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Government Performance Management Using CostPerform Business Models |
| Executive management of a Federal Credit Agency that oversees student loan applications, originations, lending, consolidations and servicing was asked by an oversight agency to provide cost of processes as a method to continuously monitor loan and process unit cost and performance. The component agency, one of a few performance based organizations (PBOs) in the Federal Government, decided to employ activity-based costing (ABC) as the solution to provide cost visibility and monitoring. To answer the request from the oversight authority, the agency first tried traditional ABC models. It was soon evident that these models could not adequately provide the requested performance data. The agency then implemented CostPerform and satisfied the process and unit cost requirements of a PBO agency. In fact, the client agency was recently written up in a General Accountability Office (GAO) study as a best in class cost management system. According to GAO, the CostPerform client agency "used unit cost information to renegotiate and consolidate several contracts relating to the administration of FSA's direct loan program and reduce FSA's unit cost for loan consolidations from $115 per unit to $66 per unit, over a period of 18 months." |
| According to GAO, the CostPerform client agency "said they used unit cost information to renegotiate and consolidate several contracts relating to the administration of FSA's direct loan program and reduce FSA's unit cost for loan consolidations from $115 per unit to $66 per unit, over a period of 18 months." (Managerial Cost Accounting Practices: |
| Implementation and Use Vary Widely across 10 Federal Agencies, GAO, www.gao.gov/cgi-bin/getrpt?GAO-07-679. July 2007). |
Using the CostPerform™ methodology and software, the consulting team supported the Federal Agency cost management team in modeling all of their resources, processes, and loan activity. The shared service costs and IT investments had been particularly difficult for management to allocate meaningfully by loan program. The CostPerform™ project cut through the hundreds of thousands of line items in the general ledger and loan files and reorganized the cost data to reflect clean and understandable total and unit costs of processes associated with their loan programs and channels, as well as the resulting costs of the various loan types. |
The Federal Client Agency was able to see: |
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All of the total and unit cost for loan, student, and other business channels; |
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The changing gap between paper and on-line loan origination costs; and, |
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Outsourced services that were out of line in terms of market unit costs. |
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This last finding led to renegotiating servicing and other outsourced processes, as well as renegotiating the shared service costs the component agency received from the main agency. |
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The CostPerform™ Client Agency has used CostPerform continuously to minor and improve their loan programs. In the coming years the Agency will increase the focus of the tool to provide predictive modeling and forecasting which will make the tool an integral part of Agency budgeting and planning, and performance management and improvement. |
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The CostPerform™ business model and approach presents an effective framework for linking Government (state, local, and federal) budgets, performance metrics, and outputs into one tool for end to end performance management. This provides government agency with a cost effective tool and methodology to perform end to end performance management and performance improvement. This is particularly timely given the emphasis on performance management over the past years, from the Government Performance and Results Act (GPRA), the Presidents Management Agenda (PMA), and the most recent Executive Order from the White House, Executive Order: Improving Government Program (http://www.whitehouse.gov/news/releases/2007/11/20071113-9.html). which appoints a Federal Agency Performance Improvement Officer (PIO) in almost all agencies, |
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The CostPerform™ methodology and software has been in use for more than 10 years by hundreds of private sector and Government agencies in Europe. Over the past 2 years it has been been implemented in the U.S. |
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Financial and Non-Financial Performance Challenges That Assist Government Executives, Managers, and Analysts
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Government Agencies Face Three Critical, and Related Challenges |
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How does a Government Agency with restrained resources predict total cost of citizen services? |
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Instead of profitability, Government is concerned with efficiency and effectiveness; thus, how does it assure that programs, shared services, overhead, outsourced functions, and investments are performing? |
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How does Government contain costs and improve performance so as to maximize public funding? |
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CostPerform™ is a powerful software system and methodology that creates the context for budget and financial performance innovation at a level that results in significant performance enhancement. |
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This innovation results in better outcomes through cost control based on service level and planned service line growth. The CostPerform™ methodology and technology are specifically designed to address those challenges of Government. The result is greater alignment, capacity and performance toward an public organization's desired outcomes. |
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CostPerform™ Provides Solutions for Multi-Level Challenges |
Executive Level |
In an environment where more and more public sector organizations are facing structural budgeting challenges, the need to introduce innovative solutions and strategic thinking into the process is critical. |
Provides Critical Information |
Currently Government C-Class Officers (CEO/ Administrators/ Directors, CFO, CIO) cannot easily see the total cost of each process, program, and shared and sustaining organization components, let alone what they will be under different volume or demand scenarios. While pieces of this information are available,, CostPerform™ offers the way to get the true picture in real time by linking the myriad of data into one tool. |
Capacity and Resource Management |
CostPerform™ helps determine the resource requirements and implementation challenges of growth. Government officials will more confidently redeploy or add capacity in key areas and strategically decide to avoid or alternatively deploy overcapacity. |
Department Level |
Government Department leaders are challenged by the implementation of changes that can greatly affect the department's outcomes. CostPerform™ produces an accurate view that allows leaders to see the impact of alternatives in program planning in order to: |
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Clearly define and understand processes that comprise efforts from multiple departments; |
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Identify correct analytics to track and test the outcomes of changes; |
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Create critical action items, such as, the myriad of performance mandates in the Government sector, from GPRA, to PMA, to the most recent Executive Order on Improving Government Program Performance. Usually, performance tools target strategy from the top down, or excruciating detail from the bottom up – CostPerform provides the right level of detail at the right level of the organization to bring all parties on the same page and to align them for performance management, monitoring, and improvement. |
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We clarify the challenges at all levels of leadership and create a way to focus the management team on alignment to create solutions that address patient care levels and long-term operational and strategic management. |
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What does this do for you? |
CostPerform™ technology and methodology provide a shared understanding of the capacities and costs of the processes within your organization. |
CostPerform™ gives you the ability to see where your resources are being used and what the public organization is getting in return. This allows you to: |
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Strategically budget based on resource availability and outcomes; |
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Search for best practices; |
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Complete Program Outcome planning for: |
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- Populations served
- Stakeholders
- Capacity Hiring and usage
- Investments such as IT
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Enhance program outcomes; |
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Create the roadmap for achieving the success of performance improvement initiatives (Lean Six Sigma, Reorganizations, Reengineering). |
Cost Perform Software and Methodology Advantages |
Web-Based Reporting and Graphics |
Interactive web-based drill down reports make process and activity-based costing and management (ABC/M) reporting useful for analysts and managers; Reports are standard and custom designed through a wizard for ease and repeatability. Graphical and tabular views of data and information are easy and automated. |
Build Models That Fit A Particular Government Business Fast |
The flexible architecture of the software allows for a more realistic replication of business processes and uniqueness. Furthermore, flexible architecture allows models to report overhead, interdepartmental services and direct activity components of each process, product or service cost separately and simultaneously. |
Actual and Unit Costs Visibility at Each State of Product/Service (Output) Flow |
Total and unit costs are visible throughout the various product/service stages. Additionally, consumption rates (pull) or fixed costs (push) drivers may be used through a single interface. This enables users to know what processes vary by service levels, what processes vary by process levels, and what processes remain fixed. |
Dashboard To Monitor Key Metrics and Project/Forecast Impacts on Resources, Processes, and Outputs |
Historical and planning models are built quickly. Planning models enable projection and forecasting capabilities. For instance, by varying product/service output quantity (volume) and productivity assumptions, analyses of the impact on budget and capacity can be analyzed. The dashboard feature allows for selected attributes to display in a dashboard and users can change the attributes to analyze impacts on resource capacity, process and output unit and total costs – a simple "what-if" scenario capability for planning and business intelligence. |
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