The National Process Improvement Project (NPIP) has recently been launched by the DCLG to promote “best BPI methods to improve local services”. 

Fundamental to this initiative is the need for process costing to make the business case for, and to assess the effectiveness of Business Process Improvement (BPI).

Nicky Jackman of the DCLG makes the point that it is essential to “compare and contrast consistently – before and after BPI” to show Local Authority to Local Authority differences in order to understand and promote best practice. 

The tool of preference is Rough-cut Activity Based Costing (ABC) developed by ValueAdding.com specifically for the public sector. Rough-cut ABC is now used by several Local Authorities and is being offered on training courses by a number of Centres of Excellence and LGAs. The rough-cut approach is so much simpler than traditional ABC, which was developed for the widely differing requirements of the commercial sector and is thus much more complex and unnecessarily detailed.

"Identifying the cost of service delivery is a key component of many local authority BPI led projects. Cost information is essential to be able to:

Baseline - to measure current performance in order to identify where improvements are required.

Compare - to identify where costs may be higher (or lower) than comparable organisations.

Measure improvements – to plan and track the impact of changes on overall performance.

There are a number of techniques available to authorities to help cost service provision. The method gaining popularity with local authorities, which has been employed by NPIP pathfinders, is rough-cut Activity Based Costing. However, as the pathfinder projects demonstrated, there are also a number of variations within this approach."

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