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Operational Assessment and Diagnostic Report
Cash out, cost avoided and capacity released are three different things, and a diagnostic that adds them together gets discounted to nothing.
River scores each process area on cost, cycle time and error rate against the evidence you supply, then puts a value on every finding worth acting on. Each one is priced as cash out, cost avoided or capacity released, carries the line it lands on in the accounts, and is stated net of what capture costs. The three kinds are subtotalled separately and never added, because one headline figure is the first thing a finance director crosses out.
Page one for this query is a maturity model. Five levels from reactive to optimising, dimensions for process, governance, people and technology, a radar chart, a twelve week roadmap. All of it is useful for telling a client where they sit, and none of it contains money. Nobody funds a move from level two to level three on performance management. They fund a figure with an account line under it and a name beside it.
Built for the consultant who has to leave a diagnostic holding an implementation mandate. It scores against the operation the client actually runs, taken from the current state step register rather than from their procedures. Where a position on a scale is also wanted, the maturity rubric and its evidence bar is the neighbour. Each priced finding becomes a recommendation inside the findings set, and the ones they buy land in a proposal with a fee basis.
Two rulebooks that already price this properly
The federal benefit-cost rules say the thing most diagnostics skip. OMB Circular A-94 excludes pure transfers from net present value: the benefit to whoever receives a transfer is matched by the cost to whoever pays for it. Any transfer that does arise has to be identified as one. Pushing work onto a supplier, a customer or the next department along is a transfer, and pricing it as a saving is how a readout gets taken apart. It leaves one budget and turns up in another.
The same circular requires major assumptions to be varied and the result recomputed, so a reader can see which input the number actually depends on. Then it tells the analyst to check for optimism, noting that studies of past activities have documented tendencies for cost growth beyond initial expectations. Every value in the register therefore carries the one variable that moves it most, the range that variable sits in, and the resulting value at both ends of that range.
The procurement rules go further and name the categories. FAR 48.001 defines instant contract savings as net reductions less the development and implementation costs. It defines collateral savings as measurable reductions elsewhere, whether or not the purchase price changes. It even carries a term for a change that costs more than it saves: negative instant contract savings. Net of implementation, and sorted by where the money lands, is the regulator's own starting position rather than a refinement.
How it works
Send the evidence
Process documentation, system exports, observation notes, and whatever cost data finance will release.
Score the areas
Cost, cycle time and error rate per area, each against a stated measurement window.
Price the findings
Gross value, cost to capture, net, and which of the three kinds each one is.
Take the mandate
The subtotals, the decision each one depends on, and the item worth dropping.
What you get
- Every finding priced as cash out, cost avoided or capacity released, never all three together
- The account line each saving lands on, so it can be traced into the client's own reporting
- Net of what capture costs, including the client's implementation effort and system work
- The decision that converts a released hour into money, and who has to make it
- Transfers identified and excluded, because moving cost to a supplier is not a saving
- The one variable that moves each estimate most, with the value at both ends of its range
Common questions
What does it need from me?
The operation and its scale, then whatever evidence exists: system exports, payroll, freight invoices, quality logs, your own observation notes, and cost of sales by line if finance will release it. Also what the client intends to do with the number, because a board paper and a budget round need different subtotals.
Why not just give the client one number?
Because four kinds of money added together is not a number, and any competent finance director takes ten seconds to see it. Recurring profit, a one off cash release, a capital deferral and contingent capacity all behave differently. Present them separately and each one survives; add them and none of them does.
What counts as capacity released?
Hours freed that do not reduce spend on their own. Removing a week of re-keying releases people, and releases no money until overtime falls, a leaver is not replaced, or outsourced volume drops. The register names which of those has to happen and who decides it, so nobody books the saving twice.
What is a transfer, and why exclude it?
A cost that moves rather than disappears. Squeezing a supplier's margin, dropping a surcharge the customer paid, or shifting work to another department all look like savings inside one budget. Total resource use is unchanged, so they are identified, sized and reported outside the net, which is exactly how the federal rules treat them.
One of the ideas costs more than it saves. Do you drop it?
It gets priced, marked negative and kept on the page. A finding deleted without a number comes back in six months from somebody who has not done the arithmetic. The procurement rules even have a name for this case, so there is a precedent for reporting the loser rather than quietly losing it. Per line, with the cost to achieve against it, that is the savings ledger.
Is this a maturity assessment?
No. A maturity model puts the client on a scale, which is worth doing and contains no money. This puts a value, an account line and a conversion condition on each finding. For the scale version, the maturity rubric with observable anchors does that job and the two sit together well.
Where does this sit in the engagement?
After the current state is documented and before any proposal is written. The scorecard needs the real process rather than the procedure, which is why it runs off the register of documented and observed steps. Each priced finding then becomes a recommendation with a criterion behind it in the findings pack.
Operational Assessment and Diagnostic Report
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