Publications
Publications
- February 1996 (Revised November 2003)
- HBS Case Collection
Indianapolis: Activity-Based Costing of City Services (A)
By: Robert S. Kaplan
Abstract
A new administration in the City of Indianapolis is initially determined to privatize many municipal services. Before taking this action, however, the city managers want to know the current cost of performing these services with the municipal workers. Existing financial systems record how much the city has been spending by functional categories and departments, but contain no information about the cost of providing services. The city establishes a task force to develop activity-based (ABC) estimates of the cost of filling potholes. It shows the information to the municipal workers and allows them to institute new cost-saving procedures so they can submit their own bid in competition with private contractors. This case describes the development of the ABC model and the reaction of the city workers to the newly revealed information.
Keywords
Cost Management; Public Sector; Activity Based Costing and Management; Service Delivery; Privatization; City; Indianapolis
Citation
Kaplan, Robert S. "Indianapolis: Activity-Based Costing of City Services (A)." Harvard Business School Case 196-115, February 1996. (Revised November 2003.)