MICs can sometimes be deferred or advanced without penalty
Last updated on December 26th, 2017 at 07:57 pm
Although rescheduling interest payments on financial debts is possible only by prearrangement, by special arrangement, or in bankruptcy, MICs on technical debt can often be deferred or advanced by simply rescheduling any work that might incur them. This is possible because, for some kinds of technical debt, MICs accumulate only if we perform engineering work that’s affected by that debt. This property is especially useful when we plan to retire an asset that bears technical debt, because when it’s removed from service, the technical debt it carries vanishes.
A rehabilitated Green Line car of the Massachusetts Bay Transit Authority. Trolley cars still travel on surface streets in Boston, but the only active lines are in medians of divided roadways. Many streets in and around Boston still contain buried trolley tracks. They comprise a technical debt, and MICs continue to accrue in the form of broken pavement and a near-continuous need to patch roadways, due to surface decomposition from the freeze-thaw cycle and the constant small movements of the buried tracks due to traffic loads. A recent sewer upgrade project in Cambridge required removal of buried tracks to remove and replace the old sewer line. This presented an opportunity to defer street surface maintenance (MICs) to take advantage of the surface rebuilding that was included in the sewer project, though I don’t know whether that opportunity was actually exploited.
For most conventional financial debts, interest charges accumulate until the debt is retired. Interest charges might be zero for defined time periods, but they’re never negative. Failure to meet the contractual payment schedule can result in penalties and additional interest charges.
But at times, for technical debt, MICs can be deferred or advanced without penalty and without additional “interest charges.” In other words, the organization can arrange to temporarily nullify the MICs on a particular class of technical debt, or for particular instances of that class, by simply rescheduling a project or projects. This is possible when the nature of the debt is such that MICs accrue only if there is a need to perform work on assets that are affected by the debt in question. In a given fiscal period, if no work is performed on those assets, the MICs can be zero. By scheduling projects accordingly, organizations can arrange for MICs to be zero.
There is one caveat. As discussed in “How technical debt can create more technical debt,” as long as a particular class of technical debt remains in place, its associated MPrin might increase. Deferring retirement of a class of technical debt is wise only if its associated MPrin is controlled or if projected changes in its MPrin are acceptable.
The Principal Principle is that a focus on the metaphorical principal of a technical debt can be your undoing. Focus on the metaphorical interest charges. Drive them to Zero and keep them there.
Misunderstandings about the metaphorical interest charges on technical debt are costly. They prevent us from exploiting the properties of technical debt that reduce carrying costs and retirement costs. And the misunderstandings arise from the fact that the technical debt metaphor is only a metaphor—technical debt and financial debt are different.
The metaphorical interest charges (MICs) and metaphorical principal (MPrin) of a particular class of technical debt can change as a result of retiring other seemingly unrelated classes of technical debt. In most cases, engineering expertise is required to determine technical debt retirement strategies that can exploit this property of technical debt.
Unlike financial debt, for technical debt there are no legally required reports or disclosures. We can sometimes estimate MICs, but most organizations don’t track the data necessary to estimate MICs with useful precision. Indeed, developing useful estimates is often technically impossible.
For financial debts, the interest charges associated with a unit of debt are (usually) the same for every unit of debt incurred under the same loan agreement. But for technical debt, the MICs associated with a given instance of a class of technical debt might differ substantially from any other instance of the same class of technical debt, even if those instances of technical debt were incurred at the same time as a result of a single decision or sequence of events.
The common understanding of interest on financial debts doesn’t correspond to the reality of technology-based systems, which are the targets of the technical debt metaphor. Formulating sound technical debt policy depends on understanding the nature of the difference between interest on financial debt and the metaphorical interest charges associated with technical debt.
