Earned Value Management ASMC Regional PDI Hanscom AFB
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1 ! Earned Value Management ASMC Regional PDI Hanscom AFB Phillip Wojcik AFLCMC EVM Focal November 15, 2017
2 My Background 2
3 50 Years Old! Happy Birthday EVM!!! Started in 1967 as Cost/Schedule Control Systems Criteria (C/SCSC) What does that mean for you?
4 Today s Topics Understanding what EVM is Common misconceptions Joint Space Cost Council Study results
5 Let s Get on the Same Page What is EVM?
6 It s Management!!! Earned Value MANAGEMENT!! Program Management that focuses on Performance Measurement What s being measured? Cost (dollars) Schedule (time) Technical (work accomplished) Performance Measurement Baseline (PMB)
7 Three Key Components of EVM 1. Processes 2. Systems 3. Data Outputs
8 Processes required for EVM and a PMB Planning Scheduling Budgeting Work Authorizations Cost Accumulation
9 Systems required for EVM and a PMB Accounting Scheduling Estimating Procurement Manufacturing/Enterprise Resource Planning (M/ERP) Time Card Management
10 Data Outputs of EVM and a PMB Integrated Program Management Report (IPMR) Format 1 (performance by Work Breakdown Structure) Format 2 (performance by Organizational Breakdown Structure) Format 3 (changes to the budget plan) Format 4 (staffing report) Format 5 (variance analysis report) Format 6 (Integrated Master Schedule IMS) Format 7 (historical, time-phased actuals and projected future estimates)
11 EIA-748 Guidelines Industry-owned set of standards/best practices Governs/dictates the systems necessary for EVM, which in turn allows for the processes that create and maintain the PMB, which in turn allows for accurate, consistent data outputs (IPMR) 32 Guidelines arranged into 5 categories: Organization Planning, Scheduling and Budgeting Accounting Considerations EVMS Analysis and EVMS Management Reports Revisions and Data Maintenance
12 Who Ensures Contractor s Systems Comply with EIA- 748? Defense Contract Management Agency DCMA DoDI Operation of the Defense Acquisition System states: Above $20M and below $100M contractor system must comply with EIA-748 No DCMA formal validation Above $100M Formal validation and ongoing compliance reviews by DCMA
13 Let s Get on the Same Page What is EVM? Processes Systems PMB Data Outputs
14 So WHEN Do We Apply EVM? DoDI describes 4 criteria for EVM applicability: 1. Cost or incentive contract types 2. Period of performance longer than 18 months 3. $20M or more on contract (not program!) including options 4. Nature of the work must be discretely measurable
15 Risky Intersections
16 Who Performs / Is Responsible for EVM? Contractor and Government Contractor manages using EVM, Gov t provides oversight based on EVM Program Manager decision making based on EVM data Engineering technical experts and advisors Contracting EVM DFARS clauses, CDRLs, proper contractual language FM (budget and cost specialists) provide analysis to PMO
17 Common Misconceptions About EVM
18 The Data Isn t Timely Enough The IPMR Data Item Description (DID) requires delivery of data between days after the close of the contractor s accounting cycle The EVM process is intended to provide early warning of emerging risk items and worsening performance trends allowing for implementation of corrective actions quickly 18 month POP required for EVM
19 The Data Is Lagging Not Leading If you re only using EVM Data as a historical reporting tool, you re not maximizing EVM s features! Estimates at Completion (EACs) are perhaps the most valuable output of any EVM system they re forward looking forecasts incorporating historical data and trends Trend analysis, TCPI, Earned Schedule, TSPI, statistically calculated EACs, etc. all help to project performance so managers can make course corrections on future work Schedule data is usually a leading indicator of cost data
20 Somebody Else Owns EVM / That s Not My Responsibility LCMC Leadership expects FMers to be the EVM analysts on programs Check your Core Docs! No Occupational Series in AF No EVM cavalry coming to do it Hanscom FZCI here to help and train!
21 EVM is a Burden on Contractors EIA-748 is an industry-owned best practice!!! Most major aerospace and defense industry partners have made the business decision to adopt EVMS as a standard way of doing business on all types of development work, including commercial, fixed-price, and government cost type contracts - EVM System s High Cost Fact or Fiction; Defense AT&L: Jan-Feb 2017 They implement EVM even on non-dod programs and below our thresholds and have been for years
22 Contractors Can Manipulate the Data There are specific, standard measurement techniques used to discretely measure work progress: Percent start/percent finished Milestone Weights Units Completed Apportioned Effort Equivalent Units Percent Complete (more subjective but requires quantifiable backup data) Milestone Weights with Percent Complete Become a skilled analyst to know what to look for
23 Contractors Can Manipulate the Data cont d The great value of EVMS is that with the required accounting reports, those interested in the product are not dependent upon subjective feelings or vague assurances. - A Practical Guide to Earned Value Project Management; Budd/Budd
24 EVM is Too Time Consuming EVM actually helps to manage by exception so that decision makers need only focus on key driving areas Relieves project managers from time-consuming explanations of their current positions so they can concentrate on running projects. - A Practical Guide to Earned Value Project Management; Budd/Budd Variance reporting thresholds are customizable for each contract to filter out only what is deemed most important or risky
25 EVM Costs too Much We Should Remove it Multiple studies indicate Earned Value Management implementation averages between 0.4% to 1.63% of a contract s cost $40K car -> no headlights/nav system to save $400 They ve got the systems and processes implemented, and are using them whether we require it or not JSCC Study suggests.9% cost premium imposed by gov t contracts
26 EVM Costs too Much We Should Remove it cont d What part of EVM do you want the contractor not to perform: Processes? (planning, scheduling, budgeting, work authorizations, cost accumulation) Systems? (accounting, scheduling, estimating, procurement, M/ERP, time cards mgmt.) Reporting? (IPMR Fmts 1-7) Usually comes down to reporting requirements Fmts 1,2,3,4,7 are electronic submissions produced by their EVMS Fmt 5 involves greatest cost, but Gov t limits variance reporting to 15 now Since management of the program is necessary, what will be used in place of EVM for progress statusing, measurement and reporting? Only makes sense if the nature of the work is not discretely measurable
27 Better Earned Value Management System Implementation Study Joint Space Cost Council
28 What is the Joint Space Cost Council? Established in 2008 by Under Secretary of Defense for Acquisition, Technology, and Logistics (OUSD (AT&L)) and the Under Secretary of the Air Force Joint government and industry collaboration with a focus on affordable, accurate and credible cost estimating on space systems 2013 JSCC initiated Better EVMS Implementation Study Participants included Boeing, Lockheed Martin, Northrup Grumman, Raytheon, Ball Aerospace, PARCA, NASA, NRO, USAF, USN, DCMA and CAPE
29 Better EVMS Implementation Study Based on premise that the cost premium imposed by Government contracts is.9% above in-house management control systems Study conducted in 2 Phases: Phase I Identify what areas drive those premiums so Government can help reduce industry costs Phase II Discover how to improve the value of EVM products and outputs for Government Program Managers
30 The Results Phase I Reducing industry costs 3 Themes 13 Recommendations Phase II Improving the value of EVM for Gov t PMs 4 Themes 12 Recommendations
31 Phase I Themes - Reducing Industry Costs Theme 1: The Control Account level (size and number) significantly impacts the cost of EVM Theme 2: Program volatility and lack of clarity in program scope as well as uncertainty in funding may impact the cost of EVMS, just as any other program management discipline Theme 3: Volume of IBRs and compliance/surveillance reviews and inconsistent interpretation of the 32 EIA-748 Guidelines impacts the cost of EVM
32 Phase II Themes Improving value of EVM for Gov t PMs Theme 1: There is widespread use of and reliance on EVM by Government PMs to manage their programs Theme 2: Government PMs highly value and heavily rely upon the Integrated Master Schedule (IMS). However, the benefits and value of the Integrated Master Plan (IMP) and Schedule Risk Analysis (SRA) have not been fully realized Theme 3: Government PMs indicated IPMR (CPR, IMS, CFSR, NASA 503) data quality problems. However, they did not always realize the opportunities and benefits to improve data quality through EVMS surveillance Theme 4: Government PMs highly value and rely upon IBR discussions. However, the benefits and value of the preparatory baseline review activities leading up to the IBR event and close-out have not been fully realized
33 Phase II Recommendations Designed to increase the benefit and value of these EVM outputs: Integrated Master Schedule Contract Funds Status Report Integrated Baseline Review EVM Metrics Variance Analysis Report Staffing (Manpower) Reports EVM data by WBS Over Target Baseline & Over Target Schedule Schedule Risk Analysis Surveillance Reviews Integrated Master Plan EVM data by OBS
34 Future Classes Full breakdown of study including comprehensive detailing of all themes and recommendations coming soon! Contract Performance Management Branch (HAOL/FZCI) is here for all your training needs: Focus Week quarterly Developing Government EACs Understanding the Format 5 Report Conducting Successful IBRs Just-in-time training all topics IBR preparation, training and support
35 EVM Assistance AFLCMC EVM Focal Point Hanscom AFB Phillip Wojcik Victoria Brown Lisa Perregil Eglin OL Patrick Stage Brent Havercroft Wright Patterson OL Kevin Hale
36 EVM Resources AFLCMC EVM SharePoint link: PARCA EVM site where you can find full JSCC Study:
37 If You Don t Believe ME A DoD EVM Report to Congress, dated Sept. 1, 2009 says it best..! After examining the topics identified in Section 887, the Department has concluded that the DoD EVM process is the best tool available to the program management community and senior leaders for effectively managing large, complex acquisitions. No other alternative exists that can match the benefits of EVM.
38 Questions?
Application of EVM to Contracts
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