Analysis Document

Analysis Document Task 7 Recommendations to Assist Cost Recovery / ROI Strategies and Budget Planning May 2, 2006

Table Of Contents Introduction Methodology Sample Telework Program Business Cases BCA 1 – Home Office (In-Depth) BCA 2 – Services (High-Level) BCA 3 – Enterprise (High-Level) Findings and Conclusions Appendix A: Benefit Savings Calculations Appendix B: Development of Telework Costs Appendix C: Resources for Developing Telework-related Business Cases

This report provides guidance for cost recovery, strategizing return on investment, and budget planning related to telework • This report on Recommendations to Assist Cost Recovery / ROI Strategies and Budget Planning is the seventh in a series of reports in the Telework Technology Cost Study • The overall study has three primary objectives • Describe the current telework technology environment • Estimate the costs of expanding telework supporting technologies so the infrastructure can support 25% to 50% of the federal workforce teleworking • Provide recommendations on how best to expand the telework supporting infrastructure • This report provides a strategic framework and methodology for identifying the value of telework investments, and thereby enhancing the cost justification and return on investment • The information in this report will help government executives develop business case analyses that fully consider the multiple benefits of telework for making investment decisions

For this study Booz Allen gathered information from 20 different federal organizations in 11 Departments and 5 Independent Agencies • The Booz Allen team conducted interviews, focus groups, and surveys of Chief Information Officer staff, Telework Program Coordinators, Teleworkers, and Managers of Teleworkers, respectively • Ten Departments and one Departmental Component participated in the study: • Department of Agriculture  Department of Interior • Department of Commerce  Department of Justice • Department of Education  Department of Transportation • Department of Health and Human Services  Department of the Treasury • Department of Housing and Urban Development  Department of Veterans Affairs • U. S. Coast Guard (component of Department of Homeland Security) • Five Independent Agencies also participated in the study: • Equal Employment Opportunity Commission  National Science Foundation • General Services Administration  Securities And Exchange Commission • National Aeronautics and Space Administration

This report presents three sample business case analyses that could be used in an agency’s investment process as project managers try to fund various telework initiatives • For this report, three sample business case analyses (BCAs) were developed • One in-depth BCA with detailed costs, benefits, and risks. It also included a cost justification and return on investment (ROI) analysis • Two high-level BCAs with detailed costs and high level benefits and risks • The Capital Planning and Investment Control (CPIC) process and Value Measuring Methodology (VMM) value factors were used to outline and develop the BCAs • Additionally, this report provides resources that project managers can use to develop their own telework-related BCAs • Cost data from deliverables two and five were consolidated for easy use by the reader, e.g. unit costs, web-based application development costs, server capacity guidelines • A guide explaining how to use the cost data to build a cost estimate for a telework BCA or telework funding requests is included • An inventory of risks and benefits typically associated with telework initiatives is provided in the Appendix • An explanation for how to tailor the example BCAs for their organization (e.g., an agency can add or subtract costs of components from sample BCAs as appropriate, if an agency provides more or less than is included in the BCA examples)

The information for this report was distilled from other data gathering and analysis that was previously performed for this study and from business case development best practices High-Level Data Synthesis Data Sources Detailed Reports Development of a Series of Reports on Telework Technology and Related Costs Data Collection From Three Sources in 16 Government Organizations Detailed Synthesis of Findings to Develop Sample Cost Recovery / ROI Strategies • Information about costs, benefits and risks associated with telework investments • Conducted discussion sessions with telework and technology experts to evaluate potential cost reduction and cost recovery / ROI strategies • Used frameworks of the Capital Planning and Investment Control (CPIC) process and Value Measuring Methodology (VMM) value factors to organize and develop sample business cases analysis (BCA) • Estimated costs and benefits associated with sample telework investments that bring agencies to the “basic” and / or “ideal” levels for Home Office, Services, and Enterprise solutions defined in Task 4 • Developed one in-depth and two high-level sample BCAs that incorporated cost estimates, cost reduction and cost recovery / ROI strategies, and addressed risk • Several reports in this study have established the technologies, costs, and enhancement plans required for telework expansion • Task 2, Task 3, and Task 4 specify the technology components needed for scalability • Task 2 and Task 5 detail the costs required for recommended technology enhancements • Task 6 and Task 9 incorporate the technology and cost requirements from the other tasks and provide recommendations for initiating and implementing telework program enhancement and expansion plans • Administered surveys to teleworkers and managers of teleworkers to obtain information about telework technology availability, usage, and performance • Conducted focus groups with Telework Program Coordinators to obtain information abouttelework program history and current state, technology issues, policy issues, and plans for expansion • Conducted interviews with CIOs and other IT staff members to obtain information aboutthe current status of the telework infrastructure and plans for enhancement Detailed Data Analysis High-Level Data Synthesis

The sample BCAs were developed to bring agencies to the “basic” and / or “ideal” levels for Home Office, Services, and Enterprise solutions Red text indicates the components included in the BCA calculations • Technology • Currently in Place* • BCA 1: Home Office • Reutilized PCs (no security software) • Limited peripherals (printer/copier/fax) • Network interface (broadband router) • Limited mobile telephone (exec staff only) • Security resources (including firewall and authentication devices) • BCA 2: Services • Enterprise connectivity, • Voice conferencing, mobile telephone access (exec staff only) • Help desk support • Technical training (general) • BCA 3: Enterprise • Secure network access, including VPN/ firewall solution • Remote email access, terminal emulation system, web interfaces (limited) • Additional • Technology Needed • for Basic Solution • BCA 1: Home Office • Laptop & docking station • Peripherals for all teleworkers (printer/copier / fax) • Mobile telephone for all teleworkers* • BCA 2: Services • Voice communications (calling card) • BCA 3: Enterprise • Basic solution is currently in place (no additional components necessary) Additional Technology Needed for Ideal Solution BCA 1: Home Office Ideal solution is not covered in BCA 1; these components are not calculated** Advanced authentication devices Collaboration tools (web cam) PDA devices for all teleworkers BCA 2: Services Residential broadband service BCA 3: Enterprise Web interfaces (all admin functions) Basic Solution Ideal Solution * The Task 4 Report listed cell phone, calling card, or additional telephone line as three voice communication options in the basic solution; in this sample BCA series, a calling card was selected to meet teleworker voice communication requirements ** BCA 1 focuses on funding a “basic” solution only.

Context for Sample BCAs The Capital Planning and Investment Control (CPIC) process provides the context for the development of BCAs in the federal government • Regardless of the dollar size and ultimate recipient of a BCA (i.e., bureau Office of Chief Information Officer (OCIO), department OCIO, or Office of Management and Budget (OMB)), each BCA must step through the process outlined in the graphic to the right • Each of the sample BCAs in this report are assumed to be in the “Select” phase, which is where investments are developed, submitted and scored • “Select” phases across government require each BCA to analyze the potential value, cost and risk for the investment in question

VALUE Value Factors Priority Quantified Benefits Value Measures Metric, Target, Scale Priority RISK Risk Inventory % - impact on costs % - impact on value (benefits) Risk Tolerance Boundary EXAMPLE Degree of Caution Required Direct Costs (Dollar Figures) COST Pre-Risk Total FY07 Sub Total: FY08 Sub Total: FY09 Sub Total: The Value Measuring Methodology (VMM) is a structured approach for investment analysis that can be used to evaluate potential telework infrastructure enhancements… Sample VMM Outputs: Sample VMM Framework Used to Structure the BCAs in this Section: …including the evaluation of the three essential factors of decision making in a structured, quantifiable and repeatable manner

For the purposes of these sample BCAs, an abridged version of VMM’s methodology was employed Overview of VMM Methodology* • Step 1. Develop a Decision-Framework • Identify & Define the Value Structure • Identify & Define the Risk Structure • Identify & Define the Cost Element Structure • Begin Documentation • Step 2. Alternatives Analysis (estimate value, cost, & risk) • Identify & Define Alternatives • Estimate Value and Cost • Conduct a Risk Analysis • On-going Documentation • Step 3: Pull Together the Information • Aggregate the Cost Estimate • Calculate the Return-on-Investment • Calculate the Value Score • Calculate the Cost and Value Risk Scores • Compare Value, Risk and Cost • Step 4: Communicate and Document • Cost, value and risk are estimated for one alternative, instead of the three that OMB’s Circular A-11 requires for business cases • Value definition is confined to the “government financial” value factor only • One of VMM’s key strengths, the quantification of qualitative benefits (i.e., the other four value factors), requires a prioritization process that is most effective when completed in an interactive session using an appropriate automated tool • This process should be done at the highest appropriate level of agency management • Risk inventory and possible risk mitigation strategies were defined in lieu of detailed risk analysis • Assessment of probability and impact would need to be done in collaborative sessions with technical and policy staff or representatives of partner agencies • Only then could its impact on the value and risk scores be determined * Only the actions in “bold” were performed in sample BCAs

The five VMM value factors help identify, define, and quantify the financial and non-financial benefits of telework investments

This section provides three sample BCAs that seek funding required to close the gap between the organization’s current infrastructure and the “basic” or “ideal” telework infrastructure Assumptions • Each sample agency’s current level of infrastructure is assumed to be consistent with Scenario B (see Appendix) • Agency objective is to close the gap between their current infrastructure to the ‘basic” and / or “ideal” level of telework support • Agencies are scaling up to 50 percent of the agency teleworking

Implementing a “Basic” Teleworker-at-Home solution for 50,000 employees at an agency with 100,000 staff can yield over $36 million of benefits in a 3-year period • Teleworker-at-Home Components in this BCA: • Laptop with Docking Station • Combination printer/ copier/fax machine

An investment of approximately $16 million over 3 years is required to provide a “Basic” Teleworker-at-Home solution for 50,000 staff at an agency with 100,000 staff • A 3-year implementation allows for phased approach over multiple budget cycles and allows all desktops to be refreshed with laptops • All estimates are in FY07 dollars • The acquisition cost of a laptop can be offset by the current cost of acquiring a desktop • The approximate annualized cost of a desktop, including maintenance, is $326 • Since Telework frequency per OPM is one day per week (or 20%), only 20% of the laptop expense was charged to the telework initiative • The remaining 80% of the expense can be shared by agency cost categories, such as annual infrastructure and COOP compliance • The laptop and printer / copier / fax unit costs are annualized and include refresh and annual maintenance expense • Please refer to Appendix B for further detail on costs

This approximate $16 million investment can be offset with a benefits realization of over $36 million over the same 3-year period • Return on Investment (ROI): 232% • Cumulative Net Present Value (NPV): $20.2 million • Payback is achieved in Year 1 • In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance

The total amount of financial benefits that could be realized from implementing the “basic” teleworker-at-home solution is derived from a number of sources • Each type of savings and benefits are based on prior industry research which are referred to in Appendix A • The improved productivity calculation is based on a recent study that found teleworkers work on average 1 additional hour on days they telework • The increased employee productivity is the largest benefit since it accounts for 50 hours per year per teleworker, while the reduction of 3 missed work days per year per teleworker accounts for just 24 hrs per employee per yr • Several of these benefits, such as employee retention, correspond to more than one value factor See Appendix A for details on how the value of benefits were calculated

VMM requires that the probability and impact of each risk factor on both cost and value be considered. This provides analysts with information necessary to determine the interaction between impact and probability and predict how that interaction will change the value and cost of the investment under consideration Examples of risk that could affect the “teleworker-at-home” solution are: Technology Issues (e.g., connectivity, performance of legacy client-server applications remotely, and security) Access to / availability of IT support Difficulties working and communicating with co-workers in the office Inflexible agency-based operating procedures Too few at-home days utilized for program to be effective Participants in telework program are not well suited for working at an alternative work site In order to illustrate the impact of risk on cost and value, this BCA assumes that a detailed risk analysis has been performed with the following outcomes: There is a 5% impact (increase) on the total costs: $16.0 million  $16.8 million There is a 15% impact (decrease) on total value: $36.2 million  $30.8 million Narrative Risk Level Probability Cost Impact Value Impact High 50% 25% -25% NOTIONAL Medium 30% 15% -15% Low 25% 5% -5% Likelihood of Likelihood of Causes Cost to Causes Cost to Causes Value to Causes Value to Occurring Occurring Increase Increase Decrease Decrease While an actual risk analysis was not performed, this sample BCA assumes that risk could have a more noticeable impact on the realization of financial benefits

Implementing an “Ideal” Telecommunication Services solution for 25,000 employees at an agency with 50,000 staff can yield over $31 million of benefits in a 3-year period • Telecommunications Services Components in this BCA: • Residential Broadband Service • Calling Card (for long distance calls) *In this BCA, potential risks were identified but their impact on value and cost were not calculated

Cost analysis shows that approximately $15.6 million over 3 years is required for implementation of a “Basic” telecommunication services solution • A calling card was selected as the best telecommunication option for several reasons • Provides practical, inexpensive way for agencies to pay for teleworkers’ long distance charges • Cell phones may be more appropriate for some teleworkers who work from multiple locations, but calling cards meet the needs of a typical home-based teleworker • Broadband access is widely viewed as critical to the success of telework • Provides faster data communication and enables timely transfer of larger data files • Provides for both data communications and voice communications, so teleworkers are able to conduct telephone calls while transferring data • Allows use of collaboration tools, video conferencing, etc., which can be difficult if not impossible to use over dial-up *Annual costs are inflated per the difference between OMB Circular A-94's Nominal and Real 3-Year Treasury Interest Rates; costs are discounted per OMB A-94's Nominal 3-Year Rate on Treasury Notes and Bonds • As detailed in the table at right, the per user cost of $634 is based on the agency providing a calling card and broadband access to each teleworker

Value analysis shows that the $15.6 million investment can be offset by over $31 million in benefits from a variety of sources • Nearly $13 million of benefit in time savings related to broadband, which nearly pays for the investment itself • Estimates are based on technical performance superiority of broadband, as compared to dial-up • Over $101 million in financial benefits can be earned by this investment – four-fifths of which is assumed to be shared agency-wide • 20 percent to telework • 80 percent to agency initiatives, such as infrastructure upgrades / maintenance and COOP compliance • The potential benefits of this investment all map to one or more of VMM’s value factors, including • Government Operational/Foundational Value • Government Financial Value • Direct User (Customer) Value See Appendix A for details on how the value of benefits were calculated

There are a variety of risks to be considered which could impact the “telecommunications services” investment Potential Risks Potential Mitigation Strategies • Technology Issues (e.g., connectivity, performance of legacy client-server applications remotely, security, data security) • Access to / availability of IT support • Operational impacts • Difficulty working/communicating with office workers • Inflexible agency-based operating procedures • Too few telework days used for program to be effective • Supervisor resistance to telework • Appropriate selection of participants for telework • Inadequate preparation • Creation of burden on non-participating employees • Staff culture / existing expectations • Resistance by organizational support functions (e.g., HR, IT) • Historical resistance by smaller Federal agencies • Difficulty in measuring results • Senior management leadership • Comprehensive security planning • Telework-specific training • Organize Telework Advisory Group or Program Management Office • Assessing the impact Telework has on timekeeping, compensation, and other issues • Preparing a written Telework agreement for employees and managers • Regularly re-evaluating and modifying the program, when necessary, to meet changing circumstances • Designation of appropriate telework coordinator

Implementing an “Ideal” Enterprise solution for 5,000 employees at an agency with 10,000 staff results in $3.4 million of benefits over a 3-year period based on this study’s analysis • Enterprise Components in this BCA: • Web-based application • (Multi-tier Unix-based architecture) *In this BCA, potential risks were identified but their impact on value and cost were not calculated

Cost analysis shows that $219,000 over 12 months is required to provide an “Ideal” web-based application solution • Since the development is assumed to take place over a 12-month period, all labor costs and hardware purchases are for FY07 • Because of the multiple uses of these investments, only a portion of the development costs were charged to the telework initiative • Since telework’s frequency per OPM is 1 day a week (or 20%), only 20% of the development costs were charged to the telework initiative • For example, 20 percent may be associated with telework • The remaining 80 percent of the expense can be shared by agency costs such as infrastructure and COOP compliance • Software and System Administration costs are not included in the total, because the costs can vary widely due to a number of factors • Further detail on assumptions and industry guidelines regarding web application development solutions is provided in Appendix B * Annual costs are not inflated since all BCA costs are provided in FY07 dollars

Value analysis shows that the $219,000 investment can yield substantial financial benefits of $3.4 million • Each type of savings and benefits are based on prior industry research which are referred to in Appendix A • The improved productivity calculation is based on a recent study that found teleworkers work on average 1 additional hour on days they telework • The increased employee productivity is the largest benefit since it accounts for 50 hours per year per teleworker, while the reduction of 3 missed work days per year per teleworker accounts for just 24 hrs per employee per yr • In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • For example, 20 percent may be associated with telework • The remaining 80 percent of the expense can be shared by agency costs such as infrastructure and COOP compliance • The potential benefits of the enterprise investment all map to one or more of VMM’s value factors, including • Government Operational/Foundational Value • Government Financial Value • Direct User (Customer) Value See Appendix A for details on how the value of benefits were calculated

There are variety of risks that could reduce the overall value of the “Enterprise” investment Potential Risks Potential Mitigation Strategies • Technology Issues (e.g., connectivity, performance of legacy client-server applications accessed remotely, security, and data security) • Access to / availability of IT support • Efficacy of training • Operational impacts • Difficulty working and communicating with office workers • Inflexible agency-based operating procedures • Too few telework days utilized for program to be effective • Supervisor resistance to telework program • Appropriate selection of participants for telework • Timely coordination with unions • Creation of burden on non-participating employees • Staff culture / existing expectations • Resistance by organizational support functions (e.g., HR, IT) • Difficulty in measuring results • Senior management leadership • Broadband residential services • Comprehensive security planning • Telework-specific training • Organize Telework Advisory Group or Program Management Office • Assessing the impact telework has on timekeeping, compensation, and other issues • Developing a plan to address the equipment needs of your organization telework program • Preparing a written Telework agreement for employees and managers • Regularly re-evaluating and modifying the program, when necessary, to meet changing circumstances • Willingness of agency to participate • Designation of appropriate telework coordinator • Coordination with local unions (when applicable) • Increased IT support and allocation of resources

By clearly articulating the financial and non-financial benefits of telework, government leaders can make an effective business case for enhancing the infrastructure and services that support telework • Substantial financial benefits can be realized by implementing an effective telework program (see table) • Reduced absenteeism costs • Reduced real estate costs • Reduced recruitment and retention costs • Improved staff productivity • Telework IT enhancements do not just benefit teleworkers, they provide IT benefits to all staff • Improves contingency support • Increases organization flexibility and ability to adjust IT infrastructure and applications to meet changes in IT needs • Improves communication between staff and between staff and people in other organizations • Easier to use applications with a common interface • Automation of administrative processes • Other non-financial benefits of telework • Compliance with federal mandates • Increased workforce diversity • Reduced traffic congestion and pollution

Appendix A: Benefit Savings Calculations BCA 1: Telework programs can save organizations 63% of their absenteeism costs • In a study released in 1999, the International Telework Association and Council (ITAC) concluded that healthy employees often miss work due to family or personal obligations that can only be met during the business day • Teleworkers are still able to get some work done, even on days when they have appointments to attend • Employers can save 63% of the cost of absenteeism per teleworking employee, or $2086 per employee per year. Source: Exploring Telework as a Business Continuity Strategy, 2005 WorldatWork • This calculation assumes that 3 sick days / snow days are saved annually per teleworker • In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance

Appendix A: Benefit Savings Calculations BCA 1: Substantial real estate savings can be gained through telework and hoteling programs • For the purposes of this example, it is assumed that in Year 3 (FY09), the agency’s lease is up for renewal • Because half of its staff now teleworks at least once a week, the agency can reduce its per person (and hence overall) square footage allocation by 10% • The cost per rentable square foot of Class B office space in Washington DC is $34 per year • Federal office space typically is classified as Class B • Class B office space definition: good location, professionally managed, fairly high-quality construction and tenancy; generally show very little functional obsolescence and deterioration • Source: Society of Industrial and Office Realtors (SIOR) 2005 Comparative Statistics of Industrial and Office Real Estate Markets • To be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades/maintenance and COOP

Appendix A: Benefit Savings Calculations BCA 1: Telework has proven to be a valuable employee recruitment and retention tool, saving employers staffing costs • According to a 2003 telework study by the Equal Employment Opportunity Commission (EEOC), their total cost of recruiting one employee is $7000 • While this figure would certainly vary from agency to agency, this study assumes that the variance would be minor • Source: OIG-01-13-AMR Assessment of Reducing Infrastructure Costs Through Increased Use of Telework FINAL • In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance

Appendix A: Benefit Savings Calculations BCA 1: Studies have shown teleworkers are more productive than office workers • In a recent study of its extensive telework program, AT&T found that teleworkers report about one additional productive hour in each workday spent at home (about a 12.5% increase, approximately) • Source: Lessons Learned From The Network-Centric Organization: 2004 AT&T Employee Telework Results • This calculation assumes that each participating employee teleworks one day per week annually, not including two weeks of paid vacation • In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance

Appendix A: Benefit Savings Calculations BCA 2: Reduced Employee Absence Savings Calculations • In a study released in 1999, the International Telework Association and Council (ITAC) concluded that healthy employees often miss work due to family and personal obligations that can only be met during the business day • Teleworkers are still able to get some work done, even on days when they have appointments to attend • Employers can save 63% of the cost of absenteeism per teleworking employee, or $2086 per employee per year. Source: Exploring Telework as a Business Continuity Strategy, 2005 WorldatWork • This calculation assumes that 3 sick days / snow days are saved annually per teleworker • In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner • i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance

The cost per rentable square foot of Class B office space in Washington DC is $34 per year Federal office space typically is classified as Class B Class B office space definition: good location, professionally managed, fairly high-quality construction and tenancy; generally show very little functional obsolescence and deterioration Source: Society of Industrial and Office Realtors (SIOR) 2005 Comparative Statistics of Industrial and Office Real Estate Markets To be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades/maintenance and COOP Appendix A: Benefit Savings Calculations BCA 2: Real Estate Footprint Savings Calculations • For the purposes of this example, it is assumed that in Year 3 (FY09), the agency’s lease is up for renewal • Because half of its staff now teleworks at least once a week, the agency can reduce its per person (and hence overall) square footage allocation by 10%

According to a 2003 telework study by the Equal Employment Opportunity Commission (EEOC), their total cost of recruiting one employee is $7000 While this figure would certainly vary from agency to agency, this study assumes that the variance would be minor Source: OIG-01-13-AMR Assessment of Reducing Infrastructure Costs Through Increased Use of Telework FINAL In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance Appendix A: Benefit Savings Calculations BCA 2: Employee Retention Savings Calculations

In a recent study of its extensive telework program, AT&T found that teleworkers report about one additional productive hour in each workday spent at home (about a 12.5% increase, approximately) Source: Lessons Learned From The Network-Centric Organization: 2004 AT&T Employee Telework Results This calculation assumes that each participating employee teleworks one day per week annually, not including two weeks of paid vacation In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance Appendix A: Benefit Savings Calculations BCA 2: Improved Employee Productivity Calculations

Appendix A: Benefit Savings Calculations BCA 2: Because staff spend less time waiting for data transmissions when they are provided broadband services, staff are more productive • These savings compare the technical performance of broadband Internet access to dial-up Internet access • The following assumptions about daily email traffic are based on a typical federal email account • average message size of 60 kilobytes • average of 25 messages per day • average total size of 1500 kilobytes (1.5 megabytes) per day

In a study released in 1999, the International Telework Association and Council (ITAC) concluded that healthy employees often miss work due to family and personal obligations that can only be met during the business day Teleworkers are still able to get some work done, even on days when they have appointments to attend Employers can save 63% of the cost of absenteeism per teleworking employee, or $2086 per employee per year. Source: Exploring Telework as a Business Continuity Strategy, 2005 WorldatWork This calculation assumes that 3 sick days / snow days are saved annually per teleworker In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance Appendix A: Benefit Savings Calculations BCA 3: Reduced Employee Absence Savings Calculations

The cost per rentable square foot of Class B office space in Washington DC is $34 per year Federal office space typically is classified as Class B Class B office space definition: good location, professionally managed, fairly high-quality construction and tenancy; generally show very little functional obsolescence and deterioration Source: Society of Industrial and Office Realtors (SIOR) 2005 Comparative Statistics of Industrial and Office Real Estate Markets To be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades/maintenance and COOP Appendix A: Benefit Savings Calculations BCA 3: Real Estate Footprint Savings Calculations • For the purposes of this example, it is assumed that in Year 3 (FY09), the agency’s lease is up for renewal • Because half of its staff now teleworks at least once a week, the agency can reduce its per person (and hence overall) square footage allocation by 10%

According to a 2003 telework study by the Equal Employment Opportunity Commission (EEOC), their total cost of recruiting one employee is $7000 While this figure would certainly vary from agency to agency, this study assumes that the variance would be minor Source: OIG-01-13-AMR Assessment of Reducing Infrastructure Costs Through Increased Use of Telework FINAL In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance Appendix A: Benefit Savings Calculations BCA 3: Employee Retention Savings Calculations

In a recent study of its extensive telework program, AT&T found that teleworkers report about one additional productive hour in each workday spent at home (about a 12.5% increase, approximately) Source: Lessons Learned From The Network-Centric Organization: 2004 AT&T Employee Telework Results This calculation assumes that each participating employee teleworks one day per week annually, not including two weeks of paid vacation In order to be consistent with the cost calculation methodology, the savings are shared across the agency in the same manner i.e., 20% to telework and 80% to agency initiatives such as annual infrastructure upgrades / maintenance and COOP compliance Appendix A: Benefit Savings Calculations BCA 3: Improved Employee Productivity Calculations

Table Of Contents Introduction Methodology Sample Telework Program Business Cases BCA 1 – Home Office (In-Depth) BCA 2 – Services (High-Level) BCA 3 – Enterprise (High-Level) Findings and Conclusions Appendix A: Benefit Savings Calculations Appendix B: Development of Telework Costs Per Teleworker Cost Build-Up Methodology “Basic” and “Ideal” Costs Scenarios Appendix C: Resources for Developing Telework-related Business Cases

Appendix B: Development of Telework Costs A comprehensive set of standard cost elements was developed for estimating the costs of telework at 18 federal organizations • In line with established cost estimation methodologies, the Booz Allen team made assumptions and estimates to compensate for several data limitations • Lower-level organizational information was used for the cost estimates when overall organization’s information was not available – these estimates apply to the lower-level organization only • Information provided did not cover all the cost elements needed for analysis and the available information differed between organizations – cost assumptions were made to compensate for the missing information • Global and project-specific drivers and assumptions (i.e., assumptions about the current telework environment at each organization) were defined • Prior year (i.e., sunk) costs are not included in the estimates • All unit costs used in this report are assumed to be in FY 2005 dollars • All cost and benefits estimates in each of the three sample business cases analyses are provided in FY07 dollars • The cost elements were grouped into the three major categories: teleworker home office, services, and enterprise costs

Appendix B: Development of Telework Costs The assumptions used to make the cost estimates were based on standard industry estimates of costs and equipment lifecycles • Hardware technology refresh cycle is based on government and industry standards and varies by product. The article “When to Upgrade” by John Dix, Network World, November 28, 2005 and professional experience were used to estimate the life-cycle of equipment • Each annualized per teleworker cost includes the following components, where applicable: 1) the annualized purchase price; 2) annual maintenance costs; 3) annual lifecycle refresh costs; 4) annual recurring fees; 5) annualized one-time fees • Since every organization interviewed has a telework program in place, these estimates are designed to capture the annualized costs of previously-made purchases • In order to provide an annualized estimate for acquisition costs, the initial purchase prices are divided by their respective product lifecycles • Calculation of Maintenance and Lifecycle Refresh Costs • Recurring (i.e., maintenance) annual costs are assumed to total 15% of the acquisition cost of hardware and 20% of the acquisition cost of software • Refresh costs are calculated by dividing the acquisition cost of each element by its respective product lifecycle

Appendix B: Development of Telework Costs Appropriate methodologies were developed in order to estimate the per teleworker costs for enterprise components • The voice conferencing per teleworker estimate assumes that a teleworker uses an additional two hours a month of teleconferencing services as a result of their telework • The enterprise connectivity per teleworker estimate assumes that each agency’s Internet connection is a DS3, which has an annual recurring cost of $8,650 (per GSA’s Washington Interagency Telecommunications System pricing) • The server cost per teleworker estimate assumes that one server can support 6,000 staff • The help desk support per teleworker estimate assumes that a teleworker is responsible for a 20% increase per year in help desk support costs based on them teleworking 20% of the time (equivalent of 1 day per week of telework)

Analysis Document