Methodology and Approach
The 1999 Legislature appropriated $250,000 for a study of activity-based costing (ABC) in Texas state government. (As volunteer participants, the Comptrollers office and the Texas Department of Transportation each contributed an additional $50,000.) This study was the direct result of a recommendation in Challenging the Status Quo: Toward Smaller, Smarter Government a 1999 report of the Comptrollers Texas Performance Review. Article IX, Section 9-6.43 of an appropriations rider also called for the creation of a management team consisting of representatives from the State Auditors Office, the Comptrollers Office, the Legislative Budget Board, and the Governors Office of Budget and Planning to oversee the administration of an ABC pilot project and to submit a report to the Legislature no later than January 15, 2001. The management team was assigned in November 1999 and a contract for consulting services was awarded to Mevatec Corporation on January 7, 2000.
Long-term goals of the project included:
- Enhancing the efficiency of individual agency operations,
- Training and educating the participating agencies in ABC,
- Creating a model for documenting work processes and assigning costs to activities that agencies could use to analyze business processes,
- Changing agency cultures to encourage the use of ABC as a strategic tool, and
- Creating a strategy to support the state in providing incentives to employees for implementing ideas that save money or improve services.
The Texas ABC Pilot Project was conducted using Mevatecs FastTrack ABM approach. Mevatec developed this approach to speed up the ABC/ABM implementation process and maximize its results.
FastTrack uses cross-functional teams working in a fast-paced workshop environment. The workshops are normally a half-day in length for five consecutive days. Throughout the workshops, Mevatec experts guided participants from each agency through the ABM process.
The consultants offered four levels of training to 170 agency participants, including:
Executives within the participating agencies attended executive-level training. The consultants conducted two-hour training sessions to provide agency leaders with a basic understanding of the concepts and the project approach.
Managers and supervisors received more detailed training within each of the functional areas to be studied. This four-hour training session covered the basic concepts of ABC and the FastTrack ABM approach, as well as process streamlining techniques.
Expert Classroom Training
The Expert Training consisted of two half-day exercises intended to prepare participants for their first ABM implementation. The course used case studies, real-world examples and class exercises to simulate ABM implementation issues and problems. In addition, the course provided a half-day software lab in which participants used the FastTrack ABM Software™ to develop ABM models.
Hands-on Staff Implementation Training
Upon completing the expert training, the Texas ABC team leaders from each agency, along with three representatives from the Comptrollers office, worked with Mevatecs experts to collect data on selected agency activities. During the project, the Texas ABC team provided training, facilitation, coaching and guidance to the agency working groups.
A "learning-by-doing" workshop accompanied the formal training. The workshop, based on a team approach, involved the documentation, through flow charts, of the major activities in each business process under study. Employees then identified the factors or conditions driving the costs of these activities and the resources consumed in performing them. Employees who actually perform the activities then estimated the amount of time required to perform each activity; learned how the activities they conduct consume resources; and identified better ways to accomplish their mission and meet customer expectations. Participants then used these time estimates to calculate the direct cost of each activity.
Participants also used a consistent method to assign indirect costs to each activity. These indirect costs were reported separately to help agency personnel understand the areas of cost they could control (direct costs) to achieve savings.
More than 25 workshops were conducted as part of the statewide project, with an average of eight state agency participants in each session. The result was an increased level of understanding of ABC within each of the participating agencies.
Following the work sessions, the consultants reviewed the data gathered and shared a summary of the workshop findings and potential savings with the workshop participants, agency managers and the ABC management team.
At the end of the workshop sessions, agencies were asked to review all recommendations and report to the management team as to which would be implemented, along with estimated implementation costs. Agencies also were asked to provide justification if they decided not to implement certain recommendations.
The final report for each agency, completed by Mevatec, as well as the agencys written response is available by calling the Government Improvement Division of the CPA at (512) 475-1086 or toll free at 1-800-531-5441 extension 5-1086.