Operations Analysis- Step 3: Cost Benefit Analysis Advanced Business Operations Training Kabul, Afghanistan November 2014.

Cost Benefit Analysis  Introduction:  It provides the analytical basis for the UNCT/OMT to make informed decisions/prioritization based on two different approaches :  Qualitative approach CBA to take into account any cost/quality improvement based on estimated baselines figures from surveys/regional figures, staff time and other resource requirements  Quantitative approach CBA to take into account any cost/quality improvement based on established baselines figures from Agency ERP database and all elements of cost savings including efficiency gains to be achieved.

Cost Benefit Analysis  Objective: Establish basis for value based selection and prioritization  Provide sufficient, rather than exhaustive, overview of the main cost / benefit elements  Only for new services identified in needs analysis  One time vs recurrent cost  Three types of costs and benefits: Type 1: Monetary Costs & Benefits ($ value) Type 2: Labor Costs & Benefits Type 3: Other Costs & Benefits

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Template Simplified Transaction Cost Analysis Monetary Costs Benefits ($)Labor Costs BenefitsOther Costs/BenefitsPrioritization ABCDEFGHI Proposed Business Solution (incl. Common Services) Anticipated Monetary Cost (One Time & Recurring $ Investment) Anticipated Monetary Benefit (One Time & Recurring Benefits) Anticipated Labor Cost- Time Investment (One Time & Recurring Labor costs) Anticipated Labor Benefit: Time reduction (One Time & Recurring Labor benefits) Anticipated Significant Other Cost Anticipated Significant Other Benefits Total Cost (A+C) Total benefit (B+D) Priority Ratio: Benefit/Cost Ratio (H/G) Higher CB Ratio, adjusted for Other Costs, higher priority

Prioritization- Simplified Transaction Cost Analysis Simplified Transaction Cost Analysis: Establishing the Priority Ratio Total Cost per business solution = Anticipated Monetary Cost ($ Investment cost) + Anticipated Non-Monetary Cost- Time Investment --- Add column A and C from the CBA template ; Total Benefit per business solution = Anticipated Monetary Benefit (total $ saving)+ Anticipated Non Monetary Benefit- Time/Labor cost saving--- Add column B and D from the CBA template ; Priority Ratio per business solution = Total Benefit Ratio/Total Cost Ratio Priority Ratio is adjusted for Other costs and benefits (subjective adjustment)

ACTIVITY BASED COSTING  ABC simple way to map: (SITUATION WITHOUT VS WITH LTA). what are the steps/processes to get a particular job done, What profile of staff is involved (Project Asst, OM, Procurement assistant etc… ) What are the grades of staff involved ( G6, G7, NOA, B, C D, P3, 4, 5 D etc..) How long does it takes to complete each process? What is the hourly proforma cost for each type of staff involved ? What is the total cost per process/step What is the standard procurement cost in a situation without LTA Vs situation with LTA. What will be the saving per standard procurement process?  By comparing the map of the proposed solution to the map of the current situation, the differences in time requirements (cycle times) and $ value can be established;

ABC SIMPLE PROCUREMENT

ABC RECRUITMENT