earned value management (evm) fundamentals

1

Earned Value Management (EVM)Fundamentals

TECHNICALScope &

Performance Goals

Integrating ToolEVMSCHEDULE

Constraints & Milestones

COST

Goals& Projections

Presented by:

Joel Little [email protected]

Derreck [email protected]

Presented at the 2016 ICEAA Professional Development & Training Workshop

mailto:[email protected]

mailto:[email protected]

2

The EVM Process - Integrated Program Management -

• An Integrated Plan Is Established (PMB)• Work Is Defined, Scheduled, and Resources Are Allocated to Lowest Level for Execution

• Risks Are Identified (the IBR Process)• Risk Management Plan Established

• Budgets Are “Earned” As Work Is Completed (Earned Value)

• Actuals Are Accumulated (ACWP)• Status Provided Against Baseline (PMB)

• Variances Are Isolated (Cost/Schedule Drivers)• Early Warning

• Management Actions• Corrective Action Identified & Implemented• Changes Are Implemented & Controlled

• Final Estimated Cost & Schedule are Forecast

Planning

Executing

Controlling

Inte

rnal

& E

xter

nal C

hang

esPresented at the 2016 ICEAA Professional Development & Training Workshop

3

DoDI 5000.02 EVM Policy Guidance

Contracts* < $20M• EVM optional (PM’s risk-based decision)• Cost-benefit analysis required• IPMR tailored (Formats 1 and 5 recommended)

• Format 6 may be recommended

* Contracts – Cost/Incentive, subcontracts, inter-government work agreementsEVM on FFP requires MDA approval; EVMIG also discourages nature of work (LOE or T & M)

Contracts* > $100M• Compliance with 32 EVMS Guidelines• Formal EVM system validation• IPMR (All Formats Required)• Integrated Baseline Reviews• Ongoing Surveillance

Contracts* > $20M but < $100M• Compliance with 32 EVMS Guidelines• No routine surveillance• No Formal EVM system validation• IPMR (tailored): Formats 1, 5, 6 & 7 required• Integrated Baseline Reviews

SEP 2015 Interim Class Deviation Memo raised threshold

SEP 2015 Interim Class Deviation Memo raised threshold

DoDI 5000.02, January 7, 2015


DoDI 5000.02 EVM Policy GuidanceWith DPAP Interim Deviation Impact

Contract Value(Then-Year $)

$0 $20M $50M $100M

* Format 6 may be required on FFP

Contract Type Risk Based Decision Cost Reimbursement & Incentive Contracts(EVM on FFP*, LOE, T&M and contracts ≤ 12 months duration is discouraged

EVM System Requirement No Mandatory Requirements

Compliant with EIA - 748

Formal EVMS validation not required

DCMA surveillance only conducted for cause

Compliant with EIA - 748

Formal EVMS validation required

Routine DCMA surveillance performed

EVM Data Requirements IPMR Formats 1, 5 & 7 Recommended

IPMR Tailored(Formats 1, 5, 6 & 7

mandatory)

IPMRAll 7 Formats required

4


5

• FAR Clauses – July 2006• FAR 52.234-2 – Notice of EVMS – Pre-Award IBR• FAR 52-234-3 – Notice of EVMS – Post Award IBR• FAR 52-234-4 – EVMS – The Gov will conduct an IBR if a pre-award IBR has not been conducted.

• DFARS Section 234.203 – Solicitation provisions & contract clause (Dec 2011)• Use the provision at DFARS 252.234-7001, Notice of Earned Value Management System, instead of the provisions at FAR 52.234-2 and FAR 52.234-3 in the solicitation

• Use the clause at DFARS 252.234-7002, Earned Value Management System, instead of the clause at FAR 52.234-4 in the solicitation and contract.

• Use DFARS 252.242-7005, Contractor Business Systems, to allow for withholding payments due to non-compliant EVMS issue

• Includes links to procedures on performing cost benefit analyses and waivers

Section I - General Provisions

DoD Contracts will NOT use FAR Clauses for EVM


6

Section J - Exhibits/Attachments• Work Breakdown Structure - MIL-STD-881 mandatory common WBS for CPR,

IMS, IPMR & CCDRs through WBS Level 3 • EVM Related Data Item Descriptions (DIDs)

Contract Performance Report DI-MGMT-81466AIntegrated Master Schedule DI-MGMT-81650Integrated Program Management Report DI-MGMT-81861(Supersedes CPR & IMS DIDs effective July 1, 2012)

• FM & Cost Related Data Item Descriptions (DIDs)Contract Work Breakdown Structure DI-MGMT-81334DContract Funds Status Report DI-MGMT-81468ACost and Software Data Reports DI-FNCL-81565C thru 81567C

• Contract Data Requirements List (CDRL) places CPR & IMS on contract • EVM CDRLs can and should be tailored within bounds of policy

Tailoring options are limited for contracts > $50MMost aspects are tailorable for contracts < $50M

• Consider all risk factors when tailoring EVM DIDsType of contract (determined by cost risk)TechnologySchedulePast contractor performance


7

EVM Key Elements

QUESTION ANSWER ACRONYM

How Much Work Should Budgeted Cost For BCWS/PVBe Done? Work Scheduled

The Plan

How Much Work Is Done? Budgeted Cost For BCWP/EVWork Performed Or Earned Value

How Much Did The Actual Cost Of ACWP/ACCompleted Work Cost? Work Performed

What Was The Total Job Budget At Completion BAC Supposed To Cost?

What Do We Now Expect The Estimate At Completion EACTotal Job To Cost?


8

Where does it all start?


9

Earned Value Management within the Contracting Process

ASSIGN BUDGETS

GOVERNMENT

PROVIDER

ACQUISITIONSTRATEGY

DEVELOPRFP

PROPOSAL

MGT VOLUME

TECH VOLUME

COST VOLUME

NEGOTIATIONSOURCE SELECTION

AWARD PROJECT

ESTABLISHPROJECTBASELINE

ASSESS RISKDEVELOP MR

PROJECTEXECUTION &

PERFORMANCEMEASUREMENT

STATUSREPORTS

DEVELOP


10

PMB Development Steps

Step 1. Define the Work Scope • Identify the scope of work • Plan the work at the control account /

work package level

Step 2. Schedule the Work • Arrange the work packages in order • Schedule work packages

Step 3. Allocate Budgets to Schedule

10040

50

• Classify the work and select an EV technique

• Budget the work packages • Spread the budget over time • Calculate cumulative BCWS


11

All earned value is accomplished at the control account BCWS/PV is established BCWP/EV is determined ACWP/AC is collected Variances are assessed Estimates are revised Workaround plans are devised

In IPT organization structures, the control account may be tied to an IMP Significant Accomplishment or Accomplishment Criteria.

EIA 748 Definition - A management control point at which budgets (resource plans) and actual costs are accumulated and compared to earned value for management purposes. A control account is a natural management point for planning and control since it represents the work assigned to one responsible organizational element on one program work breakdown structure element.

The Control AccountPresented at the 2016 ICEAA Professional Development & Training Workshop

12

10 201 Time

Schedule Integration

MASTER SCHEDULE

DETAIL LEVEL SCHEDULE

INTERMEDIATE LEVEL SCHEDULE

- Single Top Program Level Schedule - Schedules IMP Program Elements - Schedules Program and Contract Milestones - Horizontally Integrated – Depicts task relationships

among IMP Program Elements and Milestones

- Subordinate to Master Schedule scheduling a single or a limited number of Program Elements

- Schedules Associated EVMS Control Accounts - Schedules IMP Significant Accomplishment Milestones - Horizontally Integrated – Depicts task relationships

among control accounts & significant accomplishments - Vertically Integrated – All schedule elements completed

in time allocated to associated program level element

ITEM 11 12 13 14 15 16 17

CONTROL ACCT 14

CONTROL ACCT 15

CONTROL ACCT 16

CONTROL ACCT 17

CONTROL ACCT 18

CONTROL ACCT 19

- Control Account Schedule - Schedules IMP Accomplishment Criteria Milestones - Horizontally Integrated – Depicts task relationships

among Work Packages & Accomplishment Criteria - Vertically Integrated – All detailed schedule work

packages completed in time allocated to control account

Vertical Integration

12 13

Horizontal Integration

Vertical Integration


Control Acct 16


24


13

Earned Value Techniques Method Length BCWP Example

0 / 100 % 1 Mth

50 / 50 % 2-3 Mths

% Complete Varies

Variant Milestone 3 or more Mths

Level of Effort Varies

Apportioned Effort Varies


Management Reserve

Total Allocated Budget

$

Completion Date

Result: Time Phased PMB

BAC

Time 14


15

Integrated Program Management Report (IPMR)

Format 1 – Work Breakdown Structure (WBS) Format 2 – Organizational Breakdown Structure (OBS) Format 3 – Baseline Data Format 4 – Manpower Data Format 5 – Variance Analyses Format 6 – Integrated Master Schedule Format 7 – Historical Data (BCWS, BCWP, ACWP, BAC, EAC, etc.)

EVM provides an Objective means by which to Evaluate Contract Performance and predict the Future based on risk


16

General EVM Report Tailoring

• IPMR Tailoring Guidance• Format 1 & 2 Reporting Levels• Reporting Frequency• Submission Dates• Date of first and last reports• Format 5 variance reporting

thresholds• Fixed Number of Variances • Percentage or Dollar Thresholds• Specific Variances

• Contractor format• Electronic data interchange format

• IMS Tailoring Guidance• Degree of networking• Reporting Frequency• Submission Dates• Date of first and last reports• Frequency of schedule risk

analysis• Electronic data interchange

format


17

Example -- With Earned Value

Contract: 4 Miles of Railroad Track in 4 Mos for $4K Status: After 3 Mos Only 1 Mile of Track is

Complete yet $2K Spent Question: What Would You Tell the PM?

Schedule Variance$1K-$3K = ($2K)66% Behind

Cost Variance$1K-$2K=($1K)100% Overrun

Planned Work $3K Earned Value $1K Actual Costs $2K

BCWS BCWP ACWP

Material$1K

Labor$1K


18

Example -- Without Earned Value

Contract: 4 Miles of Railroad Track in 4 Mos for $4K Status: After 3 Mos Only $2K Spent of $3K Planned Question: How are You Doing and How Do You Know?

Planned Work $3K Actual Costs $2K

Material$1K

Month 1 @ $1K

Month 1 @ $1K

Month 1 @ $1K

Labor$1K


19

Management Reserve

Total Allocated Budget

ACWP(Spent)

BCWP(Earned Value)

BCWS(Plan)

$

TimeNow

Completion Date

Schedule Variance

Cost Variance

PROJECTED

SLIPPAGE

PMB

OverBudget

EACProgram at a Glance

BAC


20

Sample IPMR – Format 1

Box 8

Key Contract & Contractor Data

Boxes 1 - 4

Budget and EAC Data

Box 5

Box 6

Pop I Smith

Box 7

New OTB/OTS Box

BCWS BCWScumBCWP BCWPcumACWP ACWPcum BAC EACSV SVCV CV VAC

Format 1 provides summary level data to measure cost and schedule performance using a Work Breakdown Structure (WBS) layout. Format 1 is required for all contracts requiring EVM. All CPR data is at cost (except Format 1 Box 5 Price Data)


21

Format 2 provides data to measure cost and schedule performance data by the contractor's organization or IPT structure. It includes EVM data for material accounts and major subcontracts. Format 2 is option for contracts < $50M. All Format 2 CPR data is at cost data (no fee or profit added).



Boxes 1 - 4

Box 5

BCWS BCWP ACWP BAC EACSV SVCV CV VACBCWScum BCWPcum ACWPcum


22


Format 3 provides the budget baseline plan against which performance is measured. Format 3 is option for contracts < $50M. Unlike format 1 and 2 which each report historical performance, Format 3 forecasts the plan for the next six months and other selected intervals.


Boxes 1 - 4

Budget and Key DatesBox 5

Box 6

Management Reserve Box 7

Total Box 8

The EV performance measurement baseline at beginning of the period

The updated EV performance measurement baseline at end of period reflecting accomplishments and replanned activities—THE NEW PMB

BCWS


23


Format 4 provides staffing forecasts for correlation with the budget plans, cost and schedule estimates. It includes EVM data for material accounts and major subcontracts. Format 4 is option for contracts < $50M. Format 4 is reported by staff months rather than dollars or hours.

Format 2 Organizational Reporting Structure

Format 3 Forecast Periods


Boxes 1 - 4

Box 5

Box 6


24


Discussion should include but is not limited to:

Summary Analysis Summary of Overall Contract Variances Changes in Management Reserve Changes in Undistributed Budget Differences between EAC's (Blocks 6.a, 6.b, 6.c, or Block 8.15) (Format 1) Significant timephasing shifts in Baseline (BCWS) (Format 3) Significant timephasing shifts or Overall Changes in Forecasted Staffing (Format 4) Discussion of Over Target Baseline and/or Over Target Schedule incorporation

Format 5 is a narrative report used to explain significant cost and schedule variances and other identified contract problems and topics. It is mandatory for all EVMS contracts. Research has indicated that two thirds of the costs associated with EVMS can de attributed to variance analysis reporting.


Boxes 1 - 4

Analysis of Significant Variances: (identify and describe each) Type and Magnitude of Variance Explanation of Significant Reasons Effect on Immediate Task Effect on Total Contract Corrective Actions Taken or Planned

Box 5


25

Sample IPMR – Format 6Presented at the 2016 ICEAA Professional Development & Training Workshop

26


TRN or XML/UNCFACT Format containing:

Historical data (BCWS, BCWP, ACWP, BAC, etc…)

Future data (ETC, EAC, etc…)

IPMR WBS Element

BCWS BCWP ACWP EAC …

1 / Jan 2015

1.1.1 15564 13458 14221 25789

1 / Jan 2015

1.1.2 1278 1114 1378 2678

1 / Jan 2015

1.1.3 224 118 200 645

1 / Jan 2015

1.2.1 17891 17845 16247 69587

… …


27

Performance Data Analysis Objectives

Determine Current Status (Top Drivers) Where Are We Today?

Identify Trends Where Are We Headed? Any Cost, Schedule Surprises?

Forecast The Future (EAC Realism) What Is The EAC (Cost & Price)? What Is The Impact On The Budget?

Indicate Areas For Management Action What Should We Do Now?

Challenge – Turning Data Into MeaningfulInformation for Decision Makers


Past Performance – Root Causes

28

+CV / CPI > 1.0 -CV / CPI < 1.0 +SV / SPI > 1.0 -SV / SPI < 1.0Work is costing less than planned:

– More efficient & using fewer hours/mat’l

– Using less expensive labor category/mat’l

– Achieved a technical breakthrough

Delay in payment. Work complete but actuals have not hit ledger yetIncorrect status. Took credit for work not actually completedImproper charging. Took credit for work yet actuals were charged against the wrong account

Work is costing more than planned:

– Less efficient & using more hours/mat’l

– Using a more expensive labor category/mat’l

– Additional travel (ODCs)/Rework incurred

– Rates (OH, G&A, inflation) increased

– Encountered Technical problems

Incorrect status. Did not take credit for work actually completedImproper charging.Actuals were incorrectly charged against the accountRequirements Change.In scope contract requirement changed

Work is being accomplished faster than planned:

– More efficient & taking less time

– Achieved a technical breakthrough

Work has been accelerated in the schedule. Due to programmatic events, work has shifted forward Incorrect status. Took credit for work not actually completedBaseline Mistake.Incorrectly set work to occur later than it was supposed to

Work is being accomplished slower than planned:

– Less efficient & taking more time.

– Encountered Technical problems

Work has slipped in the schedule:

– Due to programmatic events (late GFE, GFI, predecessor priorities, etc.), work has shifted right

– Due to lack of resources, work has shifted right

Incorrect status. Did not take credit for work actually completedBaseline Mistake.Incorrectly set work to occur before it was supposed toRequirements Change. In scope contract requirement changed


Past Performance – AnomaliesAnomaly Concern

BCWS = BCWP = ACWP (and <> 0)

Not really using Earned Value – “Perfect data”

BCWP > 0, ACWP = 0 “Free” performance

BCWP > 0 and BCWS = 0 BCWP is dependent on BCWS, so why is there performance without planned performance

ACWP > 0 and BCWP = 0 What is being paid for without getting any performance?

BCWP or BCWS > BAC > 100% complete? > 100% planned?

BAC > 0 and EAC = 0 Work is planned (BAC/BCWS), but costs are expected to come in at $0 (EAC/ACWP)?

EAC > 0 and BAC = 0 Cost (EAC/ACWP) are expected for element that has no planned value (BAC/BCWS)?

BCWS, BCWP, ACWP negative

Negative (“giving back”) plan, performance, actuals

BAC < 0 and/or EAC < 0 Negative (contractor giving to Government) total plan (BAC) and/or total expected plan at complete (EAC)

29


• Objective, mathematical Estimates At Complete (EACs)can be calculated

• Most common are CPI and CPI * SPI• CPI Forecast (Mathematical Extension)

• ACWP + BCWR / CPI = BAC / CPI• Assumes even cost performance across the entire project equal to

performance experienced to date• Referred to as “best case” EAC

• CPI * SPI Forecast (Composite)• ACWP + BCWR / (CPI*SPI)• Also assumes that past cost and schedule performance are indicative of

future performance• Adjusts estimate to account for schedule performance experienced to

date• Referred to as “worst case” EAC

• Other EAC Methods: • CPI/SPI mixes: 50/50 (CPI/SPI), 80/20 (CPI/SPI), 90/10 (CPI/SPI), • Recent Performance: 3 Month CPI, 6 Month CPI, 9 Month CPI, • Historical Methods: Historical (Similar CPI @ Completion to finished

products), % Complete (Similar CPI change to finished products)

Estimate at Completion (EAC) - What Will Be The Final Cost? -

30


31

EAC Realism • Common Performance Factor Methods• TCPI = To Complete Performance Index Efficiency Necessary To Complete –

Either On Budget (BAC) Or On The (EAC).

• TCPI (BAC) = Work Remaining / Cost Remaining • TCPI (BAC) = ($4k - $1K) / ($4k - $2K) = $3K / $2K = 150%

• Compare CPI & TCPI to Assess Realism Of Future Performance – “Reality Check”

• TCPI = 150% while CPI = 50%• They are earning $0.50 on the dollar spent, and their performance will have to

improve to earning $1.50 per dollar spent for the remainder of the contract.

TCPI (BAC) = Work Remaining = BAC – BCWP Cost Remaining BAC - ACWP

If TCPI > CPI by .05, Then Question EACIf TCPI >or< CPI by .10 Then OSD TW tripped


32

Summary

Earned Value Management is required by Law, OMB Circular A-11 policy guidance, and DoDI 5000.2

EVM is the most comprehensive program management tool

Senior DOD and Congressional Leaders use it to make program decisions

Management involvement ensures EVM data is used in a proactive manner to manage programs and make timely corrective action decisions

EVM helps you identify risk, ask the right questions and make sound decisions to Keep Programs on Track.


33

Questions?


earned value management (evm) fundamentals

Documents