The pilot project completed in Fall 2000 led the management team to the following conclusions:
- While ABC/ABM studies can be costly in terms of time and other resources, the net return on such an investment in Texas could be considerable.
- To realize the greatest impact per dollar spent on ABC/ABM, its use as a tool should be targeted, rather than requiring its widespread application across all government activities. The voluntary use of ABC/ABM by agency leaders and managers at all levels can bring about improvements that raise morale and increase efficiency. Whether used voluntarily or required by the Legislature or other oversight agency, ABC/ABM is most useful when an agency experiences a significant increase in its client base and must find ways to work within its existing budget; when a comprehensive cost analysis is needed; when confirmation is needed that an agency is fully recovering the costs of providing a service; or when a comparison of costs to those of similar operations in the public or private sector is desired.
- An ABC study allows agencies to estimate the true cost of the activities reviewed, which in turn enables them to pursue reengineering opportunities and benchmark their operations against other public and private organizations.
- The ultimate success of ABC/ABM depends on how agencies use the study results. For example, the General Services Commission (GSC) estimated that its plumbers, painters and carpenters logged more than 48,000 miles driving between their warehouse and the agency administration building in 1999. Including salaries for drive times, gasoline, and indirect and administrative costs, the ABC analysis found that GSC could save about $51,000 a year simply by moving the warehouse to its administration buildings basement. Within weeks, GSC moved its warehouse.
- Potential savings identified by the consultants in ABC and ABM studies are based on available cost data and employee estimates of the time required to perform certain activities. Many of the savings identified are productivity savings, which are not always easily translated into hard dollars. Once productivity opportunities are identified, agencies must determine which are feasible in the current political and fiscal environment. Decisions about the use of productivity savings should take into consideration the extent to which an operation is adequately funded and able to meet its mission. Other savings identified can result from eliminating postage or paper expenses, but a significant investment in technology may be needed to achieve these savings.
- ABC and ABM studies represent only the beginning of a more detailed process that agencies must go through to realize results and cost savings. In this pilot project, some ideas generated were not deemed to be feasible by the participating agencies. The fast-track ABM model used is not designed to fully explore the feasibility of all ideas generated. In a few instances, agencies had already reviewed the ideas presented in the pilot reports and determined that the risks or costs associated with their implementation would outweigh their potential benefits. For example:
- The Comptrollers office ruled out a potential productivity increase from allowing licensed cigarette distributors to order cigarette tax stamps via the Internet and print them at their own locations. The agency determined that its current process, wherein distributors use a heat process to affix the stamps to cigarette packages, affords protections against fraud, counterfeiting and other security compromises that outweigh the potential savings.
- A potential productivity increase due to collapsing the process used by the Texas Workforce Commission (TWC) to collect past-due taxes was ruled out by TWC as too risky. TWC reported that the sensitive area of collections work is outlined in statute to protect the rights of both TWC and debtor employers; shortening the process would not allow appropriate response times for all parties.
- The ABC consultants suggested that savings could be realized if the Texas Department of Transportation (TxDOT) were to print maps in black and white rather than color. TxDOT determined that its customers preference for color justified the additional cost.
- Many opportunities for improvement identified in the pilot project would require an investment in new technologies. Some of the most promising opportunities require significant upfront expenditures for items such as automated work order systems. Some participating agencies have found resources within their existing budgets to further automate their operations; GSCs Capitol Maintenance operation, for example, has already automated its work order and maintenance tracking system to increase its efficiency. Other agencies may need additional resources to implement certain recommendations.
- Participating agencies sometimes found that, to achieve the full benefits of ABC/ABM, they would need the cooperation of other agencies or amendments to existing legislation. For example, GSC lacks the resources it needs to inspect all leases, as required by law. Before state agencies occupy leased space, the Texas Department of Licensing and Regulation also must inspect buildings for compliance with the Texas Accessibility Standards of the Architectural Barriers Act. The two agencies have a Memorandum of Understanding designed to help avoid duplicated effort, but greater coordination and a possible change in legislative mandates may be needed to ensure adequate, cost-effective inspections of all leased space.
In conclusion, ABC/ABM holds great promise for improving the efficiency of state government, but it is not a panacea. An ABC/ABM study can be costly and time-consuming, and would require significant training, expertise and information. Furthermore, many improvements to business processes identified through ABC/ABM may require up-front investments before savings can be achieved. As with any other management tool, managers must decide when and where ABC should be used to support decision-making. Nevertheless, the benefits of this tool, when applied wisely, far outweigh any potential disadvantages.