operating expenses consumed in a single business period. To end
this discussion, since capital costs are accumulated in bulk, the allocation of their usage
to activities in a budget may be significantly influenced by external variables such as
changes in market supply and demand.
Question 20: Why is learning curve analysis important to project management?
Refer to Section 7.2 in the text. For projects of a similar nature, repetition should improve
productivity. It’s important for the estimators to understand and carefully apply
assumptions about the learning curve. For example, if the learning factor embedded in
historic data is ignored, a project could be underestimated, because it will start out with
no learning at all.
Question 21: Why is it “ethically necessary to be honest” in negotiations between
a superior and subordinate?
Depending on the situation, bosses may not even need to negotiate. There are times
when it is appropriate for a boss to direct (think of the captain of a warship during battle),
but they aren’t that frequent in most project management situations. In most cases, there
is some level of negotiation that takes place. If the boss wants the enlightened support of
his/her subordinates, then she needs to be honest in her dealings with them. If not,
upset subordinates can “sandbag” the project making it look like they are doing the work
when in fact, they are not. In all but the smallest project, it will be impossible for the boss
to make up personally the lost work when it is discovered. Bosses do have power, but
they need to use it ethically for the long-term good of the organization.

It is also ethically necessary for subordinates to be honest as well. They should be
truthful in their communication with the supervisor. For instance, they should let the
supervisors know when they may need time away from work, what type of work they
prefer, etc. By communicating these types of things, it is more likely the subordinate will
be happy and the project completed is closer to on time.
Question 22: The chapter describes the problems of budgeting for S-shaped and
J-shaped life-cycle projects. What might be the budgeting characteristics of a
project with a straight line life cycle?
The chapter emphasizes the danger of simple across the board budget cuts for projects
with exponential or right half of a U-shaped life cycle. If the budget is cut by 10%, a
major portion of the benefit is lost. For these life cycle curves, however, further cuts have
less impact than the first. With an S-shaped curve the loss of benefit increases with each
cut. For a linear curve, a 10% cut in budget would cause a 10% loss in benefit, and each
subsequent cut would have proportionately the same amount of benefit loss.
Question 23: Interpret the columns of data in Figure 7-11. Does the $14,744 value
mean that the project is expected to return only this amount of discounted
money?
The columns in Figure 7-11 summarizes the results of the simulation data based on
these trial runs performed. The $14,744 value doesn’t indicate the exact value of the
project. Rather, it indicates the mean value based on the simulations runs in this
analysis.
Question 24: How would you find the probability in Figure 7-10 of an NPV of over
$25,000?
To find the probability of an NPV greater than $25,000 (in Figure 7-10), you would enter
“25,000” in the box in the lower left corner of the screen. The probability would then be
displayed in the “Certainty” box situated in the middle of the screen.
Question 25: Does the spread of the data in Table 7-4 appear realistic? Reconsider
Table 7-4 to explain why the simulated outcome in Figure 7-11 is so much less
than the value originally obtained in Table 7-3.
The spread of data in Table 7-4 is realistic given the nature of the PERT estimates
(pessimistic, most likely, and optimistic). This method provides a range of likelihoods
based on different scenarios. The simulated outcome in Figure 7-11 is lesser than the
value originally obtained in Table 7-3 because of the inclusion of the lower “minimum
inflow” column in Table 7-4. This reduces the overall values because it decreases the
estimates.

PROBLEMS
Problem 1: Using the cost estimation template and Actuals in Figure 7-5, compare
the model in the figure with the following estimates derived from a multiplicative
model. Base your comparison on the mean bias, the MAR, and the tracking signal.
Comment.
Period: 1 2 3 4 5 6 7 8
Estimated:179 217 91 51 76 438 64 170
Tracking
Period Estimate Actual (A(t)/F(t))-1|(A(t)/F(t))-1| MAR Signal
1 179 163 -0.08939 0.08939
2 217 240 0.105991 0.105991 0.10 0.17
3 91 67 -0.26374 0.26374 0.15 -1.61
4 51 78 0.529412 0.529412 0.25 1.14
5 76 71 -0.06579 0.06579 0.21 1.03
6 438 423 -0.03425 0.03425 0.18 1.00
7 64 49 -0.23438 0.23438 0.19 -0.28
8 170 157 -0.07647 0.07647 0.17 -0.74
Total -0.129
Again, the bias has reduced considerably and changed sign but the MAR is somewhat
greater. Hence, the Tracking Signal is substantially smaller and shows an acceptable
level of bias on the part of this estimator.
Problem 2: Conduct a discounted cash flow calculation to determine the NPV of
the following project, assuming a required rate of return of 0.2. The project will
cost $75,000 but will result in cash inflows of $20,000, $25,000, $30,000, and
$50,000 in each of the next four years.
Year Cash Flow PVIF PV$
0 $(75,000) 1 $(75,000)
1 $20,000 1.200 $16,667
2 $25,000 1.44 $17,361
3 $30,000 1.728 $17,361
4 $50,000 2.0736 $24,113
Rate 20% NPV $502
Problem 3: In Problem 2, assume that the inflows are uncertain but normally
distributed with standard deviations of $1000, $1500, $2000, and $3500,
respectively. Find the mean forecast NPV using Crystal Ball®. What is the
probability the actual NPV will be positive?
To convert this spreadsheet to a Monte Carlo simulation, Crystal Ball®
will be assigned
to generate cash flow values following a normal distribution.

The setup for the inflow during year one looks like this:
In a similar manner, normal distributions with the given standard deviations are setup for
the inflows in years one through four. The NPV is assigned as the forecast value. Then
after trials are run, a typical result looks like this:
For this distribution, the mean value is about $549 dollars and the chance that the NPV
is positive is determined by sliding the left hand slider until it is over zero ($0.00): The
resulting display from Crystal Ball®
looks like this:

The histogram generated by this trial did not have any values at zero, so the lowest
positive value of $4.00 is chosen. The area between this point and infinity gives the
probability of the NPV being positive, 58.6%.
Problem 4: A production lot of 25 units required 103.6 hours of effort. Accounting
records show that the first unit took 7 hours. What was the learning rate?
The learning rate can only be determined in reality by trial and error.
For this problem a simple spreadsheet will be used. The learning curve factor reduces
the time spent producing the lots, from the base time of 7 hours. We also know that the
total production hours for 25 units are 103.6 hours. A spreadsheet calculating the cycle
time for each lot based on a learning curve would look like this:
Unit
Base
Time Multiplier
Adjusted
Time
Trial
Rate
1 7 1.00 7.00 0.90
2 7 0.90 6.30
3 7 0.85 5.92
4 7 0.81 5.67
5 7 0.78 5.48
6 7 0.76 5.33
7 7 0.74 5.21
8 7 0.73 5.10
9 7 0.72 5.01
10 7 0.70 4.93
11 7 0.69 4.86
12 7 0.69 4.80
13 7 0.68 4.74
14 7 0.67 4.69
15 7 0.66 4.64
16 7 0.66 4.59
17 7 0.65 4.55
18 7 0.64 4.51

19 7 0.64 4.47
20 7 0.63 4.44
21 7 0.63 4.41
22 7 0.63 4.38
23 7 0.62 4.35
24 7 0.62 4.32
25 7 0.61 4.29
Total 124.0
Note that for this example, the multiplier for year two is calculated as:
2 (log(0.90)/log(2))
or 2 (-0.045/0.301)
or 2 (-0.149)
= 0.9
Each multiplier is calculated in turn based on the unit number it represents. In each case
the multiplier is used to modify the base cycle time of 7 hours and then totaled at the
bottom.
The total in this example does not equal 103.6 hours because the learning rate is
incorrect. One could insert different values and find the correct value by trial and error, or
use the Solver feature of Microsoft®
Excel. To use Solver, the total hours are set as the
“Target Cell” and the “Trial Rate” is designated as the cell to be changed subject to the
limitation that it may not exceed 1.0 using this technique, the spreadsheet with the
correct learning rate would be:
Unit
Base
Time Multiplier
Adjusted
Time
Trial
Rate
1 7 1.00 7.00 0.85
2 7 0.85 5.95
3 7 0.77 5.41
4 7 0.72 5.06
5 7 0.69 4.80
6 7 0.66 4.60
7 7 0.63 4.44
8 7 0.61 4.30
9 7 0.60 4.18
10 7 0.58 4.08
11 7 0.57 3.99
12 7 0.56 3.91
13 7 0.55 3.84
14 7 0.54 3.77
15 7 0.53 3.71
16 7 0.52 3.65
17 7 0.51 3.60
18 7 0.51 3.55
19 7 0.50 3.51

20 7 0.50 3.47
21 7 0.49 3.43
22 7 0.48 3.39
23 7 0.48 3.36
24 7 0.47 3.32
25 7 0.47 3.29
Total 103.6
Problem 5: If unit 1 requires 200 hours to produce and the labor records for an Air
Force contract of 50 units indicates an average labor content of 63.1 hours per
unit, what was the learning rate? What total additional number of labor-hours
would be required for a follow-on Air Force contract of 50 units? What would be
the average labor content of this second contract? Of both contracts combined? If
labor costs the vendor $10/hour on this second contract and the price to the Air
Force is fixed at $550 each, what can you say about the profitability of the first and
second contracts, and hence the bidding process in general?
A spreadsheet similar to the one used in problem 5 can be used for this problem as well.
Here the total hours for the first 50 units can be calculated based on the given average,
specifically 50  63.1 = 3,155 hrs. The spreadsheet with the correct learning rate would
look like this:
Unit
Base
Time Multiplier
Adjusted
Time Unit
Base
TimeMultiplier
Adjusted
Time
Trial
Rate
1 200 1.00 200.00 26 200 0.26 51.73 0.75
2 200 0.75 150.00 27 200 0.25 50.92
3 200 0.63 126.76 28 200 0.25 50.16
4 200 0.56 112.50 29 200 0.25 49.44
5 200 0.51 102.54 30 200 0.24 48.74
6 200 0.48 95.07 31 200 0.24 48.09
7 200 0.45 89.18 32 200 0.24 47.46
8 200 0.42 84.37 33 200 0.23 46.85
9 200 0.40 80.34 34 200 0.23 46.28
10 200 0.38 76.91 35 200 0.23 45.72
11 200 0.37 73.92 36 200 0.23 45.19
12 200 0.36 71.30 37 200 0.22 44.68
13 200 0.34 68.97 38 200 0.22 44.19
14 200 0.33 66.88 39 200 0.22 43.72
15 200 0.32 64.99 40 200 0.22 43.26
16 200 0.32 63.28 41 200 0.21 42.82
17 200 0.31 61.70 42 200 0.21 42.39
18 200 0.30 60.26 43 200 0.21 41.98
19 200 0.29 58.92 44 200 0.21 41.58
20 200 0.29 57.68 45 200 0.21 41.19
21 200 0.28 56.52 46 200 0.20 40.82

22 200 0.28 55.44 47 200 0.20 40.46
23 200 0.27 54.43 48 200 0.20 40.11
24 200 0.27 53.48 49 200 0.20 39.76
25 200 0.26 52.58 50 200 0.20 39.43
Sub-Total 2038.0 Total 3155.0
To answer the second part of the question, the spreadsheet is extended to 100 units.
The portion of the spreadsheet for units 51-100 is shown here:
Unit
Base
Time Multiplier
Adjusted
Time Unit
Base
Time Multiplier
Adjusted
Time
Trial
Rate
51 200 0.20 39.11 76 200 0.17 33.15 0.75
52 200 0.19 38.80 77 200 0.16 32.97
53 200 0.19 38.49 78 200 0.16 32.79
54 200 0.19 38.20 79 200 0.16 32.62
55 200 0.19 37.91 80 200 0.16 32.45
56 200 0.19 37.62 81 200 0.16 32.28
57 200 0.19 37.35 82 200 0.16 32.12
58 200 0.19 37.08 83 200 0.16 31.96
59 200 0.18 36.82 84 200 0.16 31.80
60 200 0.18 36.56 85 200 0.16 31.64
61 200 0.18 36.31 86 200 0.16 31.49
62 200 0.18 36.07 87 200 0.16 31.34
63 200 0.18 35.83 88 200 0.16 31.19
64 200 0.18 35.60 89 200 0.16 31.04
65 200 0.18 35.37 90 200 0.15 30.90
66 200 0.18 35.14 91 200 0.15 30.76
67 200 0.17 34.93 92 200 0.15 30.62
68 200 0.17 34.71 93 200 0.15 30.48
69 200 0.17 34.50 94 200 0.15 30.35
70 200 0.17 34.30 95 200 0.15 30.21
71 200 0.17 34.09 96 200 0.15 30.08
72 200 0.17 33.90 97 200 0.15 29.95
73 200 0.17 33.70 98 200 0.15 29.83
74 200 0.17 33.51 99 200 0.15 29.70
75 200 0.17 33.33 100 200 0.15 29.58
Sub-Total 4054.4 Total 4835.7
Note that both the sub-total and the total include the hours for the first 50 units.
Therefore, the hours to produce the second fifty units are 4,835.7 – 3,155 = 1,680 hrs.
The average labor content would be 1680hrs/50units = 33.6 hrs/unit. The combined
average is found by 4835.7hrs/100 units = 48.4 hrs/unit. If labor were $10/hr then the
first 50 cost, $10  63.1 = $631 each, so the firm lost money. However, the second 50
cost $336 each, so the firm made a profit of $550 – $336 = $214 each. Overall the total
labor cost would be 4835.7 hrs  $10/hr or $48,357 and the revenue would be $550/unit

 100 units or $55,000. Assuming no other costs, this would give a net profit of $55,000
– $48,357 = $6643. This suggests that the company underbid the first contract with the
expectation of winning a more profitable follow-on contract. [In practice, contractors
developing the price for repetitive products, even with a short a run as two ships, use a
learning curve when bidding on government contracts.] This manufacturer takes on
considerable risk since the contract may be cancelled in the middle or no follow on
contract may ever be offered.
Problem 6: Your firm designs PowerPoint slides for computer training classes,
and you have just received a request to bid on a contract to produce the slides for
an eight-session class. From previous experience, you know that your firm
follows an 85 percent learning rate. For this contract it appears the effort will be
substantial, running 50 hours for the first session. Your firm bills at the rate of
$100/hour and the overhead is expected to run a fixed $600 per session. The
customer will pay you a flat fixed rate per session. If your nominal profit margin is
20 percent, what will be the total bid price, the per session price, and at what
session will you break even?
The total bid price will be $41,351.87 and the breakeven point will be in the 7th
session.
Problem 7: A light manufacturing firm has set up a project for developing a new
machine for one of its production lines. The most likely estimated cost of the
project itself is $1,000,000, but the most optimistic estimate is $900,000 while the
pessimists predict a project cost of $1,200,000. The real problem is that even if the
project costs are within those limits, if the project itself plus its implementation
costs exceed $1,425,000, the project will not meet the firm’s NPV hurdle. There are
four cost categories involved in adding the prospective new machine to the
production line: (1) engineering labor cost, (2) nonengineering labor cost, (3)
assorted material cost, and (4) production line downtime cost.
The engineering labor requirement has been estimated to be 600 hours, plus or
minus 15 percent at a cost of $80 per hour. The nonengineering labor requirement
is estimated to be 1500 hours, but could be as low as 1200 hours or as high as
2200 hours at a cost of $35 per hour. Assorted material may run as high as
$155,000 or as low as $100,000, but is most likely to be about $135,000. The best

guess of time lost on the production line is 110 hours, possibly as low as 105
hours and as high as 120 hours. The line contributes about $500 per hour to the
firm’s profit and overhead. What is the probability that the new machine project
will meet the firm’s NPV hurdle?
In the spreadsheet shown below the project cost, nonengineering labor hours, material
cost, and downtime hours were all modeled using a triangular distribution. The
engineering labor hours were modeled using a uniform distribution over the range of 510
to 690 hours. As shown in the spreadsheet below, the project has a 92.37% chance of
meeting the firm’s NPV hurdle.
Problem 8: A four-year financial project has estimates of net cash flows shown in
the following table. It will cost $65,000 to implement the project, all of which must
be invested at the beginning of the project. After the fourth year, the project will
have no residual value. Assume that the cash flow estimates for each year are
best represented by a triangular distribution and that the hurdle rate is 20 percent.
(a) Use Crystal Ball®
to find the expected NPV of the project.
(b) What is the probability that the project will yield a return greater than the 20
percent hurdle rate?
Year PessimisticMost Likely Optimistic
1 $14,000 $20,000 $22,000
2 19,000 25,000 30,000
3 27,000 30,000 36,000
4 32,000 35,000 39,000
Year Pessimistic
Most
Likely Optimistic Used PVIF PV$
0 $ (65,000) $ (65,000) $ (65,000) $(65,000) 1 $(65,000)
1 $ 14,000 $ 20,000 $ 22,000 $ 20,000 1.200 $ 16,667

2 $ 19,000 $ 25,000 $ 30,000 $ 25,000 1.44 $ 17,361
3 $ 27,000 $ 30,000 $ 36,000 $ 30,000 1.728 $ 17,361
4 $ 32,000 $ 35,000 $ 39,000 $ 35,000 2.0736 $ 16,879
Rate 20% NPV $ 3,268
Now the green (or shaded) cells in the column labeled “Used” (with the exception of the
initial investment of $65,000) are calculated by Crystal Ball® using a triangular
distribution with the end points selected based on the pessimistic and optimistic values
given. The setup for year one looks like this:
The net present value is then calculated for each of 1000 trials and results are displayed
by designating the NPV cell as a forecast. Typical results look like this:
By adjusting the triangular sliders it can be seen that the chance of the NPV exceeding
$0 (and the hurdle rate) is about 87%. The mean value for this distribution is $2770.
Problem 9: If an inflation rate of 2 percent, normally distributed with a standard
deviation of .333 percent, is assumed, what is the expected NPV of the project in
Problem 8, and what is the probability that it will qualify?

Year Pessimistic
Most
Likely Optimistic Inflation Used PVIF PV$
0 $ (65,000) $ (65,000) $ (65,000) - $(65,000) 1 $(65,000)
1 $ 14,000 $ 20,000 $ 22,000 2% $ 20,000 1.220 $ 16,393
2 $ 19,000 $ 25,000 $ 30,000 2% $ 25,000 1.4884 $ 16,797
3 $ 27,000 $ 30,000 $ 36,000 2% $ 30,000 1.8158 $ 16,521
4 $ 32,000 $ 35,000 $ 39,000 2% $ 35,000 2.2153 $ 15,799
Rate 20% NPV $ 510
Now the column labeled “Inflation” has been added. Each of these cells is individually
calculated by Crystal Ball® with a normal distribution using a standard deviation of
0.33% to allow different inflation values for each year. The result is added to the “PVIF”
calculation used to determine the individual PV results.
Now the forecast values for NPV look like this:
The probability that the NPV exceeds $0 is about 50%. The mean value for this
distribution is -$85. This analysis indicates that there is only a 50-50 chance that the
project will qualify (meet the hurdle rate).
Problem 10: A cloud storage startup has decided to upgrade its server computers.
It is also contemplating a shift from its Unix-based platform to a Windows-based
platform. Three major cost items will be affected whichever platform they choose:
hardware costs, software conversion costs, and employee training costs. The
firm’s technical group has studied the matter and has made the following
estimates for the cost changes in $000s.
Using Crystal Ball®
and assuming that the costs may all be represented by
BetaPERT distributions, simulate the problem 1000 times. Given the information
resulting from the simulation, discuss the decision problem.
Low Likeliest High Low Likeliest High
Hardware 100 125 200 80 110 210

Software 275 300 500 250 300 525
Training 9 10 15 8 10 17.5
Windows
Unix
INCIDENTS FOR DISCUSSION
Preferred Sensor Company
Questions: Under these circumstances, would Sean be wise to pursue a top-down
or a bottom-up budgeting approach? Why? What factors are most relevant here?

This incident is a good opportunity to let students reach a conclusion that two processes
are better than one. Ask a student who favors each position to state their reasoning. The
leading question is: “Which advantage of each process option applies to which part of
the estimate?” The students should reach the conclusion that a combination of both is
the best choice.
Both budgeting approaches may prove useful to Sean in this scenario. Initially, a top-
down estimate should be considered because 50% of the costs are stable and
predictable based upon prior history and business intuition. Since 50% of the costs are
predictable, the remaining 50% should be explained by the new work being done. Thus,
Sean should proceed to develop a bottom-up estimate for the new work to verify that the
planned approaches and assumptions are realistic.
General Ship Company
Question: How would you monitor the costs of this project?
This incident is an opportunity to foreshadow the key concepts of the Earned Value
method. In Earned Value the progress of the project must be estimated during execution
to compare to cost and schedule actuals. Without knowing progress, there is no way to
know if cost and schedule actuals represent too much or too little. The question to ask
the class would be: “Suppose half of the estimated scrap occurred in the first six months
of the project, is that over or under the estimate?” Similarly, the controller would work
with the project manager and estimators to come up with a time phased scrap and
wastage profile associated with expected progress on the project. Then as the project
unfolds she could discover if her fears were justified or not.
CASE: CONCRETE MASONRY CORPORATION
Question 1: Do you think dividing CMC’s business into two groups will solve their
problem? Why or why not?
Student answers will vary. One opinion could be that dividing CMC’s business into two
groups could help, but that is still dependent upon so many factors. With two groups,
each could focus on their separate tasks at hand and become much more effective with
those.
Question 2: Do you agree that marketing and selling CMC’s business services is a
continuing task that should be done in a functional group?
Student answers will vary
Question 3: Were there any signals that CMC’s market was in the process of
changing that management could have acted upon? If so, what were they?
There were some signals that the market was changing. These include the prestressed
concrete gaining wide industry acceptance and technical schools and societies
beginning to offer courses in the techniques for utilizing this process. With relative wide-
spread acceptance, they should have known that more companies would soon be in the
market.

Question 4: Did CMC use bottom-up or top-down cost estimating? Do you think
CMC developed project budgets for each of their projects?
The estimates were based on top-down costing. The estimator input the span and cubic
feet needed and the rest of the estimate was calculated by the computer system.
CMC did create budgets for each project.
Question 5: Would a risk analysis of the 2500-car parking garage example have
helped CMC win the bid? If so, which techniques would have been most useful? If
not, what was wrong with CMC’s perspective?
CMC could have performed a risk analysis which should have identified loss of corporate
information as a significant risk. If that would have happened, they might not have
shared so much information with the potential client who then used that information to go
to other providers. They should have kept most of the proprietary information to
themselves so that other companies couldn’t use it to bid against them.
Question 6: Describe how you think CMC’s computer system estimated projects’
costs.
Their computer system was probably based on historical data. After inputting the span
and cubic feet required, the bid was put together based on the ratio of those two inputs
to former project costs.
READING: THREE PERCEPTIONS OF PROJECT COST
Question 1: What is the major point of the article?
Project managers need to understand the different ways costs are measured at their
organization, so that they can take actions that will favorably influence the project’s
contribution to a company’s financial plan.
Question 2: How does the accountant view project costs?
The specific answer to this question will depend upon the type of accountant that you
are dealing with. Usually, an accountant concerned with project results will fall under the
category of managerial accountant. These accountants like to understand cashflows in
order to properly book expenses and recognize revenues to determine net profit from
operations. A subset of accountants will be concerned with “plant accounting”. The plant
accountants are responsible for tracking the location and expiration of assets as the
assets are used and consumed during business operations. The plant accountant may
be concerned about tax incentives for assets such as equipment and inventories. A
financial accountant would be more concerned with financial metrics used by investors
to evaluate business performance (the profitability measures of project performance).
Some accountants will be internal auditors. They will be concerned with ensuring that
corporate policies and generally accepted accounting practices are properly and
consistently applied when reporting business results.
Question 3: How does the controller view project costs?
In general, the controller is concerned with ensuring that adequate cashflow exists to
sustain ongoing business operations. The controller will be interested in the timing and
amount of cash inflows and outflows.

Question 4: How does the project manager view project costs?
Project managers generally view costs as they are accrued against WBS elements in the
unit of measure designated by management. For example, many defense contractors
using the Earned Value method require PM’s to manage project cost by man-hours. The
dollar denominated version of the plan may be completely invisible to the PM, since it
contains overhead rates and other financial data that the company considers sensitive.
Question 5: What other costs does the project manager need to be cognizant of?
What actions should the PM take concerning these other costs?
Cost of Goods Sold (COGS) will reflect many direct costs of producing deliverables in a
project. There are many methods used by accountants to determine the expense
categories attributed to COGS, so the project manager should seek accounting’s
assistance to establish COGS for a specific project. In addition to COGS, the project
manager should follow the basic structure of the income statement used to derive
NOPAT (Net Operating Profit after Taxes). This would include SG&A expenses, interest
expenses, and taxes.
The project manager should also recognize that NOPAT is not the same concept as
cashflow from operations. The project manager should generally seek to create wealth
by managing future cashflows of the project in a manner where the amount, timing, and
risks are adequate to create free cashflows that can be returned to investors.

Exploring the Variety of Random
Documents with Different Content

with its variety of arguments and its multitudinous schemes of
reform. The main reasons for complaint are:—first, that our actual
law of property does not ensure to every labourer the whole produce
of his labour; secondly, that it does not provide for every want a
satisfaction proportionate to the available means. However much the
opinions of the different schools of socialists may vary, every socialist
organisation of property aims either at guaranteeing to the working-
classes the entire product of their industry, or at reducing to just
proportions individual needs and existing means of satisfaction by
recognising the claim of every member of society to the commodities
and services necessary to support existence, in preference to the
satisfaction of the less pressing wants of others.211 These aims are
greatly hampered by the present system, in which land and capital
are the property of private individuals freely struggling for increase
of wealth, and especially by the legally recognised existence of
unearned income212—the “rent” of the Saint-Simonians, the “surplus
value” (Mehrwert) of Thompson and Marx,—for which the favoured
recipient returns no personal equivalent to society, and which he is
able to pocket because the wage labourer receives in money-wages
less than the full value of the produce of his work. We have here a
conflict between different principles of acquisition. Both the rule that
the owner of a thing also owns what results from it, and the law of
inheritance, leading as they do to unearned income, are intruding
upon the principle of labour as a source of property. They, moreover,
interfere with the right to subsistence, which in some measure,
though often insufficiently, is recognised in all human societies;213
for, as Marx observed, the accumulation of wealth at one pole means
the accumulation of misery at the opposite pole.214 This conflict
between different principles or rights, all of which have deep
foundations in human nature and the conditions of social life, has
been brought about by certain facts inherent in progressive
civilisation. In simple societies the unearned income is small,
because no fortunes exist, and the wants of those who are incapable
of earning their own livelihood are provided for by the system of
mutual aid. Progress in culture, on the other hand, has been
accompanied by a more unequal distribution of wealth, and also by a

decrease of social solidarity as a result of the increase and greater
differentiation of the social unit. The unearned income has grown
larger, the disproportion between the returns on capital and the
reward for labour has in many cases become enormous, and hand in
hand with the opulence of some goes the destitution of others. At
the same time the injustice of prerogatives based on birth or fortune
is keenly felt, the dignity of labour is recognised, and the working-
classes are every day becoming more conscious both of their power
and their rights. All this has resulted in a strong and wide-spread
conviction that the actual law of property greatly differs from the
ideal law. But much struggle will no doubt be required to bring them
in harmony with one another. The present rights of property are
supported not only by personal interests, but also by a deep-rooted
feeling, trained in the school of tradition, that it would be iniquitous
of the State to interfere with individuals’ long-established claims to
use at their pleasure the objects of wealth. The new scheme, on the
other hand, derives strength from the fact that it aims at rectifying
legal rights in accordance with existing needs, and that it lays stress
on a method of acquisition which more than any other seems to
appeal to the natural sense of justice in man. We are utterly unable
to foresee in detail the issue of this struggle. But that the law of
property will sooner or later undergo a radical change must be
obvious to every one who realises that, though ideas of right and
wrong may for some time outlive the conditions from which they
sprang, they cannot do so for ever.
211 See Menger, Right to the whole Produce of Labour, p. 5
sqq., Goos, op. cit. ii. 61.
212 The term “unearned income” (arbeitsloses Einkommen) has
been proposed by Menger (op. cit. p. 3).
213 See supra, ch. xxiii., vol. i. 526 sqq. Among the Eskimo
about Behring Strait (Nelson, in Ann. Rep. Bur. Ethn. xviii. 294)
and the Greenlanders (Rink, Eskimo Tales, p. 29 sq.), if a man
borrows an article from another and fails to return it, the owner is
not entitled to claim it back, as they consider that when a person

has enough property to enable him to lend some of it he has
more than he needs.
214 Marx, Capital, p. 661.

THE REGARD FOR TRUTH AND GOOD FAITH
THE regard for truth implies in the first place that we ought to
abstain from lying, that is, a wilful misrepresentation of facts, by
word or deed, with the intention of producing a false belief. Closely
connected with this duty is that of good faith or fidelity to promises,
which requires that we should make facts correspond with our
emphatic assertions as to our conduct in the future. Within certain
limits these duties seem to be universally recognised, though the
censure passed on the transgressor varies extremely in degree. But
there are also many cases in which untruthfulness and bad faith are
looked upon with indifference, or even held laudable or obligatory.
Various uncivilised races are conspicuous for their great regard for
truth; of some savages it is said that not even the most trying
circumstances can induce them to tell a lie. Among others, again,
falsehood is found to be a prevailing vice and the successful lie a
matter of popular admiration.
All authorities agree that the Veddahs of Ceylon are models of veracity.
They “are proverbially truthful and honest.”1 They think it perfectly
inconceivable that any person should say anything which is not true.2 Mr.
Nevill writes, “I never knew a true Vaedda to tell a lie, and the Sinhalese give
them the same character.”3 Messrs. Sarasin had a similar experience:—“The
genuine Wood-Wedda always speaks the truth; we never heard a lie from any
of them; all their statements are short and true.”4 A Veddah who had
committed murder and was tried for it, instead of telling a lie in order to
escape punishment, said simply nothing.5
1 Bailey, ‘Wild Tribes of the Veddahs of Ceylon,’ in Trans. Ethn.
Soc. N.S. ii. 291.
2 Hartshorne, in Indian Antiquary, viii. 320.

3 Nevill, in Taprobanian, i. 193.
4 Sarasin, Forschungen auf Ceylon, iii. 541. Cf. ibid. iii. 542 sq.;
Schmidt, Ceylon, p. 276.
5 Sarasin, op. cit. iii. 543.
Other instances of extreme truthfulness are provided by various uncivilised
tribes in India. The Saoras of the province of Madras, “like most of the hill
people, … are not inclined to lying. If one Saora kill another he admits it at
once and tells why he killed him.”6 The highlander of Central India is
described as “the most truthful of beings, and rarely denies either a money
obligation or a crime really chargeable against him.”7 A true Gond “will
commit a murder, but he will not tell a lie.”8 The Kandhs, says Macpherson,
“are, I believe, inferior in veracity to no people in the world…. It is in all cases
imperative to tell the truth, except when deception is necessary to save the
life of a guest.”9 And to break a solemn pledge of friendship is, in their
opinion, one of the greatest sins a man can commit.10 The Korwás inhabiting
the highlands of Sirgúja—though they show great cruelty in committing
robberies, putting to death the whole of the party attacked, even when
unresisting—“have what one might call the savage virtue of truthfulness to an
extraordinary degree, and, rightly accused, will at once confess and give you
every required detail of the crime.”11 The Santals are noted for veracity and
fidelity to their word even in the most trying circumstances.12 A Kurubar
“always speaks the truth.”13 Among the Hos “a reflection on a man’s honesty
or veracity may be sufficient to send him to self-destruction.”14 Among the
Angami Nagas simple truth is highly regarded; it is rare for a statement to be
made on oath, and rarer still for it to be false.15 In the Chittagong Hills the
Tipperahs are the only people among whom Captain Lewin has met with
meanness and lying;16 and they, too, have previously been said to be, “as a
rule, truthful and simple-minded.”17 The Karens of Burma have the following
traditional precept:—“Do not speak falsehood. What you do not know, do not
speak. Liars shall have their tongues cut out.”18 Among the Bannavs of
Cambodia “severe penalties, such as slavery or exile, are imposed for lying.”19

6 Fawcett, Saoras, p. 17.
7 Forsyth, Highlands of Central India, p. 164. Cf. ibid. p. 361;
Sleeman, Rambles and Recollections of an Indian Official, ii. 109;
Hislop, Aboriginal Tribes of the Central Provinces, p. 1.
8 Dalton, Ethnology of Bengal, p. 284. Cf. Forsyth, op. cit. p.
155.
9 Macpherson, ‘Religious Opinions and Observances of the
Khonds,’ in Jour. Roy. Asiatic Soc. vii. 196.
10 Macpherson, Memorials of Service in India, p. 94.
11 Dalton, op. cit. p. 230.
12 Elliot, ‘Characteristics of the Population of Central and
Southern India,’ in Jour. Ethn. Soc. London, N.S. i. 106 sq.
13 Ibid. i. 105.
14 Dalton, op. cit. p. 206. Cf. ibid. p. 204 sq.; Bradley-Birt, Chota
Nagpore, p. 103.
15 Prain, ‘Angami Nagas,’ in Revue coloniale internationale, v.
490.
16 Lewin, Wild Races of South-Eastern India, p. 191.
17 Browne, quoted by Dalton, op. cit. p. 110.
18 Smeaton, Loyal Karens of India, p. 254.
19 Comte, quoted by Mouhot, Travels in Indo-China, Cambodia,
and Laos, ii. 27. For the truthfulness of the uncivilised races of
India see also Sleeman, op. cit. ii. 110 sqq.; Dalton, op. cit. p. 256
(Oraons); Crooke, Tribes and Castes of the North-Western
Provinces, ii. 478 (Hâbûra); Fraser, Tour through the Himālā
Mountains, pp. 264 (inhabitants of Kunawur), 335 (Bhoteas); Iyer,
in the Madras Government Museum’s Bulletin, iv. 73 (Nayādis of
Malabar); Walhouse, ‘Account of a Leaf-wearing Tribe on the
Western Coast of India,’ in Jour. Anthr. Inst. iv. 370 (Koragars).

The Andaman Islanders call falsehood yūbda, that is, sin or wrong-doing.20
The natives of Car Nicobar are not only very honest,21 but “the accusation of
untruthfulness brings them up in arms immediately.”22 The Dyaks of Borneo
are praised for their honesty and great regard for truth.23 Mr. Bock states that
if they could not satisfactorily reply to his questions they hesitated to answer
at all, and that if he did not always get the whole truth he always got at least
nothing but the truth from them.24 Veracity is a characteristic of the Alfura of
Halmahera25 and the Bataks of Sumatra, who only in cases of urgent
necessity have recourse to a lie.26 The Javanese, says Crawfurd, “are
honourably distinguished from all the civilised nations of Asia by a regard for
truth.”27 “In their intercourse with society,” Raffles observes, “they display, in
a high degree, the virtues of honesty, plain dealing, and candour. Their
ingenuousness is such that, as the first Dutch authorities have acknowledged,
prisoners brought to the bar on criminal charges, if really guilty, nine times
out of ten confess, without disguise or equivocation, the full extent and exact
circumstances of their offences, and communicate, when required, more
information on the matter at issue than all the rest of the evidence.”28 Among
the natives of the Malay Archipelago there are some further instances of
trustworthy and truthful peoples;29 whereas others are described as
distrustful and regardless of truth.30 Thus the natives of Timor-laut lie without
compunction when they think they can escape detection,31 and of the Niase it
is said that “truth is their bitter enemy.”32
20 Man, in Jour. Anthr. Inst. xii. 112.
21 Distant, in Jour. Anthr. Inst. iii. 4.
22 Kloss, In the Andamans and Nicobars, p. 227 sq.
23 Ling Roth, Natives of Sarawak, i. 66-68, 82. Boyle, Adventures
among the Dyaks of Borneo, p. 215. Selenka, Sonnige Welten, p.
47.
24 Bock, Head-Hunters of Borneo, p. 209.
25 Kükenthal, Forschungsreise in den Molukken, p. 188.
26 Junghuhn, Battaländer auf Sumatra, ii. 239.

27 Crawfurd, History of the Indian Archipelago, i. 50.
28 Raffles, History of Java, i. 248.
29 Riedel, De sluik- en kroesharige rassen tusschen Selebes en
Papua, p. 96 (Serangese). St. John, Life in the Forests of the Far
East, ii. 322 (Malays of Sarawak).
30 Marsden, History of Sumatra, p. 209 (natives of the interior of
Sumatra). Riedel, op. cit. p. 314 (natives of the Luang-Sermata
group). Steller, De Sangi-Archipel, p. 23.
31 Forbes, A Naturalist’s Wanderings in the Eastern Archipelago,
p. 320.
32 Modigliani, Viaggio a Nías, p. 467.
Veracity and probity were conspicuous virtues among various uncivilised
peoples belonging to the Russian Empire. Georgi, whose work dates from the
eighteenth century, says of the Chuvashes that they “content themselves with
a simple affirmation or denial, and always keep their word”;33 of the
Barabinzes, that “lying, duplicity, and fraud, are unknown among them”;34 of
the Tunguses, that they “always appear to be what they really are,” and that
“lying seems to them the absurdest thing in the world, which prevents them
being either suspicious or necessitated to accompany their affirmations by
oaths or solemn protestations”;35 of the Kurilians, that they always speak the
truth “with the most scrupulous fidelity.”36 Castrén states that the Zyrians, like
the Finnish tribes generally, are trustworthy and honest,37 and that the
Ostyaks have no other oaths but those of purgation. Among them “witnesses
never take the oath, but their words are unconditionally believed in, and
everybody, with the exception of lunatics, is allowed to give evidence.
Children may witness against their parents, brothers against brothers, a
husband against his wife, and a wife against her husband.”38
33 Georgi, Russia, i. 110.
34 Ibid. ii. 229.
35 Ibid. iii. 78. Cf. ibid. iii. 109.

36 Ibid. iii. 192. Cf. Krasheninnikoff, History of Kamschatka, p.
236.
37 Castrén, Nordiska resor och forskningar, i. 257.
38 Ibid. i. 309 sq.
The Aleuts were highly praised by Father Veniaminof for their truthfulness:
—“These people detest lying, and never spread false rumours…. They are
very much offended if any one doubts their word.” They “despise hypocrisy in
every respect,” and “do not flatter nor make empty promises, even in order to
escape reproof.”39 The regard in which truth is held by the Eskimo seems to
vary among different tribes. Armstrong blames the Western Eskimo for being
much addicted to falsehood, and for seldom telling the truth, if there be
anything to gain by a lie.40 The Point Barrow Eskimo “are in the main truthful,
though a detected lie is hardly considered more than a good joke, and
considerable trickery is practised in trading.”41 Of the Eskimo at Igloolik, an
island near Melville Peninsula, we are told that “their lies consist only of
vilifying each other’s character, with false accusations of theft or ill behaviour.
When asking questions of an individual, it is but rarely that he will either
advance or persist in an untruth…. Lying among them is almost exclusively
confined to the ladies.”42 In his description of the Eskimo on the western side
of Davis Strait and in the region of Frobisher Bay, Mr. Hall says that they
despise and shun one who will shag-la-voo, that is, “tell a lie,” and that they
are rarely troubled by any of this class.43 The Greenlanders are generally
truthful towards each other, at least the men.44 But if he can help it, a
Greenlander will not tell a truth which he thinks may be unpleasant to the
hearer, as he is anxious to stand on as good a footing as possible with his
fellow-men.45
39 Veniaminof, quoted by Dall, Alaska, pp. 396, 395.
40 Armstrong, Discovery of the North-West Passage, p. 196 sq.
41 Murdoch, ‘Ethnological Results of the Point Barrow
Expedition,’ in Ann. Rep. Bur. Ethn. ix. 41.
42 Lyon, Private Journal during the Voyage of Discovery under
Captain Parry, p. 349.

43 Hall, Arctic Researches, p. 567.
44 Dalager, Grønlandske Relationer, p. 69. Cranz, History of
Greenland, i. 171, 175. Nansen, Eskimo Life, p. 158.
45 Nansen, Eskimo Life, p. 101. Idem, First Crossing of
Greenland, ii. 334 sq.
The Thompson River Indians of British Columbia maintain that it is bad to
lie, that if you do so people will laugh at you and call you a “liar.”46 Speaking
of the Iroquois, Mr. Morgan says that the love of truth was a marked trait of
the Indian character. “This inborn sentiment flourished in the period of their
highest prosperity, in all the freshness of its primeval purity. On all occasions
and at whatever peril, the Iroquois spoke the truth without fear and without
hesitation. Dissimulation was not an Indian habit…. The Iroquois prided
themselves upon their sacred regard for the public faith, and punished the
want of it with severity when an occasion presented itself.”47 Loskiel likewise
states that they considered lying and cheating heinous and scandalous
offences.48 Among the Chippewas there were a few persons addicted to lying,
but these were held in disrepute.49 The Shoshones, a tribe of the Snake
Indians, were frank and communicative in their intercourse with strangers,
and perfectly fair in their dealings.50 The Seminole Indians of Florida are
commended for their truthfulness.51 With special reference to the Navahos,
Mr. Matthews observes, “As the result of over thirty years’ experience among
Indians, I must say that I have not found them less truthful than the average
of our own race.”52 Among the Dacotahs lying “is considered very bad”; yet in
this respect “every one sees the mote in his brother’s eye, but does not
discover the beam that is in his own,”53 want of truthfulness and habitual
dishonesty in little things being prevalent traits in their character.54 So, also,
the Thlinkets admit that falsehood is criminal, although they have recourse to
it without hesitation whenever it suits their purpose.55 Of the Chippewyans,
again, it is said that they carry the habit of lying to such an extent, even
among themselves, that they can scarcely be said to esteem truth a virtue.56
The Crees are “not very strict in their adherence to truth, being great
boasters.”57 Heriot58 and Adair59 speak of the treacherous or deceitful
disposition of the North American Indians; but the latter adds that, though
“privately dishonest,” they are “very faithful indeed to their own tribe.”

46 Teit, ‘Thompson Indians of British Columbia,’ in Memoirs of
the American Museum of Natural History, Anthropology, i. 366.
47 Morgan, League of the Iroquois, pp. 335, 338.
48 Loskiel, History of the Mission of the United Brethren among
the Indians in North America, i. 16.
49 Keating, Expedition to the Source of St. Peter’s River, ii. 168.
50 Lewis and Clarke, Travels to the Source of the Missouri River,
p. 306.
51 Maccauley, ‘Seminole Indians of Florida,’ in Ann. Rep. Bur.
Ethn. v. 491.
52 Matthews, ‘Study of Ethics among the Lower Races,’ in Jour.
of American Folk-Lore, xii. 5.
53 Schoolcraft, Indian Tribes of the United States, ii. 196.
54 Eastman, Dacotah, p. xvii.
55 Douglas, quoted by Petroff, Report on Alaska, p. 177.
56 Richardson, Arctic Searching Expedition, ii. 18. Cf. ibid. ii. 19.
57 Richardson, in Franklin, Journey to the Shores of the Polar
Sea, p. 63.
58 Heriot, Travels through the Canadas, p. 319.
59 Adair, History of the American Indians, p. 4.
Of the regard in which truth is held by the Indians of South America the
authorities I have consulted have little to say. The Coroados are not
deceitful.60 The Tehuelches of Patagonia nearly always lie in minor affairs, and
will invent stories for sheer amusement. “In anything of importance, however,
such as guaranteeing the safety of a person, they were very truthful, as long
as faith was kept with them. After a time,” Lieutenant Musters adds, “when
they ascertained that I invariably avoided deviating in any way from the truth,
they left off lying to me even in minor matters. This will serve to show that
they are not of the treacherous nature assigned to them by some ignorant

writers.”61 Among the Fuegians, according to Mr. Bridge, no one can trust
another, lying tales of slander are very common, great exaggeration is used,
and it is not even considered wrong to tell a lie.62 Snow, however, speaks of
“the honesty they undoubtedly evince in many of their transactions”;63 and
Darwin states that the Fuegian boy on board the Beagle “showed, by going
into the most violent passion, that he quite understood the reproach of being
called a liar, which in truth he was.”64
60 von Spix and von Martius, Travels in Brazil, ii. 242.
61 Musters, At Home with the Patagonians, p. 195 sq.
62 Bridges, in A Voice for South America, xiii. 202 sq. Cf. Hyades
and Deniker, Mission scientifique du Cap Horn, vii. 242; King and
Fitzroy, Voyages of the “Adventure” and “Beagle,” ii. 188.
63 Snow, Two Years Cruise off Tierra del Fuego, i. 347.
64 Darwin, Journal of Researches, p. 227.
Of the Australian aborigines we are told that some tribes and families
display on nearly all occasions honesty and truthfulness, whereas others
“seem almost destitute of the better qualities.”65 According to Mr. Mathew,
they are not wantonly untruthful, although one can rely on them being faithful
to a trust only on condition that they are exempt from strong temptation.66
Mr. Curr admits that under some circumstances they are treacherous, and that
it costs them little pain to lie; but from his own observations he has no doubt
that the black feels, in the commencement of his career at least, that lying is
wrong.67 Mr. Howitt has found the South Australian Kurnai “to compare not
unfavourably with our own people in their narration of occurrences, or as
witnesses in courts of justice as to facts. Among them a person known to
disregard truth is branded as a liar (jet-bolan).”68 Among the aborigines of
New South Wales people who cause strife by lying are punished, and “liars
are much disliked”; Dr. Fraser was assured by a person who had had much
intercourse with them for thirty years that he never knew them to tell a lie.69
Among the tribes of Western Victoria described by Mr. Dawson liars are
detested; should any man, through lying, get others into trouble, he is
punished with the boomerang, whilst women and young people, for the same

fault, are beaten with a stick.70 In his description of his expeditions into
Central Australia Eyre writes, “In their intercourse with each other I have
generally found the natives to speak the truth and act with honesty, and they
will usually do the same with Europeans if on friendly terms with them.”71
With regard to West Australian tribes Mr. Chauncy states that they are
certainly not remarkable for their treachery, and that he has very seldom
known any of them accused of it. He adds that they are “habitually honest
among themselves, if not truthful,” and that, during his many years’
acquaintance with them, he does not remember ever hearing a native utter a
falsehood with a definite idea of gaining anything by it. “If questioned on any
subject, he would form his reply rather with the view of pleasing the enquirer
than of its being true; but this was attributable to his politeness.”72 According
to a late Advocate-General of West Australia, “when a native is accused of any
crime, he often acknowledges his share in the transaction with perfect
candour.”73 Very different from these accounts is Mr. Gason’s statement
concerning the Dieyerie in South Australia. “A more treacherous race,” he
says, “I do not believe exists. They imbibe treachery in infancy, and practise it
until death, and have no sense of wrong in it…. They seem to take a delight
in lying, especially if they think it will please you. Should you ask them any
question, be prepared for a falsehood, as a matter of course. They not only lie
to the white man, but to each other, and do not appear to see any wrong in
it.”74 The natives of Botany Bay and Port Jackson in New South Wales are by
older writers described as no strangers to falsehood.75 And speaking of a tribe
in North Queensland, Mr. Lumholtz observed that “an Australian native can
betray anybody,” and that “there is not one among them who will not lie if it is
to his advantage.”76
65 Brough Smyth, Aborigines of Victoria, i. 25.
66 Mathew, ‘Australian Aborigines,’ in Jour. and Proceed. Roy.
Soc. N.S. Wales, xxiii. 387.
67 Curr, Australian Race, i. 43, 100.
68 Fison and Howitt, Kamilaroi and Kurnai, p. 256.
69 Fraser, Aborigines of New South Wales, pp. 41, 90.
70 Dawson, Australian Aborigines, p. 76.

71 Eyre, Expeditions of Discovery into Central Australia, ii. 385.
72 Chauncy, quoted by Brough Smyth, op. cit. ii. 275, 281. Cf.
Oldfield, ‘Aborigines of Australia,’ in Trans. Ethn. Soc. N.S. iii. 255.
73 Moore, quoted by Brough Smyth, op. cit. ii. 278.
74 Gason, ‘Dieyerie Tribe of Australian Aborigines,’ in Woods,
Native Tribes of South Australia, p. 257 sq.
75 Collins, English Colony in New South Wales, i. 600.
Barrington, History of New South Wales, p. 22.
76 Lumholtz, Among Cannibals, p. 100.
According to Mr. Hale, the Polynesians are not naturally treacherous, by no
means from a horror of deception, but apparently from a mere inaptitude at
dissembling; and it is said that the word of a Micronesian may generally be
relied upon.77 To the Tonga Islanders a false accusation appeared more
horrible than deliberate murder does to us, and they also put this principle
into practice.78 We are told by Polack that among the Maoris of New Zealand
lying is universally practised by all classes, and that an accomplished liar is
accounted a man of consummate ability.79 But Dieffenbach found that, if
treated with honesty, they were always ready to reciprocate such treatment;80
and, according to another authority, they believed in an evil spirit whom they
said was “a liar and the father of lies.”81 The broad statement made by von
Jhering, that among the South Sea Islanders lying is regarded as a harmless
and innocent play of the imagination,82 is certainly not correct. The
treacherous disposition attributed to the Caroline Islanders83 and the natives
of New Britain84 does not imply so much as that. The New Caledonians are,
comparatively speaking, “not naturally dishonest.”85 The Solomon Islanders
are praised as faithful and reliable workmen and servants,86 though cheating
in trade is nowadays very common among some of them.87 Of the people of
Erromanga, in the New Hebrides, the Rev. H. A. Robertson states that “truth,
in heathenism, was told only when it suited best, but,” he adds, “it is not that
natives are always reckless about the truth so much as that they seem utterly
incapable of stating anything definitely, or stating a thing just as it really
occurred.”88 In the opinion of some authorities, the Fijians are very untruthful

and regard adroit lying as an accomplishment.89 Their propensity to lie, says
the missionary Williams, “is so strong that they seem to have no wish to deny
its existence, or very little shame when convicted of a falsehood.” The
universal prevalence of the habit of lying is so thoroughly taken for granted,
“that it is common to hear, after the most ordinary statement, the rejoinder,
‘That’s a lie,’ or something to the same effect, at which the accused person
does not think of taking offence.” But the same writer adds:—“Natives have
often told me lies, manifestly without any ill-will, and when it would have
been far more to their advantage to have spoken the truth. The Fijians hail as
agreeable companions those who are skilful in making tales, but, under some
circumstances, strongly condemn the practice of falsehood…. On matters
most lied about by civilised people, the native is the readiest to speak the
truth. Thus, when convicted of some offence, he rarely attempts to deny it,
but will generally confess all to any one he esteems…. The following incident
shows that lying per se is condemned and considered disreputable. A white
man, notorious for falsehood, had displeased a powerful chief, and wrote
asking me to intercede for him. I did so; when the chief dismissed the case
briefly, saying, ‘Tell—that no one hates a foreigner; but tell him that every one
hates a liar!’”90 Other writers even deny that the Fijians were habitual liars;91
and Erskine found that those chiefs with whom he had to deal were so open
to appeals to their good faith as to convince him “that they had a due
appreciation of the virtue of truth.”92
77 Hale, U.S. Exploring Expedition, Vol. VI. Ethnography and
Philology, pp. 16, 73.
78 Mariner, Natives of the Tonga Islands, ii. 163 sq.
79 Polack, Manners and Customs of the New Zealanders, ii. 102
sq. See also Colenso, Maori Races of New Zealand, pp. 44, 46.
80 Dieffenbach, Travels in New Zealand, ii. 109.
81 Yate, Account of New Zealand, p. 145.
82 von Jhering, Der Zweck im Recht, ii. 606.
83 Angas, Polynesia, p. 386.
84 Powell, Wanderings in a Wild Country, p. 262.

85 Anderson, Travel in Fiji and New Caledonia, p. 233.
86 Parkinson, Zur Ethnographie der nordwestlichen Salomo
Inseln, p. 4.
87 Sommerville, ‘Ethnogr. Notes in New Georgia,’ in Jour. Anthr.
Inst. xxvi. 393.
88 Robertson, Erromanga, p. 384 sq.
89 Wilkes, U.S. Exploring Expedition, iii. 76.
90 Williams and Calvert, Fiji, p. 107 sq.
91 Erskine, Cruise among the Islands of the Western Pacific, p.
264. Anderson, Travel in Fiji and New Caledonia, p. 130.
92 Erskine, op. cit. p. 264.
Nowhere in the savage world is truth held in less estimation than among
many of the African races. The Negroes are described as cunning and liars by
nature.93 They “tell a lie more readily than they tell the truth,” and falsehood
“is not recognised amongst them as a fault.”94 They lie not only for the sake
of gaining some advantage by it, or in order to please or amuse, but their lies
are often said to be absolutely without purpose.95 Of the natives of the Gold
Coast the old traveller Bosman says, “The Negroes are all, without exception,
crafty, villainous and fraudulent, and very seldom to be trusted, being sure to
slip no opportunity of cheating an European, nor indeed one another.”96
Among all the Bakalai tribes “lying is thought an enviable accomplishment.”97
The Bakongo, in their answers, “will generally try and tell the questioner what
they think will please him most, quite ignoring the truthfulness we consider it
necessary to observe in our replies.”98 Miss Kingsley’s experience of West
African natives is likewise that they “will say ‘Yes’ to any mortal thing, if they
think you want them to.”99 The Wakamba are described as great liars.100
Among the Waganda “truth is held in very low estimation, and it is never
considered wrong to tell lies; indeed, a successful liar is considered a smart,
clever fellow, and rather admired.”101 Untruthfulness is said to be “a national
characteristic” of the tribes inhabiting the region of Lake Nyassa.102 From his
experience of the Eastern Central Africans, the Rev. D. Macdonald writes:

“‘Telling lies’ is much practised and is seldom considered a fault…. The negro
often thinks that he is flattered by being accused of falsehood. So, when
natives wish to pay a high compliment to a European who has told them an
interesting story, they look into his face and say, ‘O father, you are a great
liar.’”103 To the Wanika, says Mr. New, lying is “almost as the very breath of
their nostrils, and all classes, young and old, male and female, indulge in it. A
great deal of their lying is without cause or object; it is lying for lying’s sake.
You ask a man his name, his tribe, where he lives, or any other simple
question of like nature, and the answer he gives you will, as a rule, be the
very opposite to the truth; yet he has nothing to evade or gain by so doing.
Lying seems to be more natural to him than speaking the truth. He lies when
detection is evident, and laughs at it as though he thought it a good joke. He
hears himself called a mulongo (liar) a score of times a day, but he notices it
not, for there is no opprobrium in the term to him. To hide a fault he lies with
the most barefaced audacity and blindest obstinacy…. When his object is gain,
he will invent falsehoods wholesale…. He boasts that ulongo (lying) is his pesa
(piece, ha’pence), and holds bare truth to be the most unprofitable
commodity in the world. But while he lies causelessly, objectlessly, recklessly
in self-defence or for self-interest, he is not a malicious liar. He does not lie
with express intent to do others harm; this he would consider immoral, and
he has sufficient goodness of heart to avoid indulging therein…. I have often
been struck with the manner in which he has controlled his tongue when the
character and interest of others have been at stake.”104 If a Bantu of South-
Eastern Africa “undertakes the charge of any form of property, he accounts
for it with as great fidelity as if he were the Keeper of the Great Seal. But, on
the other hand, there are many circumstances in which falsehood is not
reckoned even a disgrace, and if a man could extricate himself from
difficulties by lying and did not do so, he would be simply thought a fool.”105
Andersson speaks of the “lying habits” of the Herero.106 Of the Bachapins, a
Bechuana tribe, Burchell observes that among their vices a universal disregard
for truth and a want of honourable adherence to their promise stand high
above the rest, the consequence of this habitual practice of lying being “the
absence of shame, even on being detected.”107 Among the Kafirs “deception
is a practised art from early childhood; even the children will not answer a
plain question.”108 It is considered a smart thing to deceive so long as a
person is not found out, but it is awkward to be detected; hence a native

father will enjoy seeing his children deceive people cleverly.109 “In trading
with them, you may make up your mind that all they tell you is untrue, and
act accordingly…. Your own natives, on the other hand, if they like you, will lie
for your benefit as strongly as the opposite party against you; and both sides
think it all fair trade.”110 And in a Kafir lawsuit “defendant, plaintiff, and
witnesses are allowed to tell as many lies as they like, in order to make the
best of their case.”111 But we also hear that Kafirs do not tell lies to their
chiefs, and that there are many among them who would never deceive a
white man whom they are fond of or respect.112 Among the Bushmans
veracity is said to be too often, yet not always, disregarded, “and the neglect
of it considered a mere venial offence.”113 “The first version of what a
Bushman or any native has to say can never be relied on; whatever you ask
him about, he invariably says first, ‘I don’t know,’ and then promises to tell
you all he does know. Ask him for news, and he says, ‘No; we have got no
news,’ and shortly afterwards he will tell you news of perhaps great
interest.”114 In Madagascar there was no stigma attached to deceit or fraud;
they “were rather admired as proofs of superior cunning, as things to be
imitated, so far at least as they would not bring the offender within the
penalties of the native laws.”115 Ellis says that “the best sign of genius in
children is esteemed a quickness to deceive, overreach and cheat. The people
delight in fabulous tales, but in none so much or universally as in those that
relate instances of successful deceit or fraud…. Their constant aim is, in
business to swindle, in professed friendship to extort, and in mere
conversation to exaggerate and fabricate.”116 These statements refer to the
Hovas; but among the Betsileo, inhabiting the same island, lying and cheating
are equally rife, and “neither appears to have been thought a sin, so long as it
remained undiscovered.”117 At the same time many of the Madagascar
proverbs are designed to put down lying, and to show that truth is always
best.118
93 Baker, Albert N’yanza, i. 289. Burton, Mission to Gelele, ii.
199.
94 Reade, Savage Africa, p. 580.
95 Hübbe-Schleiden, Ethiopien, Studien über West-Afrika, p. 186
sq.

96 Bosman, New Description of the Coast of Guinea, p. 100.
97 Du Chaillu, Explorations and Adventures in Equatorial Africa,
p. 390. Cf. ibid. p. 331.
98 Ward, Five Years with the Congo Cannibals, p. 47.
99 Kingsley, Travels in West Africa, p. 525.
100 Krapf, Travels in Eastern Africa, p. 355.
101 Wilson and Felkin, Uganda, i. 224. Cf. Felkin, ‘Notes on the
Waganda Tribe,’ in Proceed. Roy. Soc. Edinburgh, xiii. 722; Ashe,
Two Kings of Uganda, p. 295.
102 Macdonald, ‘East Central African Customs,’ in Jour. Anthr.
Inst. xxii. 119.
103 Macdonald, Africana, i. 262 sq.
104 New, Life, Wanderings, and Labours in Eastern Africa, p. 96
sqq.
105 Macdonald, Light in Africa, p. 211.
106 Andersson, Lake Ngami, p. 217. Cf. ibid. p. 499 (Bayeye).
107 Burchell, Travels in the Interior of Southern Africa, ii. 553 sq.
108 Holden, The Past and Future of the Kaffir Races, p. 179.
109 Kidd, The Essential Kafir, p. 285.
110 Leslie, Among the Zulus and Amatongas, p. 199. Cf. ibid. p.
202.
111 Maclean, Compendium of Kafir Laws and Customs, p. 58.
112 Kidd, The Essential Kafir, p. 286.
113 Burchell, op. cit. ii. 54.
114 Chapman, Travels in the Interior of South Africa, i. 76 sq.
115 Sibree, The Great African Island, p. 338.

116 Ellis, History of Madagascar, i. 143 sq.
117 Sibree, op. cit. p. 125. Shaw, ‘Betsileo,’ in Antananarivo
Annual, iii. 79.
118 Clemes, ‘Malagasy Proverbs,’ ibid. iv. 29.
But in Africa, also, there are many peoples who have been described as
regardful of truth and hostile to falsehood. Early travellers speak very highly
of the sincerity of the Hottentots. Father Tachart says that they have more
honesty than is almost anywhere found among Christians;119 and Kolben
agrees with him, asserting that the word of a Hottentot is sacred, and that
there is hardly anything upon earth which he looks upon as a fouler crime
than breach of engagement.120 According to Barrow, the Hottentots are
perfectly honest and faithful, and, “if accused of crimes of which they have
been guilty, they generally divulge the truth.”121 Of the Manansas Dr. Holub
states that, so far as his experience goes, they are beyond the average for
honesty and fidelity, and are consequently laughed at by the more powerful
tribes as “the simpletons of the North.”122 The Bahima in the Uganda
Protectorate are usually very honest and truthful, and most of the Nandi think
it very wicked to tell a lie.123 Among the For tribe of Central Africa “lying is
held to be a great crime; even the youngest children are severely beaten for
it, and any one over fifteen or sixteen who is an habitual liar suffers the loss
of one lip as a penalty.”124 Speaking of the natives of Sierra Leone,
Winterbottom remarks that, in proportion as we advance into the interior of
the country, the people are found to be more devoid of art and more free
from suspicion.125 “Those who have dealings with the Fán universally prefer
them in point of honesty and manliness to the Mpongwe and Coast races,”
and it is an insult to call one of them a liar or coward.126 Monrad, who wrote
in the beginning of the nineteenth century, asserts that among the Negroes of
Accra lying is by no means common and that they are as a rule honest
towards their own people.127 According to an early authority, the people of
Great Benin were very straightforward and did not cheat each other.128 Mr.
and Mrs. Hinde write that the Masai are as a race truthful, and that a grown-
up person among them will not lie; “he may refuse to answer a question, but,
once given, his word can be depended on.”129 Dr. Baumann, on the other
hand, says that they often lie, but that they regard lying as a great fault.130

The Guanches of the Canary Islands are stated to have been “slaves to their
word.”131 Of the Berbers of Morocco Leo Africanus writes:—“Most honest
people they are, and destitute of all fraud and guile…. They keep their
couenant most faithfully; insomuch that they had rather die than breake
promise.”132 M. Dyveyrier found the same virtue among the Touareg, another
Berber people:—“La fidélité aux promesses, aux traités, est poussée si loin par
les Touareg, qu il est difficile d’obtenir d’eux des engagements…. Il est de
maxime chez les Touâreg, en matière de contrat, de ne s’engager que pour la
moitié de ce qu’on peut tenir, afin de ne pas s’exposer au reproche
d’infidélité…. Le mensonge, le vol domestique et l’abus de confiance sont
inconnus des Touâreg.”133 As regards the truthfulness of the African Arabs
opinions vary. Parkyns asks, “Who is more trustworthy than the desert
Arab?”134 According to Rohlfs and Chavanne, on the other hand, the Arabs of
the Sahara are much addicted to lying;135 and of the Arabs of Egypt Mr. St.
John observes:—“There is no general appreciation of a man’s word…. ‘Liar’ is
a playful appellative scarcely reproachful; and ‘I have told a lie’ a confession
that may be made without a blush.”136 Herodotus’ statement that “the Arabs
observe pledges as religiously as any people,”137 is true of the Bedouins of
Arabia in the present day. “No vice or crime is more deservedly stigmatised as
infamous among Bedouins than treachery. An individual in the great Arabian
Desert will be forgiven if he should kill a stranger on the road, but eternal
disgrace would be attached to his name, if it were known that he had robbed
his companion, or his protected guest, even of a handkerchief.”138 Wallin
affirms that you may put perfect trust in the promise of a Bedouin, as soon as
you have eaten salt and bread with him.139 But whilst faithfulness to a tacit or
express promise is thus regarded by him as a sacred duty, lying and cheating
are as prevalent in the desert as in the market-towns of Syria.140 Speaking of
the Bedouins of the Euphrates, Mr. Blunt observes:—“Truth, in ordinary
matters, is not regarded as a virtue by the Bedouins, nor is lying held
shameful. Every man, they say, has a right to conceal his own thought. In
matters of importance, the simple affirmation is confirmed by an oath, and
then the fact stated may be relied on. There is only one exception to the
general rule of lying among them. The Bedouin, if questioned on the breed of
his mare, will not give a false answer. He may refuse to say, or he may
answer that he does not know; but he will not name another breed than that
to which she really belongs…. The rule, however, does not hold good on any

other point of horse dealing. The age, the qualities, and the ownership of the
horse may be all falsely stated.”141
119 Tachart, quoted by Kolben, Present State of the Cape of
Good Hope, i. 167.
120 Ibid. i. 59.
121 Barrow, Travels into the Interior of Southern Africa, i. 151
sq.
122 Holub, Seven Years in South Africa, ii. 209.
123 Johnston, Uganda Protectorate, ii. 630, 879.
124 Felkin, in Proceed. Roy. Soc. Edinburgh, xiii. 232.
125 Winterbottom, Account of the Native Africans in the
Neighbourhood of Sierra Leone, i. 206 sq.
126 Burton, Two Trips to Gorilla Land, i. 225 sq.
127 Monrad, Guinea-Kysten og dens Indbyggere, p. 6.
128 Quoted by Ling Roth, Great Benin, p. 45.
129 Hinde, The Last of the Masai, p. 34.
130 Baumann, Durch Massailand, p. 165.
131 Bory de St. Vincent, Essais sur les Isles Fortunées, p. 70.
132 Leo Africanus, History and Description of Africa, i. 183.
133 Dyveyrier, Exploration du Sahara, p. 384 sq.
134 Parkyns, Life in Abyssinia, ii. 182.
135 Chavanne, Die Sahara, p. 392.
136 St. John, Adventures in the Lybian Desert, p. 31.
137 Herodotus, iii. 8.
138 Burckhardt, Notes on the Bedouins and Wahábys, p. 190 sq.

139 Wallin, Reseanteckningar från Orienten, iii. 116.
140 Burckhardt, op. cit. p. 104 sq. Cf. Wallin, op. cit. iv. 89 sq.;
Doughty, Arabia Deserta, i. 241.
141 Blunt, Bedouin Tribes of the Euphrates, ii. 203 sq. Cf.
Niebuhr, Travels through Arabia, ii. 302:—“There is no instance of
false testimony given in respect to the descent of a horse. Every
Arabian is persuaded that himself and his whole family would be
ruined, if he should prevaricate in giving his oath in an affair of
such consequence.”
Various statements of travellers thus directly contradict the
common opinion that want of truthfulness is mostly a characteristic
of uncivilised races.142 And we have much reason to assume that a
foreigner visiting a savage tribe is apt rather to underrate than to
overestimate its veracity. Mr. Savage Landor gives us a curious
insight into an explorer’s method of testing it. “If you were to say to
an Ainu, ‘You are old, are you not?’ he would answer ’Yes’; but if you
asked the same man, ‘You are not old, are you?’ he would equally
answer ‘Yes.’” And then comes the conclusion:—“Knowingly speaking
the truth is not one of their characteristics; indeed, they do not know
the difference between falsehood and truth.”143 It is hardly
surprising to hear from other authorities that the Ainu are
remarkably honest, and regard veracity as one of the most
imperative duties.144 Speaking of the Uaupés and other Brazilian
tribes, Mr. Wallace observes:—“In my communications and inquiries
among the Indians on various matters, I have always found the
greatest caution necessary, to prevent one’s arriving at wrong
conclusions. They are always apt to affirm that which they see you
wish to believe, and, when they do not at all comprehend your
question, will unhesitatingly answer, ‘Yes.’”145 Savages who are
inclined to give inaccurate answers to questions made by strangers,
may nevertheless be truthful towards each other. As the regard for
life and property, so the regard for truth varies according as the
person concerned is a foreigner or a tribesman. “Perfidy and
faithlessness,” says Crawfurd, “are vices of the Indian islanders, and
those vices of which they have been most frequently accused by

strangers. This sentence against them must, however, be understood
with some allowances. In their domestic and social intercourse, they
are far from being a deceitful people, but in reality possess more
integrity than it is reasonable to look for with so much
misgovernment and barbarity. It is in their intercourse with strangers
and with enemies that, like other barbarians, the treachery of their
character is displayed.”146 The natives of the interior of Sumatra are
“dishonest in their dealings with strangers, which they esteem no
moral defect.”147 Dalager states that the same Greenlanders who,
among themselves, in the sale of an object which, the buyer had not
seen, would depreciate it rather than overpraise it—even though the
seller was anxious to get rid of it—told frightful lies in their
transactions with Danish traders.148 The Touareg, whilst scrupulously
faithful to a promise given to one of their own people, do not regard
as binding a promise given to a Christian;149 and their Arab
neighbours say that their word, “like water fallen on the sand, is
never to be found again.”150 The Masai, according to Herr Merker,
hold any kind of deceit to be allowable in their relations with persons
of another race.151 The Hovas of Madagascar even considered it a
duty for anyone speaking with foreigners on political matters to state
the exact opposite to the truth, and punished him who did
otherwise.152
142 Burton, City of the Saints, p. 130. Vierkandt, Naturvölker
und Kulturvölker, p. 273. von Jhering, Der Zweck im Recht, ii.
606.
143 Landor, Alone with the Hairy Ainu, p. 283.
144 Holland, in Jour. Anthr. Inst. iii. 237. von Siebold, Aino auf
der Insel Yesso, p. 25.
145 Wallace, Travels on the Amazon, p. 494 sq.
146 Crawfurd, op. cit. i. 71 sq. Cf. Christian, Caroline Islands, p.
71 sq.
147 Marsden, op. cit. p. 208.

148 Dalager, op. cit. p. 60 sq.
149 von Bary, quoted by Chavanne, Die Sahara, p. 186.
150 Dubois, Timbuctoo, p. 231.
151 Merker, Die Masai, p. 115.
152 Ellis, History of Madagascar, i. 144. Professor Stanley Hall
observes (‘Children’s Lies,’ in American Journal of Psychology, iii.
62) that ”truth for our friends and lies for our enemies is a
practical, though not distinctly conscious rule widely current with
children.”
In point of truthfulness savages are in many cases superior to
nations more advanced in culture. “A Chinese,” says Mr. Wells
Williams, “requires but little motive to falsify, and he is constantly
sharpening his wits to cozen his customer—wheedle him by promises
and cheat him in goods or work.”153 His ordinary speech is said to be
so full of insincerity that it is very difficult to learn the truth in almost
any case.154 He feels no shame at being detected in a lie, nor does
he fear any punishment from his gods for it;155 if you call him a liar,
“you arouse in him no sense of outrage, no sentiment of
degradation.”156 Yet the moral teachings of the Chinese inculcate
truthfulness as a stringent duty. One of their injunctions is, “Let
children always be taught to speak the simple truth.”157 Many
sayings may be quoted from Confucius in which sincerity is
celebrated as highly and demanded as urgently as it ever was by any
Christian moralist. Faithfulness and sincerity, he said, should be held
as first principles. Sincerity is the way of Heaven, the end and
beginning of things, without which there would be nothing. It is as
necessary to truly virtuous conduct as a boat is to a man wishing to
cross a river, or as oars are to a boat. The superior man ought to
feel shame when his conduct is not in accord with his words.158 But
there are instances in which sincerity has to yield to family duties: a
father should conceal the misconduct of his son, and a son that of
his father.159 Moreover, the great moralists themselves did not
always act up to their lofty principles. Confucius and Mencius

sometimes did not hesitate to tell a lie for the sake of
convenience.160 The former could excuse himself from seeing an
unwelcome visitor on the ground that he was sick, when there was
nothing the matter with him;161 and he deliberately broke an oath
which he had sworn, because it had been forced from him.162 In
Japan, Burma, and Siam, truth is more respected than in China. “In
love of truth,” says Professor Rein, “the Japanese, so far as my
experience goes, are not inferior to us Europeans.” 163 The Burmese,
though partial to much exaggeration, are generally truthful.164 And
“the mendacity so characteristic of Orientals is not a national defect
among the Siamese. Lying, no doubt, is often resorted to as a
protection against injustice and oppression, but the chances are
greatly in favour of truth when evidence is sought.”165
153 Wells Williams, The Middle Kingdom, i. 834.
154 Smith, Chinese Characteristics, p. 271.
155 Cooke, China, p. 414. Edkins, Religion in China, p. 122.
Bowring, Siam, i. 106. Wells Williams, op. cit. i. 834.
156 Smith, Chinese Characteristics, p. 271.
157 Wells Williams, op. cit. i. 522.
158 Lun Yü, i. 8. 2; vii. 24; ix. 24; xii. 10. 1; xv. 5. 2. Chung
Yung, xx. 18. Douglas, Confucianism and Taouism, pp. 103, 114,
146. Legge, Chinese Classics, i. 100.
159 Lun Yü, xiii. 18. 2.
160 Legge, Chinese Classics, i. 100. Smith, Chinese
Characteristics, p. 267.
161 Lun Yü, vi. 13.
162 Lun Yü, xvii. 20.
163 Rein, Japan, p. 393.
164 MacMahon, Far Cathay and Farther India, p. 62. Forbes,
British Burma, p. 45. Fytche, Burma Past and Present, ii. 67.

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