A Government Department within Victoria was in the process of partnering with a major technology service provider over a multi-year transformation program to improve its school administrative function. They sought our support to ensure that the end-to-end cost of the program was precise, robust and flexible for the Department to endorse funding. Cost analysis determined the level of required funding, timeframes and overall composition of the team needed to drive the program.
The client had quickly formed a team to review and determine the total cost of the program. However, they lacked the necessary financial analysis and cost determination skills required to size and cost a program of this scale undertaken by the Department for the first time in over ten years.
Previous efforts to determine cost did not incorporate good practices, cost sensitivities, risks and appropriately skilled resource needs across the entire program. Key program stages were not costed, and contingency levels were not applied consistently or robustly.
Over a two-month period, Terra Firma determined the end-to-end costs using first principles in program cost estimation. We developed a cost framework and model that was tailored and suited to our client’s need. This incorporated good practices in education specific program stages, cost sensitivities, cost contingencies, hidden cost drivers and common discounting factors.
As the costs were determined and finalised, they were benchmarked against industry-leading solution providers and similar programs in similar sectors in other states and government agencies. This ensured that the cost was comparable, estimated correctly and testable. A cost model was determined that was robust, flexible and balanced a range of scenarios based on changing variables such as time, resources, program scope and level of funding capacity available to the Department. The model was then socialised with client leadership including the Deputy Secretary of the Department.
The client endorsed our cost report consisting of the recommended scenario, sensitivities to consider and most likely risks. The cost model developed by this engagement was used to baseline future investment planning and business case stages of the program. This included modelling program stages, resources and scope. The client is now in subsequent stages of program planning, including gaining final funding approval, procurement and team formation.