Joint CMG/PCMGLenhardt & Colton, LLC

Activity Based Cost ManagementActivity Based Cost Management

Joint CMG/PCMG Meeting

October 17, 2000

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 2

October 17, 2000

AgendaAgenda

– Background of ABC Mary Prescott

– ABC in Program Support Pete Lenhardt

– Moving from ABC to ABM Pete Lenhardt

– Q&A All

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 3

October 17, 2000

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 4

October 17, 2000

Current StatusCurrent Status

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 5

October 17, 2000

Status, cont.Status, cont.

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 6

October 17, 2000

Perceived Cost

Actual CostActual Cost

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 7

October 17, 2000

Activity Based Cost ManagementActivity Based Cost Management

“Activity-Based”Activity Based CostingActivity Based Management

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 8

October 17, 2000

Input OutputActivity

Resource $

End Cost Objectives

ProjectsOfferings Customers

Demands

An Activity-Based ApproachAn Activity-Based Approach

Exploit the “Process Model” of Work

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 9

October 17, 2000

What does “it” cost?– What is the annual

cost of Construction Management?

– What is the cost of a “typical” bridge design?

– How much does it cost to prepare a “complex” PS&E package?

Activity Based ManagementActivity Based Management

How well are we meeting our objectives?

Activity Based Performance

Measures

How can we institutionalize improvements?

Activity Based Budgeting

How do we know what to improve?

Activity Based Continuous

Improvement

How can we better manage

capital projects?

Activity Based Project/Resource

Management

Activity Based SolutionsActivity Based SolutionsProblem? Solution!

How much does it really cost?

Activity Based Costing

ActivitiesActivities

Activities Outputs

Resources

Activity Analysis

Inputs

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 10

October 17, 2000

Master Activity ListActivity # Activity Name P/S Output

Output VolumeMeasure

OutputCount

Total Orig.Dollars

OTS-01 Produce a PS&EPackage.

P A PSE Package # of (n) PSEPackages

Seenormalization

workbookOTS-02 Provide OTS expertise to

non-OTS projects andprograms.

P An OTSresponse.

Level of effort (#of OTS hours)

LOE

OTS-03 Prepare municipal &utilityagreements/permits.

P ExecutedDocuments

# of (n) ExecutedDocuments

Seenormalization

workbookOTS-04 Manage consultant

contract process.P A managed

consultantcontract process.

# of (n) activeconsultantcontracts

Seenormalization

workbookOTS-05 Develop customized

software and systems.P Supported

ApplicationPackages

# of (n)SupportedApplicationPackages

Seenormalization

workbook

OTS-06 Develop/design finalproject plans & aestheticdesign guides.

P A final projectplan or aestheticdesign guide

# of (n) finalproject plans/aesthetic guides

Seenormalization

workbookOTS-07 Design and deliver OTS

Training Events.P Training # of (n) training

events.See

normalizationworkbook

OTS-08 Prepare and distributeprogram support reports.

P An authoredreport

# of (n) OTSreports

Seenormalization

workbookOTS-10 Publish and update

standards andspecifications.

P Published/updated standards andspecifications

# of (n)published/updatedstandards &specifications.

Seenormalization

workbook

OTS-98 Manage and administerOTS activities.

S NA NA NA

Grand Total

Partial Activity List—OTSPartial Activity List—OTS

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 11

October 17, 2000

How much does it cost?

On which activity do we spend the greatest amount of resources?

Activity Cost Pareto ReportActivity Cost Pareto Report

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 12

October 17, 2000

How much does it cost to… manage and administer

our primary (core) activities?

Secondary ActivitiesSecondary Activities

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 13

October 17, 2000

How much does it cost… to complete one unit of output?

Dollars Per Output SummaryDollars Per Output Summary

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 14

October 17, 2000

Activity Dictionary EntryActivity Dictionary Entry

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 15

October 17, 2000

TS1—Produce a PS&E PackageTS1—Produce a PS&E Package

Normalization Criteria

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 16

October 17, 2000

TS1—Produce a PS&E PackageTS1—Produce a PS&E Package

Normalization Factors

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 17

October 17, 2000

TS1—Produce a PS&E PackageTS1—Produce a PS&E Package

Hours Per Output Type

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 18

October 17, 2000

TS1—Produce a PS&E PackageTS1—Produce a PS&E Package

Dollars Per Output Type

1.0X

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 19

October 17, 2000

TS1—Kinds of Resources per OutputTS1—Kinds of Resources per Output

Joint CMG/PCMG Lenhardt & Colton, LLC Slide 20

October 17, 2000

From ABC to ABMFrom ABC to ABM

Identify improvement opportunities

Reduce NVA Improve VA

Develop process controls

Non-financial process reports

Process Controls

Current ABC Project

Identify Resources

Develop ABC Information

Identify outputs and CPO

Identify Activities

ABC info for strategic decisions

Strategic Information

Develop action plans

Improvement Project Status Reports

Process Improvements

Incorporate in new budgets

Activity Based Planning & Analysis

Resource Controls

Cost, Quality, Time (CQT)

Performance Measures