What’s the Cost?.......What’s the Question?

The Importance of Building and Sustaining Operational Cost Models in Support of Capability

Mr David RobinsonBusiness ManagerRAN Fleet Air Arm27-28 Jun 2011

Presentation Topics

The Importance of Quality Data

Theory and Practise Defence/Navy Management - Lessons Learnt

Costing in Defence

My Boss Doesn’t Think This is Important The Current Costing Environment

What’s the Cost?……What’s the Question?

Costing Scenarios and Potential Issues The Future

Costing Pools and Costing Tools Sustaining Knowledge

Integrated Solutions to Support Continuous Improvement

The Importance of Consistent Quality Cost Data

Pyzdek – Repeatable, Reproducible, ….

Remove over complicated accountancy based rules, regulations and reporting

Constant validation

Cost and analysis resources

Is cost all you need?

Examples from Industry, Defence and CAM-I Survey

The basis/core of next tier process

Walk before you run – transitioning data in support of CI methodology

People

Cost and Performance

Process

Defence Costing – Operators, Accountants & Users

How do you engage staff to highlight the importance of cost data?

- In the case of Defence its all about capability/effect

How do you link cost data to capability?

- Timely application of current working knowledge/operations to costing scenarios

- ABM best practice – Link/mirror your cost data to performance indicators

- Create data packages and cost management processes at the level you need

Build it and they will come

- Engaging external providers? You hold the knowledge….

- Automation: Beware the ‘push button solution’. Provide manageable ‘data pools’ not ‘solutions’.

- Navy Capability Costing Systems support

FAA BM PI 8 Governance & Compliance

What’s the Cost?.......What’s the Question?

Do you understand what you’re asking?

Abe Lincoln once highlighted his distrust for economists stating “I could ask of 300 economists their assessment of the state our finances, and receive a different response from each ”…

$ Lets look at the example of costing people – Actual, CEI Ready Reckoner – Direct, Total Variable, SOC, CFTS, Reserves, Trainees, Filled Vs Vacant

$ To support Net Personnel Operating Costs (NPOC), Schedule of Rates and Charges (SORC), Directed Level of Capability (DLOC)?

Information gathering - start at square one

$ What is the purpose of the costing? Highlight the scenario

$ Is there existing guidance on how this is to be done?

$ Don’t recreate the wheel, look to align with current endorsed process

$ Ask the specialists

Danger Will Robinson

Get it right the first time

- Validate and document your assumptions

- Ask the specialists

- Peer review - Operator and Cost Analysis

Potential examples

- Acquisition NPOC offset issues

- Budget or equipment removal

- Capability decision errors

Application in the Defence Environment

Costing pool solutions (PMKEYS, ROMAN, Assets, EO, MILIS etc)

RAN COGNOS models

- Total Cost of Capability

- NPOC

- DLOC

- Log Consumption

- CEI SORC

Sustaining your efforts

- Resource and train to sustain

- Embedded methodology

- The importance of integrated methodology as it pertains to improvement

QUESTIONS

“There is always a better way of doing business”