Zero Base Budgeting (ZBB) in the public sector and the private sector are very different processes, and this must be understood when implementing a ZBB process in the public sector. “The use of ZBB in the private sector has been limited primarily to administrative overhead activities (i.e. administrative expenses needed to maintain the organization…)”.[2] For example, Peter Phyrr used ZBB successfully at Texas Instruments in the 1960s and authored an influential 1970 article in Harvard Business Review. In 1973, President Jimmy Carter, while governor of Georgia, contracted with Phyrr to implement a ZBB system for the State of Georgia executive budget process.[3]
President Carter later required the adoption of ZBB by the federal government during the late 1970s. “Zero-Base Budgeting (ZBB) was an executive branch budget formulation process introduced into the federal government in 1977. Its main focus was on optimizing accomplishments available at alternative budgetary levels. Under ZBB agencies were expected to set priorities based on the program results that could be achieved at alternative spending levels, one of which was to be below current funding.” [4]
According to Peter Sarant, the former director of management analysis training for the US Civil Service Commission during the Carter ZBB implementation effort, “ZBB means “different things to different people.” Some definitions are implying that zero-base budgeting is the act of starting budgets from scratch or requiring each program or activity to be justified from the ground up. This is not true; the acronym ZBB, is a misnomer. ZBB is a misnomer because in many large agencies a complete zero-base review of all program elements during one budget period is not feasible; it would result in excessive paperwork and be an almost impossible task if implemented.” [5] In many respects the “common misunderstanding” of ZBB noted above resemble a “sunset review” process more than a traditional public sector ZBB process.