The TD-ABC analysis is the 6th step for a responsible use of DTs in PAs. It is an approach that was developed to replace traditional costing accounting methods that were inaccurate when considering indirect costs, while simplifying the activity-based costing (ABC) analysis, focusing on both activities and time.

TD-ABC usage in the public sector allows PAs to “improve performance and efficiency in the supply of public goods and in the management of public institutions, relying on the principle of the lowest cost conjunction with maintaining the highest quality”[1]. A step-by-step approach for the TD-ABC analysis is given below:

1. Define the disruptive technology for the service under consideration.

Describe in detail the use of the DT for a specific service, which will provide an overview of the extent of the costing exercise and anticipate any other related activities that are important for the DT adoption or fine tuning.

2. Define the value-chain of the implementation cycle.

Define the whole value-chain of implementation, identifying which services are need for the implementation or fine tuning of a DT, any external providers chain, and different departments to be involved in the process.

3. Develop a process map with each activity to be carried out.

Once the DT and the implementation or fine-tuning process is completed, a process map need to reflect how the process will be carried out, step-by-step. It includes the identification of different resources to be deployed, such as space, equipment, and personnel involved (number of workers, which activity each one of them will perform, how many days and hours a week they work, time breaks, etc).

4. Obtain time estimation for each activity and related processes.

Estimate how much time is needed to perform each of the activities identified in the mapping step, anticipating additional process that will be needed for each activity.

5. Identify all direct and indirect costs for the implementation.

Define all costs, including the cost of space maintenance, equipment, utilities, salaries of involved personnel, and consumables if applicable.

6. Estimate the capacity for each resource and calculate the capacity cost rate in the form of “currency per minute”.

The TD-ABC is based on  time approach. Hence, all costs estimation should follow the formula:

In this sense, the financial or procurement advisor should be aware that despite the working hours of workers, they should consider their practical working time (or in the case of equipment, the actual time that it is used).

Using the estimated time needed to perform the service ($/h), the cost of the service is computed as:   

Service cost estimate=unit cost estimate euro/h* Estimated duration of the service (h)

7. Calculate the total cost for the implementation process[2].

Based on the previous step, involved roles should proceed to calculate the total direct and indirect costs of the adoption/fine-tuning of the usage of DT in their public administration.

For further information, consult the guidelines developed in the context of ETAPAS Governance Model for the application of the TD-ABC Analysis.

[1] Vazakidis, Athanasios; Kyriakidou, Eleftheria. “Time-Driven Activity-Based Costing in the Public Sector. The Case of Greek General Chemical State Laboratory under the Greek Crisis”. Journal of social sciences, 2020.

[2] Based on Chola, Lumbwe;Mcbain, Ryan; Chi, Y.Ling. “Costing healthcare services using time-driven activity-based costing: a simple step-by-step guide for data collection and analysis”. Center for Global Development, Policy paper 271, October 2022.