INITIAL MARE ISLAND ACTIVITY-BASED COSTING STUDY STATEMENT OF WORK

FOUND TO BE OUTSIDE OF SCOPE OF BASIC CONTRACT BY NAVAL SUPPLY SYSTEMS COMMAND, AND MARKED UP WITH DELETIONS BY SHIPYARD TQM DIRECTOR

TQM is a management philosophy that consists of process improvement tools, techniques and activities involving everyone in the organization in an integrated effort towards improving performance. This improved performance is directed toward satisfying such cross-functional goals as quality, cost and schedule. TQM integrates fundamental management techniques and technical tools under a disciplined approach focusing on continuous process improvement

The leadership of Mare Island Naval Shipyard believes that TQM provides a positive framework for improving performance at the Naval shipyard, and is committed to implementing certain process improvement tools and techniques to further advance their existing TQM programs. We have chosen to implement a technique entitled "Activity-Based Costing" (ABC) which supports TQM in the following manner:
1) ABC provides cost data on critical processes thereby establishing "benchmarks" for future TQM improvement efforts,
2) ABC provides the basis for "best practice" analyses thereby assisting process action teams in comparing process performance data (cost and quality) between the eight Naval shipyards and in choosing models to use as targets or standards of performance,
3) ABC provides information on value added and non-value added worksteps within processes to support process improvement efforts, and
4) ABC provides the basis to link process costs to customers thereby ensuring a proper customer focus for shipyard activities.

THE COST ESTIMATE

To perform this effort the following was proposed - the only cost reduction was in travel - the final cost was $457,000. The resultant report was discarded 4 months later - I leave it to you to determine if the taxpayer (yourselves) got fair value for its money.

Partner.....……..100.hrs@$273.80.....$27,380.00
Director....……..370.hrs@$128.89.....$47,689.30
Manager...……..560.hrs@.$87.08.....$48,764.80
Sr Assoc..……2,800.hrs@.$70.67...$197,876.00
Consultant..…....560.hrs@.$48.16.....$26,969.60
Administrative…..40.hrs@.$34.00........$1,360.00

………………………Total Labor…$350,039.70

None of the individuals that worked on this project were specifically identified as being at one of the above labor categories

Two of them were retired Navy Captains - neither of whom had any apparent expertise in TQM or ABC; a third was a retired Navy Commander whose previous experience was in doing "ABC?" work at three previous naval shipyards.

There also were no contractual requirements for employment at any of the above labor categories - anyone could claim to be any of these categories - no specific experience or education was required.

Mare Island was forced to employ this group of people by virtue of being required to employ this specific contractor. Some of the individuals connected with this exercise later self-published a book "Activity-Based Management in Government".

The conscious removal of all references to TQM is important because we were forced to use the Total Quality Management Implementation Federal Supply Schedule Contract with Coopers and Lybrand.

Return to Coopers & Lybrand, Navy and TQM - Fraud or Mistake

Send mail to me at rhelbig@california.com