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  • Predictive Analytics for Improved Cost Management

PRICE Cost Control Experts Co-Author New Parametric Estimating Book with CAM-I. "The Closed Loop: Implementing Activity-Based Planning and Budgeting"

MT. LAUREL, NJ / April 26, 2004 / PRICE Systems, the world leader in Program Affordability Management solutions for the global Federal market, today announced that two of its project and cost control experts Arlene Minkiewicz and Todd Geiser have made significant contributions to the new book titled "The Closed Loop: Implementing Activity-Based Planning and Budgeting", published by the Consortium for Advanced Manufacturing - International (CAM-I).

Although current budgeting practices and processes have many problems, the budget is here to stay, and accurate and reliable cost estimates will remain the cornerstone of effective project management. For years, parametric cost estimating has been an invaluable tool for cost estimators in the Aerospace and Defense industries as well as many other commercial businesses. More recently, these same industries have started to adopt Activity-Based Cost and Budgeting systems to help increase their control and management of overall financing. Although these two methodologies differ in how they are applied and what they are used for, a careful comparison of the two indicates that they are more alike than different. Realizing these facts and wanting to bring these two methods closer together, PRICE Systems decided to invest in the CAM-I initiative to study Activity-Based Budgeting.

The Closed Loop describes a model and methodology intended to help managers and executives use a well thought out, rigorous process for planning and budgeting within their areas of responsibilities. The Closed-Loop Model presented in this book helps managers understand the costs of doing business as they relate to the products and services that the business delivers to its clients. The Closed Loop is designed to enable managers to evaluate the operational side of doing business first-building a plan with the right mix of products and services based on resource availability. This book enables managers and executives to apply financial information as they evaluate and form the most efficient budget.

Once the initial model was developed and documented, the group felt that the best way to optimize the value of the model was to publish an implementation guide. The Closed Loop book is that guide. Arlene Minkiewicz's contributions to this book included the authoring of two of the chapters in the book. One of these chapters (Chapter 7) focuses on the development of the initial Closed-Loop Model-describing the basic building blocks for an Activity-Based Budgeting system and showing how these building blocks can be used to build a complete operational model. This chapter focuses on the use of cost drivers and the development of consumption rates and cost estimating relationships-showing strong connections to the parametric cost estimating incorporated within the PRICE estimating and analysis tools. The other chapter that Arlene authored (Chapter 9) addresses how to sustain a closed-loop model once it has been developed. This chapter addresses many of the issues that arise in any organization as business processes change-focusing on the areas most likely to be affected in a transition from traditional budgeting to activity-based budgeting using the closed-loop model. Topics covered in this chapter include the processes that require change in order to take advantage of the closed loop: change management; knowledge management; and successful transition strategies.

The Closed-Loop Model reflects a powerful new budgeting approach that speaks to many of the challenges associated with traditional budgets and budget processes while retaining and enhancing the benefits obtained from the process. At a minimum, the Closed-Loop Model can supply an improved calculation engine for, and extend the operational relevance of, a traditional budget process. This book also shows the foundation for much of the thought process that went into designing PRICE's TruePlanning estimating tools which bases much of its operation on Activity Based Concepts.

The contributions of Arlene Minkiewicz and Todd Geiser were twofold. Both subject matter experts participated in the book's conception and development. When the initiative began in June 2000, The Closed Loop was nothing more than chicken scratch written on the back of a cocktail napkin. Over the next several years, Arlene and Todd helped form the group that would develop a model for organizations to take control of their planning and budgeting processes.

Although this book is intended for managers and executives with responsibilities for organizational budgets, we firmly expect that managers in operating functions will find the Closed-Loop Model as useful as those in financial functions.

The book is currently available from the CAM-I on-line library. Click here for details.