Public Sector Governance and Accountability Series: Budgeting and ...

230 Gary Cokins
the organization may be shocked to discover that the four-lane urban
expressway costs 800 percent per mile (or per kilometer) more than the
smallest, slowest-traveled type of road. But during the cost analysis, this
comparable difference could be supported by the facts. For example:
The four-lane road requires twice as many passes of a snowplow truck as
a two-lane road.
The snowplow trucks for expressways may be maintained in large garages
with technical equipment and a complete organization of mechanics,
whereas for rural roads drivers may get a hammer and a wrench and a
good-luck wish.
The expressway may receive more frequent line painting.
The expressway may have more sewer culverts to maintain.
The expressway may have more electronic road direction signs.
Dozens of other characteristics can result in the four-lane urban
expressway being much more expensive relative to other types of roads,
after the effect of distance has been removed. Regardless of whether one can
articulate all these characteristics, the level of activity costs used to service
the road is inherently governed by the type of roadbed.
Notice that each final cost object in figure 7A.1, such as the signage, has
different types. For example, signage may consist of expensive electronic
signs on main roads, metallic signs on all roads, and wooden signs on rural
roads. ABC/M traces all the sign maintenance work activity costs to the
signs as if they were the only purpose for costing. In fact, many organizations
dedicate a local ABC/M model to such a final cost destination. But in this
example, all the signage costs are further reassigned into the roadbed
depending on the unique number and type of signs for each specific
roadbed. This assignment relies on cost-object drivers; the activity drivers
have already completed their mission to trace the workload costs to their
cost object.
Also notice in figure 7A.1 how the type of cement is assigned to the
pavement, not directly to the roadbed. In this case, there are enough costs
and diversity in types of cement to dedicate a final cost object. Then these
costs are mixed like a recipe’s ingredients into various types of pavements.
The pavements ultimately are reassigned to the types of roadbeds.
In the end, all the activity costs, excluding operational sustaining costs,
must be traced to the final-final cost object—the types of roadbed—regardless
of how the ABC/M design team chooses to configure the model. But those
teams that follow the rules on defining drivers and add common sense—not