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Writer's picture Dr. Dale R. Geiger CMA CGFM

Consistency vs Customization: Setting a Standard for Managerial Costing


Soon after the passage of the Chief Financial Officers Act came the creation of the Federal Accounting Standards Advisory Board (FASAB). Its task was to develop a set of comprehensive standards to improve federal accounting. Managerial Costing was one of the areas of interest and I was called to provide testimony and I addressed the issue of the heart of the difference between bookkeepers and analysts: consistency.


The career accountants who also testified advocated rigid standards for consistency. I remember one official from the Office of Management and Budget who said she wanted to be able to compare the radiology lab in one military hospital to one in another!


My response was that developing such capability would be enormously burdensome, of limited value in comparing one organization to another, and of negligible value to the laboratories themselves. I offered the following as part of a discussion of the pros and cons of consistency. It posed the question “what if all ship designs in the Navy were consistent?”





Is there Value in Having a Single Ship Design?


Of course there are benefits in having every ship in the Navy the same. There are always benefits to consistency. Personnel would only have to be trained and staffed for one ship rather than many different types. Supplies and ammunition requirements would be standardized rather than highly diverse.


Deployments would probably be easier to balance as the only variable would be the number of ships. Furthermore, the combat performance of each shipped could be compared to one another at the Office of Management and Budget since each ship commander would be fighting the same platform.



Are there Downsides to Such Consistency?


Of course, there are always disadvantages too. The downsides should be obvious from the drawing of what a multi-mission ship might look like.


Consider the functions of a submarine that must be incorporated. All ships would also need torpedoes tubes in bow. Perhaps the ballistic missiles could be built into the flight deck.

Yes, all ships would need a flight deck for air missions. And yes, the flight desk must not leak when submerged. Note that flight launches and recoveries could be more difficult when submerged, but all ship commanders would have the same problem so that performance measurement would be consistent.


Requirements for cruise missiles and big guns would have to be accommodated somewhere in the design and the bow would also have to be capable of opening so the marines could disembark for the beaches. Helicopters, minelaying, supply ship storage capability, anti-ship missiles, anti-air missiles, radars, and probably other functions would also pose a challenge to the consistent combat ship designer!


Now it is probably possible to build such a ship although the cost would certainly be great. The bigger question, however, is whether the ship would be very good at any of its multiple missions. Undoubtedly, the answer is “no.” As one military student said, “It would probably be good only as a target.”


Trying to make one design apply to a multitude of highly diverse missions is also relevant to the design of managerial costing systems. If it were done, the resulting accounting system would have been extremely complex and of limited value. It would primarily be another external reporting burden.


Fortunately the FASAB board ultimately approved a Managerial Costing Standard that required federal organizations to develop managerial costing approaches customized to their requirements.

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