PURPOSE: The purpose of ABC/M is to provide visibility into the cost and performance of DOI-wide processes and outputs, as well as provide individual Bureau program and financial managers with consistent information, training, and tools to apply and use ABC/M information to improve business operations. ABC/M allows the Department to break its mission down into specific work activities to measure costs and performance. This information allows the Department to improve program performance, assure that the Departmental budget supports best value results, respond to customer demands, and plan for workforce skills needed to deliver program commitments.
ABC/M DESCRIPTION: ABC/M is a management tool that provides information about the cost of doing work and how work aligns with the Department's strategic objectives. ABC/M is a methodology that allows an organization to focus on the activities or work done that generate cost, and to analyze what influences the amount of cost, what causes cost to occur, the cost of work performed, and the outputs produced from the work done.
Traditionally, organizations capture costs by object class, such as salaries, travel, equipment, materials, or training. This object class view provides little information on what an organization actually produced or accomplished. ABC/M realigns these costs by work activity and shows what an organization produces. By focusing on the outputs of work, an organization can measure how efficiently it is doing work, and can determine how effective its work processes were in producing outputs. Knowing how efficiently and effectively it works, an organization can reengineer work processes to improve performance, and better allocate resources based on performance and costs.
ABC/M IMPLEMENTATION AT DOI: The Department's work is defined in approximately 300 work activities. These 300 work activities align to established goals and strategies for executing the Department's mission in resource protection, resource use, recreation, and serving communities. This alignment of work against the Department's goals and strategies allows measurement of the cost of executing the Department's Strategic Plan, and allocation of resources to do work through the Strategic Plan.
Most bureaus have their own set of ABC/M work activities defining bureau management needs. These bureau work activities align with the DOI work activities in a hierarchical relationship that assigns one or more bureau work activities to a single DOI work activity. DOI work activities are summary level work activities; bureau work activities translate the DOI work activities into the work done within a bureau.
Although work activities can produce more than one output, all DOI work activities have only one output identified as the primary work output for the activity. This primary work output is the output that is most important to cost, or is the primary output produced by the work activity. All work activity costs are associated with this primary output. This primary output is the basis for unit costing (cost per unit of output produced) to gauge the cost efficiency of work.
ABC/M captures the full cost of doing work. The full cost of doing work is the cost of performing the work activity itself, plus all associated overhead (or indirect) costs, such as budgeting, accounting, procurement, human resources, program management, etc. Overhead costs, captured in overhead cost activities, are allocated to the (direct) work activities based on direct labor costs.
STATUS: Formal Department-wide ABC/M implementation began FY04 with all DOI employees documenting their time, purchases, travel, training, etc. and outputs to the (bureau, OS Office, or departmental) work activities they performed. ABC/M work activity codes have become part of the Department/bureau cost structure.
An ABC/M system developed by the National Business Center captures cost and performance information against work activities and goals and strategies of DOI's strategic plan. The ABC/M system provides information on:
Eventually, as the Department moves toward implementation of the Financial and Business Management System (FBMS), the Department's ABC/M System will be folded into FBMS.
- Unit cost of production of all DOI work activities
- Cost of executing goals and strategies in DOI's strategic plan
- Performance against targets
- Minimum efficient workload
- Predicting costs for changing workloads
- Organizations and programs where cost efficiency needs to be improved
ABC/M implementation is an ongoing process. DOI will continue to revise the DOI work activity and output definitions to more accurately reflect the work being done, changing business processes, and improvements to program performance.