(L)earned Value Janis Rizzuto (April 13, 2006)

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Page 1 of 6 (L)earned Value You are logge My Ac SPONSORS Home > Features > Features (L)earned Value Janis Rizzuto (April 13, 2006) In the second of our three-part series on earned value management,

Volkswagen s bug of the 50s is today s best-selling Beetle. Hip huggers of the 60s have been reborn as low-rise pants.

1 Page 1 of 6 (L)earned Value You are logge My Ac SPONSORS Home > Features > Features (L)earned Value Janis Rizzuto (April 13, 2006) In the second of our three-part series on earned value management, experienced practitioners share some trends, best practices and pitfalls. Plus, profiles of two successful EVM applications in the public and private sector. Volkswagen s bug of the 50s is today s best-selling Beetle. Hip huggers of the 60s have been reborn as low-rise pants. And harvest gold and avocado green of the 70s are desirable in design again as warm earth tones. Whether it s in cars, fashion or colors, everything old is new again. Crystal Ball Deltek eproject IIL Internatio Oakwood PPM Summit Primavera RMC Project SQE Stanford Univ SteelTrace Telelogic The same maxim is true of earned value management (EVM) in the project management industry. Although EVM has been around for nearly four decades in the defense industry, the current buzz about EVM would make project managers think it is the latest and greatest invention to assure project success. EVM is definitely fashionable even trendy, says Cheryl Johnson, senior consultant for Project Solutions Group, Vienna, Va. Johnson says several factors are contributing to EVM s prominence, including tighter regulations to require it on more government projects and growing interest from the private sector. If you are on the procurement side, you need assurances that you are using a contractor who can deliver, Johnson says. On the contractor side, you can t stay in business if you can t deliver. EVM can give both parties a measure of confidence that the project goals can be met. An EVM system effectively integrates the project scope of work with cost, schedule and performance elements for optimum project planning and control. The qualities and operating characteristics of EVM are described in American National Standards Institute/Electronics Industries Alliance Standard 748. In 2005, the Office of Management and Budget stated its intention to enforce EVM in IT projects at the federal agencies, including compliance with ANSI 748. The defense agencies have been applying the ANSI 748 standard for some time. Further, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council have proposed a revision to the Federal Acquisition Regulations to standardize use of EVM across the government.

2 Page 2 of 6 What s really happening now is that EVM is getting rolled out to projects of a lower value that are not just about building an aircraft carrier, says Elizabeth Mautner, director of administration and finance for the human resources line of business at the Office of Personnel Management in Washington, D.C. EVM has been around for a long time, but people are waking up with tighter resources and seeing that we need to have better control of IT projects to see that they are successfully implemented. Even though EVM is decades old, few organizations outside of the defense arena have much maturity in using it. That fact is spawning marketplace solutions as companies and consultants emerge with software and services to measure EVM maturity and hasten it along. For example, Johnson is leading PSG in creating an assessment tool to evaluate EVM capabilities. The demand for experienced earned value professionals is at all-time high, she says. Demand has also produced a new designation to assess individual experience in EVM. In late 2005, the Association for the Advancement of Cost Engineering established the Earned Value Professional, or EVP, certification. Johnson, herself an EVP, says only about 150 people have passed the rigorous test, which includes actual data analysis of a case, not just multiple-choice questions. Ray Stratton, PMP, EVP, is also part of the newly minted EVP group. As president of Management Technologies in Brea, Calif., he takes great interest in tracking developments in the EVM field he has been passionate about for years. Only about 4 percent to 6 percent of all the projects out there are using EVM, Stratton says. But interest is growing and project managers are becoming more familiar with EVM. It s coming out the government Department of Defense closet. Primavera Systems Joel Capperella confirms that interest. I just did an interview with Computerworld magazine, says the Bala Cynwyd, Pa.-based market manager for public sector/aerospace and defense. Private industry is headed this direction. The magazine is getting a lot of inquiries from its readers about EVM. They want to know if this will be a flash in the pan or a discipline the industry really embraces. Stratton would lay odds it is the former. EVM s increasing popularity stems from the essential project feedback it delivers. EVM is excellent at showing one of two things: either you don t have a good plan or you have a good plan and you are unable to follow it. Paul Self, a business solutions consultant at Deltek (formerly Welcom), makers of Cobra EVM software, sees private industry taking hold of EVM systems both for competitive advantage and risk management. Based in Houston, Self sees growing interest from oil and gas companies. One potential client is an offshore drilling platform contractor, pursuing EVM for the first time after stumbling on a major project. They are determined not to be embarrassed again, he says. Take a look at two organizations proud of their EVM practices and note the factors critical to their success: Profile: The Savvy Agency Implementer The Office of Personnel Management climbed up the learning curve on EVM and is now enjoying the view at the top, according to Mautner. EVM is working well for our projects, she says. It s giving people at all levels of the project a lot of insight into what s going on. Getting to this point took years. In 2004, Mautner learned about EVM, got project managers trained and did market research for software tools. In 2005 after purchasing Primavera Systems product, OPM implemented EVM on five e-government projects designed to consolidate certain personnel functions across agencies, such as security clearance, payroll services and recruitment. We brought on projects in a phased way, Mautner says. We designed the EVM system as an enterprisewide system within OPM, but for the first year, it was implemented as a pilot. EVM was a good fit for the e-gov projects, Mautner says. From the beginning, we took EVM very seriously. We saw some of the early guidance from OMB, and because our work was on electronic government projects, they were very forward-looking, innovative projects focused on IT.

3 Page 3 of 6 This year, EVM has been adopted enterprisewide and is already positively impacting two other major projects the retirement systems modernization project and the financial systems modernization project. We are seeing those projects use the procedures that we used, Mautner says. We felt good that the things we put together on the front-end of this are still working for the new projects. Indeed, OPM s EVM system is delivering information that is being used by management, as it is supposed to do. Major projects at OPM are reviewed at a higher level, Mautner says. Our CIO has an investment review board, so when projects go out of our tolerance level then they are reviewed by the board. Success Factors: Executive Sponsorship: The key at the front-end is getting high-level executive sponsorship, Mautner says. I worked with our own executive leadership and the CIO and CFO at OPM to get executive buy-in. The support needs to be there across time, not just in the beginning. There has to be a commitment by the agency to spend resources both in dollars for software and training, but also for managers time to plan their projects using this system and then report their projects on a monthly basis. Phased Implementation: Mautner says proving EVM in a small group of projects made the difference in her agency s success and paved the way for better acceptance later on. Change Management: At a very basic level, what you are asking everyone to do is report their time every day by hour what they are doing against a set of activities, Mautner says. This is a change management process that involved the employees, managers and timekeepers. There were many training sessions and job aids, and we are continually renewing that training. Profile: The Up-And-Coming Contractor At Inter-Coastal Electronics, using EVM is a competitive strategy, says Dan Horne, CFO of the Mesa, Ariz.-based manufacturer of simulation, training and instrumentation devices for the military. For the past two years, the company has been using EVM concepts in an informal way, and this year, the company is tightening up its practice by deploying ERP software with EVM capabilities from Relevant Business Systems. The company s impetus in stepping it up came from learning from its losses. After losing some big proposals, I went to the debriefs and began to realize that the reason why we lost didn t have so much to do with our ability as it did with the customer s perception of us, Horne says. When you are a small business, it s hard to change people s opinion enough in order to get them to take the risk with you and give you that initial opportunity. Horne says Inter-Coastal s EVM practice will open the door on larger contracts. Instead of jobs in the $8 million to $10 million range that the company gets now, it wants $50 million deals. In one case, we lost business to Lockheed and then Lockheed failed at the project technically, Horne says. The government came back to us and gave us the business. If we had just shown better when we competed in the beginning, we probably would have won the business. Inter-Coastal s elective choice to use EVM is unique, as most defense-oriented contractors of a certain size are required to be proficient in the discipline. It s a strategy we are pursuing to show that we can do EVM before we are asked to, instead of coming in in arrears and promising that we will, Horne says. We are being proactive. Success Factor: Work Breakdown Structures: In its drive to adopt EVM, Inter-Coastal is transitioning to formal WBS templates in its ERP system. It s moving carefully, Horne says, because unless staff understands how to use such structures manually, automating them will only cause havoc. It s also keeping its WBS shallow and simple. One historical problem with WBS is that people make it too detailed, Horne says. When people make a really sophisticated and granular WBS, the pollution from trying to manage the project that way drifts upward and you can t manage at the

4 Page 4 of 6 top. Horne emphasizes the essential value of WBS in EVM. If you do the WBS well, you get good feedback, he says. If you don t do the WBS well, then you get into basic arguments about why the project didn t go well and you miss the feedback opportunities so that the next project might go better. Three Hurdles Before EVM Even though the spotlight is on EVM, experts point to pitfalls that can negatively impact the practice. Consider these warnings: Customer Immaturity: It s one thing to be on the project side generating EVM data monthly. It s quite another to be on the receiving end of that data. Sources say customer knowledge is a weak spot. Unless the procuring agent evaluates the progress reports, they are of no value, Johnson says. Therefore, customers need to be equally sophisticated in EVM if they are to evaluate the EVM capabilities of possible partners and then use the EVM data to manage projects, which is the goal. A lot of education is needed on both sides, she says. An associate at Booz Allen Hamilton in McLean, Va., Tim Boatwright is focused on educating his government clients at the U.S. Coast Guard. He consults with business management officials to help them better understand the EVM data their contractors are providing. The data the Coast Guard is getting from their contractors is very good, Boatwright says. That s probably because they are essentially a defense agency and their contractors are familiar with the defense world. Still, in terms of the agency s overall experience with EVM, there are lots of questions. Overall, Boatwright says, the focus across the government agency spectrum is on the mechanisms needed to report EV as opposed to using EV as a management tool. The overhead required to get the reports out and to use EV as a management tool is virtually the same. But you have to do that first step before you come to the realization that the data can be useful. In terms of EV hitting its stride as a management tool, we are probably a few years away. Mautner says OPM repeated EVM training for its executives a couple of times to reinforce their understanding. You have to make sure that the data that comes out of projects is being used at the highest level by executives, she says. When executives look at these reports, ask questions about them and want to understand whether the project is on tract or not, then you know that they are really paying attention to the system. Overcomplicated Approaches: There is consensus that the perception of EVM s level of difficulty works against its widespread adoption. People fear it because they don t understand it, says Robert Blakeney, product marketing director at Deltek. And practitioners don t help the cause because they have their own language of acronyms BCWS and all the rest and they don t share it willingly with new users. To some degree, everyone needs to quit using the acronyms and use real words that the average planner can understand. Stratton agrees that complexity can hinder progress. The government and the contractors are probably making EVM harder than it has to be to get started, he says. They are doing that because they read the 32 ANSI criteria and think that if they aren t doing all of those then they aren t doing EVM. That s clearly not the case. They d be better off spending time building up the infrastructure to fulfill some basic requirements that might not meet all the criteria. Doing that would give them stronger data and a more fundamental work breakdown structure. Start where you are is Capperella s recommendation. The most common mistake that people make is getting a software tool or hiring a consultant or reading every book they can get their hands on, he says. Those things individually are valuable, but they miss what is going on in their projects organization today. The first thing we recommend is taking an inventory and analyzing the way they are structuring their work on larger projects. How do you plan out how you are going to execute a large project, and in conjunction, how are you structuring your costs over the life of that project.

5 Page 5 of 6 Indeed, Stratton says, the key to EVM competence is not found in a software tool. Software does not provide the instant gratification of being ANSI 748 compliant, he says. Compliance is in the policies and procedures and in the organization of projects. The software industry has some fine products out there, and they make laborious jobs easier, but they don t replace thinking. Boatwright offers advice, too: I tell people new to EV not to get intimidated by it--it s not rocket science. For the most part, project managers are doing 80 percent of the work already. It s just looking at it a different way. The additional piece is valuing the progress you ve made. EV dollarizes that progress so you can compare where you are on a project with how much you have spent and how much you should have spent. Lax Standards and Certifications: Some experts are concerned by the loose nature of EVM s expansion and the speed at which it is being undertaken. For example, Self says he finds the lack of standardized data troublesome. An agency is held accountable for the performance of its contractors, but that agency receives data from multiple contractors in multiple formats, depending on the tool the contractors are using. It makes interpreting what s going on and managing accordingly problematic, he says. Third-party organizations are cropping up, saying they can certify ANSI 748 compliance, but as yet there is no organization to certify the certifiers, Stratton says. However, the National Defense Industrial Association has formed a committee to draft standards for companies who claim to be certifiers. In the meantime, the OMB says that agencies can self-certify, he says. That s the weakest link to have an agency stand up and declare itself ANSI-compliant. For Stratton s taste, the focus on the EVM ANSI standard, and not just simple EVM, is trying to move too fast. It s a bit sad that the government is trying to move so quickly and not build up the infrastructure to do EVM right, he says. The penalty of trying to implement EVM without the proper foundations, proper training and proper management support is that it will appear to be working for the short term. But in a year or two, it may not reflect programs accurately and will be discarded because it didn t work, even though there is 30 years of Department of Defense data that shows it does work. If certain aspects of the EVM trend are addressed and EVM s value as a discipline for project control is realized, experts agree the rewards will be felt on current projects as well as future ones. The ability to better structure and fund future work is perhaps the biggest payoff, Boatwright says. The crown jewel of EVM is that if you can build up a database, then you can look at a type of work and see how to bid by checking against the past experience. Plus, the heart-in-the-right-place thinking behind broader EVM requirements is laudable as well. Blakeney concludes: The government has some of the most stringent project management and reporting requirements out there. They are trying to spend our money well. That s encouraging. Next week: Implementing EVM in a Professional Services Organization. Janis Rizzuto is a frequent contributor to ProjectsAtWork. Write a review for this article Sponsored Announcements and Special Offers Introducing a New PMP Exam Prep System from Optimo. Are you new to project management, looking for formal PM training, seeking to update your skills or looking to become a Certified Project Manager? If so, then our Performance Coach System is for you. Our system will optimize both your personal and professional development.

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GAO Earned Value Management (EVM) Audit Findings

GAO Earned Value Management (EVM) Audit Findings Based on Best Practices for EVM in the GAO Cost Estimating and Assessment Guide Karen Richey December 2012 EVM is an Important Management Decision Support