Business Processes Analysis & Exchange Network Return on Investment Exchange Network Users Meeting...

Business Processes Analysis &

Exchange Network Return on Investment

Exchange Network Users MeetingHilton San Francisco Hotel, Continental BallroomApril 18-19, 2006

ROI for Exchange Network

Purposes EPA needs cost saving data to justify future EN funding States need cost data to show benefits prior to EN projects

ROI Project Results Investigate 5 data flows Develop a model to systematically quantify ROI values

Monetary values Qualitative improvements

Develop an Excel program that: Calculates ROI values for five data flows Extensible to accommodate different state IT project environments Screening tool for developing plans for EN projects

We Need Quantifiable Answers to These Questions ….

“What are either the benefits of, or compelling reasons for, electronic reporting (i.e., EN technologies)?”

“What percent of your target audience is using it?”

“Do you think you’ll see a return on your application development investment?”

ROI Project Objectives

1. analyze environmental business processes, 2. develop a reusable tool to model the return on

investment from implementing EN technologies,

3. develop a final report & guide describing the ROI model and its application for facility, state, & EPA applications, and

4. publicize economic benefits of implementing EN technologies

Data Flows

AQS - The Air Quality System DMR - Discharge Monitoring Reports RCRA - Resource Conservation and Recovery Act SDWIS - Safe Drinking Water Information System TRI - Toxics Release Inventory

Surveyed States

Michigan New Jersey Washington Pennsylvania

Site Visit Accomplishments Gather state information to verify the initial Model’s

Business Processes for the data flows (before & after EN) Operational scenario differences among different states Actual state values for ROI calcuations Improve the ROI model

Collect quantitative information regarding the cost of maintaining data flows

Use information gathered to assess the Return on Investment associated with the implementation of EN technology

Document qualitative improvements

ROI Model – Technical ProceduresBusiness Process Analysis

ROI Research

Cost Factors

Initial ROI Model

· Developed a diagram of each data flow’s business process

· Identified the cost factors of each step in each process

For each Cost Factor found in the Business Process Diagram, determine the following: · Input Parameters· Default Values· Assumptions

· Research other ROI Models· Determined that MI Evaluator

would be a suitable basis for the development of the ROI Model to be developed in this project

· Incorporate the Cost Factors (including all input parameters and default values) into the model

· Develop a Financial Model· Develop calculations

· ROI· Payback Period· Total Cost of Ownership

State Interviews

· Evaluate Business Processes· Investigate missing Cost

Factors· Collect actual state data· Refine default value

assumptions· Collection of Qualitative

Factors

1

2

Final ROI Model

Revise Initial Model based on site visits· Add/remove cost factors· Increase usability· Change analysis boundary

3

4

5

6

7

Facility USEPA

State

Facility Staff State Staff

2

3

`

4a.1

4a.2

PCSState Staff

StateDatabase

`

eDMR website

In

tern

et

Data Consumer

`

5

Data Consumer

Facility manuallyenters data

onto paper forms

1

4b

Facility submits data

electronically

ROI Model – Business Process Analysis

eDMR Dataflow

ROI Model – ROI Factors & Input Parameters

eDMR Pre Exchange Network Key Factor Description

State makes the blank submission DMRs available to the facility. They either mail blank copies to the facility or make them available online. Input parameters: a. Hourly rate of state staff

($/hr) The hourly rate each state staff earns (including all benefits and indirect costs)

b. Time spent preparing mailings (hr/year)

The time it takes state staff to prepare blank DMR forms to be mailed to the facilities.

c. Cost of mailing ($/mailing) The cost to mail each package of DMRs to the facility

d. Number of mailings sent by the state

The total number of mailings sent to the facility each year.

e. Average amount of lost mail.

The percentage of DMRs lost in the mail

2 Sending blank DMR forms (from the state to the facility)

Equation: Annual mail preparation cost ($) = (a*b)*(1+e) Annual postage cost ($) = (c*d)*(1+e)

ROI Model – State Survey

State Survey is divided into 3 sections Business Process Analysis – Verify the business

processes associated with each data flow (including all potential cost factors and various operational scenarios for every state)

Assessment of State Costs – Determine cost estimates for each ROI factor (step in the business process)

Qualitative Factors Survey – Determine what qualitative benefits are associated with the project

ROI Model – ROI Calculations (eDMR Dataflow) Facility-to-State Cost Factors

Cost Factors

Input Parameters

Parameter

Pre - Implementation Post - Implementation

Value Unit Value Unit

(1) Enter permit limits into PCS

Not Zero

(a) Hourly rate of state staff $28.50 $/hour $28.50 $/hour

(b) Time spent to enter permit limits

900.00 hours/year 900.00 hours/year

SUBTOTAL COST $25,650.00 /year $25,650.00 /year

(2) Sending blank DMR forms (from the state to the facility)

Zero


(b) Time spent preparing mailings


(c) Cost of mailing $1.00 $/submission $0.00 $/submission

(d) Number of mailings sent to facilities

24000 submissions/year 0 submissions/year

(e) Average amount of lost mail

0.00% % lost 0.0% % lost

(f) Extra mailing 10% % of total mailing 0% % of total mailing

SUBTOTAL COST $46,464.00 /year $0.00 /year

Cost Factors

Input Parameters

Parameter



(3) Processing of paper submissions

Zero

(a) Hourly rate of state staff $47,840.00 $/year $0.00 $/hour

(b) Total Processing Time 200.00 hours/year 0.00 hours/year


(4a.1) Data entry cost (by state)

Zero


(b) Number of DMRs/year 24000 DMRs/year 0 DMRs/year

(c) Time spent - enter each DMR 1.5 hours/DMR 0 hours/DMR

(d) Accuracy of data entry 98% % entered correct 0.0% % entered correct

SUBTOTAL COST $1,101,600.00 /year $0.00 /year

(5) Data usage cost to respond to inquiries and additional data analyses

Zero


(b) Time to enter data 16 hours/permit 0 hours/permit

(c) # of permits data entered 80 permits/year 0 permits/year


Facility to State Total $1,223,114.00 /year $25,650.00 /year

ROI Model – ROI Calculations (eDMR Dataflow) Facility-to-State Cost Factors

Cost Factors

Input Parameters

Parameter



(4a.2) Submission to EPA

Zero


(b) Average time spent preparing submission



(4b.2) Submission to EPA

Not Zero


(b) Number of DMRs entered 0 DMRs/year 0 DMRs/year

(c) Time to enter each DMR into PCS

0.00 hours/DMR 0 hours/DMR

(d) Accuracy of data entry 0% % entered correctly 0.0% % entered correctly

SUBTOTAL COST $0.00 /year $0.00 /year

Total cost - State to EPA $2,880.00 /year $0.00 /year

Total Cost Pre-EN: $1,225,994 /year $25,650 /year

ROI Model – ROI Calculations (eDMR Dataflow) State-to-EPA Cost Factors

Project Implementation Cost Factors

Input Parameters

ParameterValue

State to EPA (Node)

Platform Java

Database Oracle

Server Hardware $30,000

Software Operating System $0

Database Software $25,000

Node Software $45,000

Node Implementation $100,000

(a) TOTAL NODE COST $200,000

(b) How many data flows will be sharing this node by the end of the next three years? 15

(c) What was the eDMR specific implementation cost (to plug in the eDMR data flow)? $130,000

SUBTOTAL COST $143,333

Total EN Implementation Cost: $143,333

ROI Model – ROI Calculations (eDMR Dataflow) Implementation Cost Factors

ROI Analysis

-$1,000,000

-$500,000

$0

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

0 1 2 3 4 5 6 7

Years

Operational Savings ($/year)

Cumulative Project Investment ($)

Cumulative Balance of CombinedInvestment and Savings ($)

Dataflow in production

Payback

Table 1

Payback Period (years after project completion, data flow is in production)

A1 Project development duration 2

B1 Year with first positive balance 4

C1 Cumulative balance of the previous year ($) -228,904

D1 Cumulative balance of this year ($) 90,372

Payback Period (years): C1/(D1 - C1) + (B1-A1-1) = 1.72

ROI Model – ROI Calculations (eDMR Dataflow) Financial Model

Key Questions

NPDES Permittees 1200Project development duration (Years)

1Key values for ROI Analysis

1 Operational Scenario

Choose facility DMR submission method

Paper

Choose DMR types: BothChoose DMR tracking method:

State database and PCS

Business Scenario Questions:

2

Default Values

Facility to State Cost Factors:(A4) Data entry cost (by state)

Pre - EN Post - EN

Hourly rate of state staff ($/hour)

28.5 0

Number of Permittees 1200 1200Frequency of submissions 12 12# of DMRs/year (Data entered)

14400 14400

Time spent to enter each DMR (hours/DMR)

0.29 0.00

Time spent to enter each monthly DMR

0.87 0.00

Accuracy of data entry (% entered correctly)

100% 100%

SUBTOTAL COST ($/year)

$474,240.00 $0.00

State to EPA Cost Factors:(5) Submission to EPA

Pre - EN Post - EN

Hourly rate of state staff ($/hour)

28.5 37.5

Average time spent preparing submissions (hours/month)

0 0

Number of DMRs entered 14400 0Time to enter each DMR into PCS

0.29 0

Time spent to fix submission problems (hours/year)

N/A 60

SUBTOTAL COST ($/year)

$118,560.00 $2,250.00

3

ROI Model Overview – Step 1, 2, 3

Add to all other facility to statecost factors

Add to all other state to EPAcost factors

Financial Model5

% Participation by facilities (a projected

goal)

% Project spending (% of total

implementation Cost)Year 0 0% (Development) 50%Year 1 0% (Development) 50%Year 2 25% (Production Year)Year 3 37%Year 4 50%Year 5 60%Year 6 70%

4

ROI Calculations

Year 2 $446,475Year 3 $379,781Year 4 $307,530Year 5 $251,952Year 6 $196,3745 year

average $316,422

Annual Facility to State operational Cost (Post-EN)

Implementation Cost6

7

Average Annual Operational Cost Pre-EN ($/year) (5 year basis) $703,980Average Annual Operational Cost Post-EN ($/year) (5 year basis) $318,672Initial Capital Investment ($) $506,850Annual Maintenance Cost ($/year) $50,685Annual Savings ($/year) $334,623

ROI SummaryAverage ROI (5 year basis) 66%Payback period (years) 2.1Expected % Participation after 5 years 70%% Participation needed for positive ROI 0%

Facility to StateSUBTOTAL COST $270,850.00

State to EPATOTAL NODE COST $240,000Total # of flows implemented on the Node within first 3 years (estimate)

10

Shared Node Cost $24,000Implementation $212,000

SUBTOTAL COST $236,000.00TOTAL IMPLEMENTATION COST $506,850.00

Pre - EN Post - EN

Total cost from Facility to State ($/year)

$585,420 $29,640Pre - EN Post - EN

Total cost from Facility to State ($/year)

$118,560 $2,250

Annual State to EPA operational Cost (Post-EN)

$2,250

ROI Model Overview – Step 4, 5, 6, 7

Qualified Benefits to Facilities & Labs“Saves my compliance administration costs…

streamlines the reporting process”

“…provides immediate feedback of compliance status for proper actions”

“…will increase the amount of data accessible for trend analysis”

“…data entry errors are reduced…”

“Time saver…more traceable than paper…immediate confirmation of receipt”

“…at least half a million dollars [savings] for all community and non-community facilities and labs…”

Qualified Benefits to State & EPA

Eliminates data entry operators and other staff resources

Improves facility to state data quality by elimination of data entry errors

Improves the program effectiveness/efficiency

Improves response to public health concerns

Allows staff to better utilize precious resources

Eliminates backlog of paper reports

Deliverables 1. Analytical ROI model and guidance documentation

capable of incorporating facility, state and EPA business process variables.

2. Business process analysis of 5 data flows at four states, survey of facility and state representatives with data collection of ROI variables and quotes.

3. Final report.

4. Marketing materials highlighting project purpose, process, analysis and model development results.

Final Report/Guide

Report Content: Explain the ROI modeling tool Summarize findings in each state Draw conclusions about EN impacts to business process efficiencies

The report benefits: Aid state agencies with annual budgets, IT project strategies and

priority deliberations; Assist state project managers in making EN investment proposals to

management; and Assist ongoing state, Network & CDX performance measures

projects.

More Info?

Michael Beaulac Tony Jeng

Executive Division enfoTech & Consulting, Inc.

MI Department of Environmental Quality Lawrenceville, NJ 08648

Lansing, MI 48867 609-896-9777, ext. #107

517-241-7808 [email protected]

[email protected]

Kurt Rakouskas Molly O’Neill

ECOS ECOS

Washington, D.C. 20001 Washington, D.C. 20001

202-624-3684 202-624-3507 [email protected] [email protected]

Business Processes Analysis & Exchange Network Return on Investment Exchange Network Users Meeting...

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