Some Views on the Costing of a Collective Agreement

Cost evaluation and cost estimation are often misused by those interested in the identification and quantification of the application costs of a collective agreement. This paper aims at classifying in relation to these two calculation practices those methods or techniques generally used by the firm.

Cost estimation is a practice referring mainly to the rapid availability of statistical information in order to complete a projection of the additional costs caused by the renewal of a collective agreement. Cost evaluation refers mainly to a systematic and rational analysis covering a longer period, i.e. the life of the agreement, in order to control expenditures and to make some forecasts. Cost estimation is by far the most largely spread calculation practice in the firm.

Indeed, because of differences in stress situations and because of the belief that cost projections done in bargaining are sufficiently valid, cost evaluation is not as popular and as widely used as cost estimation. Such a cost evaluation method is limited by relatively important disadvantages. Indeed little or no concern is given to the costs and revenues stemming from changes in the essentially non-monetary provisions and negotiators are not able, with the methods in use, to quantify the indirect costs of monetary provisions.

The proposed method is not to be understood as an instrument to favorize the mutual destruction of the parties at the bargaining table. On the contrary, it aims at rationalizing the analysis of the monetary value of foreseable changes in the collective agreement in order to bring the parties to things more in the long term.

Generally speaking, the provisions of a collective agreement are evaluated in terms of direct costs. However the importance of indirect costs, although surely not forgotten, is generally not systematically evaluated and analyzed and too few interrelations are made. This brings up the point of the cost correction coefficient catalogue.

This catalogue, a booklet, includes a subdivision for each provision of the collective agreement. Direct costs are separately entered in each subdivision and, as for indirect costs, a complete list of those provisions indirectly related to a given clause is made. For each provision, a correction coefficient and the resultant cost in absolute value are indicated. The summation of such coefficients and indirect costs provides the total coefficient and the total indirect costs for a given agreement. The challenge stands within the effort to build correction coefficients. It is the basis of the validity of cost evaluation and cost estimation. More research is needed on such coefficients.

When one says that a cost for one party is a revenue for the other, we must keep in mind that it is gross revenue that is at stake. Indeed what concerns the worker is the increase in his actual available income. Therefore correction coffecients should also be used here if one wants to equate cost to satisfaction. Whereas for additional costs, coefficients are mostly positive in sign, they are generally negative for additional revenues.

It has been mentionned that cost estimation is more widely used than cost evaluation. One may however wonder how valid estimation of indirect costs of change in a provision can be obtained if no reference tool exists to identify the implications of such a clause on others and the degree of mutual influence. Correction coefficients find on additional rationale here.

Such an effort to systematize the cost measures of a collective agreement aims much more at bringing the parties to think in terms of positive satisfaction results stemming from expenses rather than exclusively looking and dollars and cents. This may be a better way to facilitate dialogue at the bargaining table.