Costing Library Services
Dean W. Dibling
Table of Contents
While all librarians must be concerned about the cost of services they
provide to patrons, special librarians must be particularly mindful of the bottom line. Special libraries
are frequently part of a for-profit enterprises and experience extra pressure to reduce costs and contribute
to the organization's profits. In addition, careful monitoring of the costs of library services is a critical
part of the decision making process for allocating library resources.
As early as 1936, Louis R. Wilson declared that methods would be adopted to determine
the cost of library services within ten years (Gross, 2006). Unfortunately, there is still no single generally-accepted
method for calculating the cost of library services. This paper will briefly examine five major costing models: the
Input/Output Model, Functional Cost Analysis, the Library Costing Model, the Equivalent Valuation Approach, and the
Cost Minimization Model.
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Why Bother with Costing?
A natural starting point in the discussion of costing library services is "Why bother with
costing in the first place? Libraries seldom have an unlimited budget and those libraries that function as part of a
for-profit organization must be especially mindful of keeping costs under control. Costing data is, at the very least,
useful and in some cases critical to other library functions. These include:
- Cost/benefit analysis
- Determining the effectiveness of service
- Determining the efficiency of service
- Determining the allocation of resources
- Substantiation of funding
- Determination of fees
- Comparison of services within and across organization(Gross, 2006)
Matthews reminds us that "librarians have long searched to find some performance measure
that will indicate the "goodness" of the library and its services...Intelligent use of measures can guide our decisions
and help us make meaningful comparisons" (Matthews, 2003).
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The Input/Ouput Model
Sayre and Thielen(1989) presented this somewhat simplistic costing model, primarily for
use in small public libraries. In this model, all inputs needed to support the various library services are determined and
used to calculate the per unit cost of said services, based on the actual utilization. In other words, the cost is
determined based on the number of items circulated, the number of times an item is circulated, the number of attendees
for a particular program, or number of hits to the library web site. This method has proven to be less than satisfactory
for larger operations.
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Functional Cost Analysis
According to Abels, Kantor, and Saracevic (1996), "Library managers must respond to
institutional demands for the justification of maintaining or supplementing resources and services. The difficulty
of assigning costs and values to library and information services and resources is magnified by the advent of a
broad variety of computerized and electronic modes of library service." In an attempt to more accurately assess costs,
they use Functional Cost Analysis to attempt to address one of the major weak point of the Input/Output Model -- that of the
difficulty in isolating certain costs.
The Input/Output Model assumes that all costs can be isolated and assigned to one
specific resource or service. In reality, this is not the case. For example, the cost of the building must be taken
into account, but how does one decide how much of that cost is to be assigned to the reference department? How much
is assigned to the serials collection? When a reference librarian takes time to provide a patron with instruction on
using the OPAC, is that considered a reference activity or does the library keep a separate accounting for library
instruction? Obviously, some of these questions are more difficult than others. Frequently there is no "right" answer
and, just as frequently, the method of handling these nebulous costs varies from library to library. Abels, Kantor, and
Saracevic, therefore, attempt to calculate fractional costs, i.e., this workstation is utilized 20% of the time to
provide patron access to the OPAC, 80% of the time the provide patron access to the internet. Costs for that workstation
are then distribute to those two services along those same percentages.
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The Library Costing Model
Robert M. Hayes has developed the Library Costing Model to deal with the complexities
of electronic resources (Hayes, 1996). He posits that costs, as they apply to any specific operation or service,
can be grouped into four major categories: acquisition purchases for materials used in providing it, staff salaries
for performance of it, direct expenses associated with it, and indirect costs allocated to it.
Like Functional Cost Analysis, the Library Costing Model attempts to separate fractional
costs using "workload factors," which are then expressed as percentages of FTE (yearly full-time equivalent) staff
for the performance of 1,000 units. For example, a transaction which takes one minute to accomplish would be
expressed as .01 FTE per 1,000 transactions. The Library Costing Model also takes into account direct expenses and
"overhead," such as training and meeting times, other unallocated work or vacations, and salary related expenses,
such as the employer's contribution to social security, workman's compensation, etc.
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The Equivalent Valuation Approach
Ryan and McClure (2003) made improvements to the Equivalent Valuation Approach. This
system takes its cost from an equivalent service being provided by a commercial service as the cost of the library
service being costed. For example, if a commercial firm charges $X for a answering a simple reference question then
the value of the library answering a simple reference question is also held to be $X. This method is more applicable
in determining the value added to the organization than determining the "true" cost of a service.
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The Cost Minimization Model
Barbara Hegenbart (1998) attempts to apply the economic concept of the cost-minimization
model to provide a framework for analyzing the economic basis of an operation. The model relies on first defining output
and input factors and then calculating the marginal and average fixed costs. If these figures can be accurately
ascertained, then one can calculate the minimum price the organization can charge and the minimum volume of business that must
be conducted in order for the organization to remain economically viable. This model involves the use of rather
sophisticated calculations that, of course, will be useless if the underlying costs are not properly assessed.
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The costing of library services is a complicated and sometimes confusing activity about
which there is little uniform consensus regarding method. A survey of six libraries will likely show as many different
methods for calculating costs. The ongoing trend of increasing electronic resources is only adding to this complication.
Nevertheless, the costing of library services is an area of librarianship that cannot be ignored by the special
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