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Project Identifier: Administrative Efficiencies for Open Access ImplementationVersion: 2.0Contact: Kara JonesDate: 19 March 2015

Using Functional Cost Analysis to Evaluate the APC Payments Process

Jisc OA Good Practice Pathfinder projectsAdministrative Efficiencies for Open Access Implementation

Liz [email protected]

#OAGPgw4openaccess.wordpress.com

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This work is licensed under a Creative Commons Attribution 4.0 International Licence.http://creativecommons.org/licenses/by/4.0/

Making it possibleJisc offers digital services and solutions for UK education and research. The charity does this to achieve its vision for the UK to be the most digitally advanced education and research nation in the world. This project Administrative Efficiencies for Open Access Implementation is part of Jisc’s work to reduce the burden on HEIs in implementing funders’ OA requirements through enabling universities, working with

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others both within and beyond the sector, to develop improvements in IT tools, standards and services, and the related workflows and organisational arrangements for OA implementation

ContentsAdministrative Efficiencies for Open Access Implementation.................................................1

Executive Summary...............................................................................................................................4

Objective....................................................................................................................................................5

Literature Review....................................................................................................................................5

Open Access Costs..................................................................................................................................5

Functional Cost Analysis.......................................................................................................................5

Functional Cost Analysis of the APC Payments Process............................................................6

Methodology..........................................................................................................................................6

Findings...................................................................................................................................................9

Paying the APC (F2)..........................................................................................................................11

Comparison of APC payment methods..................................................................................12

Meeting Funder Requirements (F3)............................................................................................13

Reporting (F5)....................................................................................................................................13

Variations on ‘simple’ payments and worst case scenarios...............................................14

Conclusions.............................................................................................................................................15

Recommendations................................................................................................................................15

Review of the FCA methodology......................................................................................................16

Acknowledgements......................................................................................................................................17

References...................................................................................................................................................17

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Executive SummaryThis report outlines an analysis of the administrative costs of processing APC payments in the four universities of the GW4 alliance: Bath, Bristol, Cardiff and Exeter. Functional Cost Analysis (FCA) methodology was used to investigate labour costs per APC payment and identify resource intensive functions with a view to later improvement. The findings show the total time to process an APC payment, from initial enquiry to completing reporting requirements, varies from one hour and forty minutes to four hours and forty minutes and identifies three functions as resource intensive:

paying the APC reporting meeting funder requirements.

Costs of the APC payment process vary from £23.30 to £114.34 between the four institutions, or around £50 per simple APC at comparable institutions. Payment by invoice is the most resource intensive payment method at all the institutions. Both pre-payment and payment by credit card, where used, are less resource intensive than invoice payments in three of the four institutions.A functional family tree diagram has been produced using FCA, to outline the activities around APC payments. The closeness of the data collected around these activities demonstrates the implementation of APC payments process has followed a similar pattern in three of the four institutions and comparisons can be made between them.It is recommended that at least one resource intensive function is selected for improvement and the FCA exercise repeated at a later date to confirm if costs have decreased. Streamlining of finance processes would assist improvements but the likelihood of influencing internal institutional finance procedures needs to be considered against alternative payment methods.

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ObjectiveThe objective of the Functional Cost Analysis was to measure the administrative costs around APC payment and derive a labour cost per article.

Literature Review

Open Access CostsThe report ‘Counting the Costs of Open Access’, published in November 2014, examined the range of costs borne by research institutions and associated with funder open access policy compliance, specifically Research Councils UK and post-2014 REF policies. The comprehensive investigation covered twenty-nine research organisations and analysed costs related to management, advocacy, infrastructure development and the cost of administering gold and green open access options. This project focuses specifically on the costs of gold open access only, analysing administrative costs associated with APC payments at four HE institutions. As no APC payments are made for green open access the administrative costs of green open access were excluded. Administrative costs of APC payments was identified as accounting for ‘only a small proportion of the total’ costs by the ‘Counting the Costs of Open Access’ report (Research Consulting, 2014) but the main focus of this work is to examine current processes in depth at four specific institutions, identify potential improvements for implementation and measure the impact of such improvements. The investigation may provide useful recommendations for other institutions to streamline processes as volumes increase (Research Consulting, 2014) and thus build on the earlier report but no conclusions for the sector as a whole can be made. Institutions will need to examine their processes to determine the relevance of the findings to their processes and costs.The Jisc APC project illustrated typical Gold OA workflows, similar to this project, but with the objective of comparison between intermediary systems, such as Jisc APC, and in-house systems to highlight opportunities for optimising processes (Jisc Collections, 2014). The case studies and workflows mapped by the APC project had similar aims to this investigation (of developing more productive and efficient workflows) but focused on working with a third party intermediary.

Functional Cost AnalysisFunctional cost analysis (FCA) fits within the value engineering family of techniques for examining the cost of a product or service. It provides a structured approach to cost analysis of a service or product, in our case the APC payments process (or service). FCA ‘uses the functions of a product as a basis’ (Yoshikawa, Innes and Mitchell, 1994) for this approach. The ‘functions represent a view of the service potential’ (Yoshikawa, Innes and Mitchell, 1994) of the product or service to the customer, rather than the physical parts of the product. Using functions provides an abstract approach, an advantage as it enables the discovery of ‘different, and more

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cost effective, ways of achieving these functions’ (Yoshikawa, Innes and Mitchell, 1994) rather than just tinkering with existing activities within the service. FCA, when applied to internal business processes rather than a product, aims to reduce the cost of the overhead service and improve the service for internal managers, ‘the customer’ and ultimately external users or customers (Yoshikawa, Innes and Mitchell, 1994). Yoshikawa, Innes and Mitchell suggest ten steps in applying functional cost analysis including preliminary selection of area for analysis and team members, objective setting, initial information gathering, defining functions and functional maps, evaluation of the functions, suggesting and comparing alternatives, decisions and reviews. Value Engineering and FCA are seen as team activities (Yoshikawa, Innes and Mitchell, 1994); team members are seconded from different departments involved in the service within the organisation to contribute their knowledge to the analysis. Brainstorming is suggested as an effective means of identifying and developing ideas for change.

Functional Cost Analysis of the APC Payments ProcessMethodologyFunctional cost analyses were carried out for each of the four universities in the GW4 alliance: Bath, Bristol, Cardiff and Exeter. The project FCA was limited to a subset of the ten steps suggested by Yoshikawa, Innes and Mitchell. The area for analysis, team members and objective of the FCA having already been agreed and Lean 6 Sigma chosen as the methodology for identifying process improvements, the project FCA focussed on the gathering of data, definition of functions and the cost analysis. Throughout the process we have regularly communicated with related projects including Jisc Monitor and other OA Pathfinder projects.Initially, information on the activities performed for the payment process were collected through interviews with Research Support or Repository Librarians at each of the collaborating partners. A flowchart of the process at each institution was then constructed, identifying the process flow and activities at each stage. Re-iterative scrutiny and editing refined the flowcharts until they were agreed to be accurate and complete.The functions within the process were then identified and a functional family tree for the APC payments process developed (Diagram 1). The tree shows the primary function (F0) and four levels of sub-functions; the activities of the APC payment process relate to these functions.

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Diagram 1. Functional Family Tree for APC Processes

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Using a matrix of activities against functions and sub-functions, wherein each activity in the process workflow was associated with the function and sub-functions it related to, it was then possible to record the time taken for each process activity within its sub-function and calculate the time for each function and sub-function (Diagrams 2.1 and 2.2).

Diagram 2.1

Diagram 2.2

Time, as a measure of effort, rather than costs was used as the base measure for calculations as comparisons could be made between institutions and by other external parties. Costs are subject to variation dependent on the grade of the staff member performing the activity and therefore not comparable.

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The matrix was further refined to allow comparison of the three payment methods identified (Diagram 3).

Diagram 3. Analysis with payment method

FindingsThe methodology enabled the calculation of the total time to process APCs for each of the four institutions, the number of separate activities and the % of the total time devoted to each of the functional tasks (Table 1). These figures include the times for all the payment methods possible at each individual institution and, therefore, do not illustrate the time taken to pay an individual APC. This inclusion allows comparison of the complete APC payment process and resourcing across institutions rather than limiting comparisons to payment methods.The total time to process an APC payment varies from 101 to 279 minutes. Three institutions range between 208 and 279 minutes. The close grouping of these three suggests a similarity of effort by the institutions. Institution W was unable to obtain timings for some of the finance work which could explain their lower value for the time taken (208) but additional investigation is required to verify. Institution X, with a payment process of 101 minutes, has been unable to obtain details of finance staff activities and timings and author timings for APC payments. This lack of data could

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explain the lower values of time to process payments and number of activities for this institution but further investigation is needed to establish the reasons for the lower values.If Institution X is disregarded, the range of the number of separate activities to process APC payments for the other three institutions is small, varying from 34 to 38; again suggesting a similarity of process across the institutions.The closeness of the data demonstrates the implementation of APC payments process has followed a similar pattern in three of the four institutions and comparisons can be made between them. The ‘Counting the Costs of Open Access’ report identified a time of 119 minutes (unweighted) and 134 minutes (weighted) to process an APC which is at the low end of our findings (101 to 279 minutes). However, our timings covered the complete payment process, including time for all three payment methods, and therefore would be higher. A cost per article of £81 to administer an APC identified by ‘Counting the Costs of Open Access’ is slightly higher than the costs of three institutions (W, X and Y) but lower than institution Z; differences may be explained by the inclusion of complex payments in the ‘Counting the Costs of Open Access’ estimates and variations in staff grades. Overall the findings of both reports are at similar levels.In comparing the six functions within the APC process the percentage of the total time taken was used as a base figure for each function to allow comparison across institutions and evaluation of the time/effort for each functional area within each institution and to avoid focussing on actual timings. Payment methods are noted separately for comparison within and across institutions. The ‘Pay APC (all payments)’ function includes activities performed for all payments and any problem investigation work; the three payment method groupings include only those activities directly related to the payment method.For most institutions three functions are time intensive: paying the APC, meeting funder requirements and reporting. Within three institutions (W, Y and Z) payment by invoice is the most time intensive, paying the APC or payment by credit card is the second most time intensive and reporting the third. For institution X, meeting funder requirements is the most time intensive work, invoice payment the second and reporting the third. The lack of author and finance data may explain this variation.Comparing payment methods shows invoice payments to be the most time intensive and pre-pay accounts significantly less. Only two institutions use credit card payments and they demonstrate a wide variation in the percentage of total time required to support these payments: institution Y‘s credit card process is comparable with invoice payments whereas institution Z’s process is comparable with payment using a pre-pay account.As ‘Paying the APC’ function is time intensive for three institutions it suggests the set up required in each institution to enable payment and subsequent investigation of problems is a significant time factor in the process. Combined with the time intensive nature of some payment methods suggests this is the most resource intensive function.APC payments Institution Institutio Institutio Institutio

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activities W(limited data on finance times)

n X (no finance work/times included)

n Y n Z

Total time (minutes)

208 101 244 279

Number of separate activities ALL

36 21 38 34

F1. Ensuring eligibility (% of total time)

5 5 3 7

F2. Pay APC (all payments) (% of total time)

17 5 11 16

F2. Pre-pay account payment (% of total time)

13 12 7 10

F2. Invoice payment (% of total time)

35 18 23 40

F2. Pay on credit card (% of total time)

n/a n/a 23 9

F3. Meeting funder requirements (% of total time)

14 40 14 0

F4. Meeting institutional requirements (% of total time)

2 0 1 6

F5. Reporting (% of total time)

14 15 18 12

F6. Publicising OA publication (% of total time)

0 6 0 0

Table 1. Time to process a single, simple APC Payment, total number of separate activities and the percentage of total time devoted to each functional area.The three functional areas (F2, F3 and F5) requiring higher percentages of the time were investigated in more detail.

Paying the APC (F2)From the activity timings and using the maximum and minimum salaries for the grades of staff involved maximum, minimum and average costs of the APC process for each institution were calculated (Table 2). These figures assume a simple, uncomplicated APC payment with only simple, easily correctable issues, if such a

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payment exists. Variations due to incomplete data and significant problem investigation are not included. Only direct staff costs have been used. A percentage uplift for indirect staff costs can be added to these figures if desired.The costs of the APC payment work vary from £23.30 to £114.34 between the four institutions. Missing times for finance staff at institution W and author and finance times at institution X will have decreased their cost figures. The grade of staff performing the work at Institution Z significantly increased the costs to that institution. From this it may be inferred that the costs are of the order of £50+ per simple APC for comparable institutions.As might be expected, variations of pay within grades results in only a minimal increase in costs but an increase in grade of staff performing the work has significant impact. Whatever the reasons for using higher grade staff the importance of documenting procedures and training lower grade staff to perform the work should be not be underestimated. It is important to understand when volumes and workload dictate this should occur.

Max cost Min cost Average cost

Notes

Institution W

£57.29 45.83 £51.70 No costs for some finance work

Institution X £26.24 £23.30 £24.77 no costs for finance work

Institution Y £60.80 £48.30 £54.55Institution Z £114.34 £91.34 £102.84 Inflated by

grade of staff performing work

Table 2. Total direct staff costs in processing a single, simple APC payment

Comparison of APC payment methodsComparison of the timings and number of activities for the three different payment methods (Table 3) shows payment by invoice to be the most resource intensive and to have the highest number of activities of all the methods at all the institutions. Missing author and finance times and activities for institution X have decreased their figures for invoicing and pre-payment. Missing finance times for institution W have impacted the figures for payment by invoice.Only two institutions pay by credit card so comparison is limited and contradictory: the number of activities is comparable but time differs. In institution Y the credit card is ‘owned’ by another functional area increasing the payment time. Institutional constraints around payments can significantly increase activity time within the process even if the number of activities do not increase. For institutions W, X and Y paying using a pre-pay account provides the least time intensive option (even allowing for monitoring and topping up an account). For institution Z credit card payments provide the least intensive time option.

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In the case of invoice payments, adding suppliers to finance systems can add significant times (between 20 and 30 minutes) plus delays in communication to the process. One respondent to our questionnaire proposed all payments where the supplier is not already on the system should be paid using a credit card.

Pay APC using pre-pay account

Pay APC via invoice

Pay APC using credit card

Notes

Time (minutes)

No. of activities

Time (minutes)

No. of activities

Time (minutes)

No. of activities

Institution W

27 5 72 10 n/a n/a No data for finance work – invoice payments

Institution X

12 4 18 8 n/a n/a No data for finance work – invoice payments

Institution Y

16 5 56 8 55 3

Institution Z

28 6 111 10 25 3

Table 3. Comparison of payment methods

Meeting Funder Requirements (F3).From the activity timings and using the maximum and minimum salaries for the grades of staff involved maximum, minimum and average costs of the work for each institution were calculated to enable further investigation (Table 4). Only direct staff costs have been used, a percentage uplift for indirect staff costs can be added to these figures if desired.For institutions W, X and Y the times and costs to perform this function vary only slightly, between £6.82 and £10.21, suggesting these are comparable. Institution Z spends considerably less time and therefore has lower costs than the other three, although higher grade staff are performing the work. Investigation reveals checking is performed quarterly in Institution Z but included within the process workflow in the other three institutions.

Time (minutes)

Max cost

Min cost

Average cost

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Institution W

30 £9.25 £7.42 £8.36

Institution X

40 £10.21 £9.08 £9.64

Institution Y

35 £7.61 £6.03 £6.82

Institution Z

6 £3.16 £2.49 £2.83

Table 4. Total time and direct staff costs for meeting funder requirements

Reporting (F5).From the activity timings and using the maximum and minimum salaries for the grades of staff involved maximum, minimum and average costs of the reporting function for each institution were calculated to enable further investigation. Two types of costs arise for reporting: the costs of gathering data within the process i.e. during processing of an APC payment and the regular, episodic analysis of data and building of reports (Tables 5.1 and 5.2). For regular reporting the costs are based on annual equivalence for comparison. Only direct staff costs have been used, a percentage uplift for indirect staff costs can be added to these figures if desired.

Time (minutes)

No. of activities

Max cost Min cost Average cost

Institution W

33 7 £6.96 £5.50 £6.25

Institution X

15 3 £3.83 £3.40 £3.62

Institution Y

43 14 £10.30 £7.91 £9.10

Institution Z

33 7 £17.03 £13.46 £15.24

Table 5.1. Time, number of activities and costs for gathering data during the processing of an APC

Three institutions have comparable times for the gathering of data whilst Institution X is significantly less due to their low number of activities for this function. The costs reflect the number of activities are the time required to perform the work apart from institution Z where the inflated costs are again related to the grade of staff performing the work.

Comparing these figures with the costs of regular reporting indicates where resource is consumed in the reporting function. The manual compilation of reports makes this a labour intensive activity. The costs of internal reporting varies significantly with different institutional requirements. For institution Y internal reporting requirements create higher resource demands than external reporting. The data for external

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reports are broadly similar with Institution Z demanding less time and therefore lower costs whilst X and Y had very similar resource times. No data for external reports was available from institution W.

Internal (Institutional) Reports External ReportsMax cost Min cost Average

costMax cost

Min cost Average cost

Institution W

£747.88 £608.90 £680.22 - - -

Institution X

£261.66 £232.46 £247.06 £523.32 £464.91 £494.12

Institution Y

£1,636.16

£1,323.89

£1,480.02 £508.74 £412.35 £460.54

Institution Z

£80.65 £62.92 £71.79 £378.80 £299.23 £339.01

Table 5.2. Total annual direct staff costs for regular reporting on APC payments.

Variations on ‘simple’ payments and worst case scenariosAll institutions reported wide variations on the time and therefore resource required to process APC payments arising from communication issues, lack of author and publisher awareness, compliance issues and problem identification and resolution.Institution X was able to quantify these, indicating that total time to process an APC payment could increase to 518 minutes in a ‘worst case’ scenario. Although times for finance and author activities are not included for this institution this is a fivefold increase on the ‘simple’ payment resource requirement.Anecdotally, Institution W suggest around 50% of all payments have issues, whereas Institution Z estimate around 20% have issues. The average time spent resolving might be 60 minutes, but might be spent over some weeks when the issue develops as ‘the overall delay to the paper ….. starts to be more of a problem for the author trying to get published’. Institution Y reports taking six months to resolve some issues and email communication with parties prolonging times for even the very simplest tasks. Compliance checking until everything is correct can take months and this repetition increases resource demands rapidly.

ConclusionsThe time and cost to process a simple APC payment show some consistency across institutions and identify three functions as resource intensive: paying the APC, reporting and meeting funder requirements. Payment by invoice is the most resource intensive payment method for all institutions. Streamlining of processes would assist but institutions need to consider the probability of influencing internal institutional finance procedures and consider alternative payment methods. Both pre-payment

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and payment by credit card, where used, are less resource intensive than invoice payments in three of the four institutions. The work of analysing workflows and activities demonstrated that timings and resource requirements depend on each institutional environment; the ease or not of performing activities in different functional areas, institutional requirements and priorities. The project findings can be used by other institutions to assist understanding and demonstrate requirements but should not be used as a substitute for understanding their own individual environment. To gain a full understanding of the resource issues in your own institution we would recommend performing your own functional cost analysis.

RecommendationsThe findings suggest some useful actions may assist in reducing costs for other institutions. Not all will be applicable to every institution and an understanding of internal processes and systems is required to select the most beneficial for each institution.

Potentially useful actions:

Use of pre-pay and credit card payments to lower payment costs Evaluate required frequency of some tasks (for example checking and reporting) Automate manual tasks e.g. compilation of reports Training lower grade staff to perform some of the tasks

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Review of the FCA methodologyThe FCA methodology did enable calculation of costs for all four institutions and provided information on where to target further investigation and improvement. Performing the FCA across four institutions was helpful in allowing comparison and identifying similarities although this is not statistically significant.Functional cost analysis requires considerable resource investment itself to understand the methodology, obtain the information required, build matrices and perform the analysis. Performing this analysis across four institutions added additional complexity and communication issues. Both the initial collection of information on the workflow and the later on the timings and activities of the process at each institution were time consuming and prolonged; taking three and five times longer than planned. Rather than seconding team members from departments involved in the service as described by Yoshikawa, Innes and Mitchell the project used email communication between institutions with the collaborators at each institution in the role of investigators. Defining the workflow required detailed knowledge and became an iterative process as queries were raised and answered. Building the institutional matrices involved contacting staff in several departments at each institution, explaining the project, gaining and verifying information prolonging the time necessary for both data collection stages. The investigation has value but requires considerable investment of time and resource to achieve.Buy-in and engagement with the project and its information needs was necessary and problematical in some departments leading to missing data for some institutions. Institutional engagement would have required a high level of support within institutions and consensus from many areas. The time required to reach this in four institutions was unacceptable for the project and the alternative of Librarian investigators was used.Differences in how work activities are categorised in functions by institutions may lead to differences in functional times and apparent resource demands. Having a project co-ordinator building the matrices centrally and validating data assisted in ensuring standards were uniform but all details could not be examined and therefore inconsistencies may remain.FCA has its roots in manufacturing and may explain why the methodology is more effective with a single path process. We adapted the matrix and methodology to allow for alternative payment methods. Too many variations would increase difficulties with the matrix and interpretation of total times for the process.The functional basis of investigation enables analysis of effort, or time, allied to functional areas and, in future, identifies functions for improvement which should provide more significant change than simpler and more obvious improvements to activities. It has enabled the identification of resource intensive functions to target for improvement.

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AcknowledgementsThe project team gratefully acknowledge the assistance of the Research Support Librarians based at the Universities of Bristol, Cardiff, Bath and Exeter (Kathryn Smith, Katherine Quinn and Samantha Jones, Kara Jones, Jill Evans and Finlay Jones) in carrying out the Functional Cost Analysis exercise. Without their support and input the exercise would not have been possible.

ReferencesJisc Collections, 2014. Jisc APC pilot project [Online]. London: Jisc Collections. Available from: https://www.jisc-collections.ac.uk/Jisc-APC-project/ [Accessed 17th March 2015]NSERC Chair in Design Engineering, 2012. Functional Cost Analysis [Online] Halifax Nova Scotia: University of Dalhousie. Available from: http://design.engineering.dal.ca/content/functional-cost-analysis [Accessed 18th March 2015]Research Consulting, 2014. Counting the Costs of Open Access [Online]. Nottingham: Research Consulting. Available from: http://www.researchconsulting.co.uk/wp-content/uploads/2014/11/Research-Consulting-Counting-the-Costs-of-OA-Final.pdf [Accessed 17th March 2015] University of Calgary Department of Mechanical & Manufacturing Engineering, n.d. Functional Cost Analysis [Online] Calgary: University of Calgary. Available from: http://people.ucalgary.ca/~design/toolbox/toolbox-cost1.htm [Accessed 18th March 2015]Yoshikawa, T., Innes, J. and Mitchell, F., 1994. Applying Functional Cost Analysis in a Manufacturing Environment. International Journal of Production Economics, 36, pp. 53-64.

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http://people.ucalgary.ca/~design/toolbox/toolbox-cost1.htm

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https://www.jisc-collections.ac.uk/Jisc-APC-project/

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