Budget modelling

GoalsĀ 

As part of the key initiatives of First Principles Review, the Chief Information Officer Group (CIOG) was tasked with addressing the Agencies issues with consistent ICT budget modelling for Department.

The ChallengeĀ 

The First Principle Review highlighted that the current model is unsustainable and the Agency required a capability that can be understood, mature for the industry and is easy to sustainably maintain for use within the Defence on an ongoing basis.

Defence requires the proposal of a model to migrate into the current core Defence business functions of:

  • BAU
  • Asset Management; and
  • Investment/Sustainment.

The core capability components of a cost model that Defence wants to transition into should be the ability to:

  • Analyse and understand key cost drivers within Defence;
  • Enable more transparency;
  • Determine how we can control consumption with a foreseeable end state; and
  • Provide a model that’s more sustainable and less labour intensive for the Department of Defence as a whole.

The Solution

Over a period of about 4-5 months, CDRU developed a model which allowed costs to be segregated into various IT Towers and Sub Towers (this approach was agreed by CIO and CFO staff and was seen basically as the key element of a specification for the ongoing functionality to be built into SAP)

Data was sorted by:

  1. Function, Division, Branch and Cost Centre.
  2. approx. 42 categories of costs included with most using standard ATM/TBMO definitions although some extras were included as they were significant. e.g. Satellite.
  3. Data was collected at the Cost Centre Level and aggregated as appropriate

The model was completed and used extensively by CIO and financial staff to build and justify budget requirements for FY2018 and beyond, especially in the sustainment area.

In addition, a spec was drawn up and presented to allow CFO Group to build the model into SAP along with recommendations for changes to the Chart of Accounts to better capture raw data at source.
Data was collected for four years and then extrapolated for another six years as required by CFO.

Results:

  • ClearCost return on investment exceeded 10 times the original investment within the first 6 months
  • Simplification and automation of manual processes enabled the identification of inefficient services, and recover costs within the CIO Group.

“We are very pleased CDRU identified multiple opportunities to drive cost reductions across major contracts, and identified opportunities to align activities to the Budget process with major opportunity to move the Chief Information Officer Group over to a state-of-the-art Contract and Vendor Management.”