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Chapter 2

ABC in the public sector

Austerity measures introduced by many governments have meant that the public
sector is under increasing pressure to deliver more services, for less money, and with
greater transparency. Public sector organisations thus need to identify, allocate and
control costs more than ever before. ABC is seen as one possible tool to help with
this.

The main drivers for introducing ABC are:

 Public responsibility – responsible public organisations must have tight
control of running costs at a time when resources provided by central
government are strictly limited.

 Public accountability – many organisations are being challenged as to
whether or not they spend taxpayer money wisely and feel a need to
demonstrate this when the questions are asked.

 Resource allocation within organisations – there have been concerns in
many organisations as to whether the services provided had an equitable
distribution of scarce resource – or whether those who shouted loudest got the
most resource.

 Helping managers to manage – managers need a better awareness of what
activities actually cost to provide before they can think which to cut.

 However, many public sector organisations have resisted the introduction of
ABC.

 To measure the cost of a service and take into account resource costs, the
resource used must be measured – which often means recording time spent.

 Timesheets allow accountability for what people are actually doing, and for this
cost then to be allocated to services. This is a challenge for the public sector,
and for those that wish to use ABC or take a similar approach, a culture change
is definitely required.

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