Earned Value Management
– Knowledge Sharing
IFS Customer Summit 2011
Laura Ayres
April 12, 2011
Agenda
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EVM Defined
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EVM Regulatory Requirements & Industry Standards
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Current EVM Environment
Earned Value Management Defined
- Earned Value Management (EVM) is a program and project portfolio management tool that integrates the technical, schedule and cost parameters of a contract and contract components
EVMS defined in industry standard ANSI/EIA 748: 32 guidelines grouped into five categories:
1. Organization
2. Planning, Scheduling, and Budgeting 3. Accounting Considerations
4. Analysis and Management Reports 5. Revisions and Data Maintenance
Schedule
Cost Technical
- EVM requires the integration of:
Technical Requirements
− Work Scope
− Entry and Exit Quality Criteria
Schedule – Detail Plan
– Effective planning
– Identification of internal/external dependencies
Cost-Budget Resources
Earned Value Management System
•
The software components of an EVMS typically include the following:
◦ EVM Scheduling Engine
◦ EVM Cost Engine
◦ EVM Reporting Engine
•
EVMS integration considerations
◦ Finance Systems/ERP
◦ Manufacturing/MRP Systems
◦ Estimating tools
EVM Regulatory Requirements and Industry
Standards
Where to draw the EVMS line?
Contracts Thresholds Requirements
Cost or Incentive Equal to or
Above Threshold
> $50M • Compliance with industry EVM standard • Formal EVM system validation
• Contract Performance Report • Integrated Master Schedule • Integrated Baseline Reviews • Ongoing surveillance
Cost or Incentive Less Than Upper Threshold but Equal to or Above Lower Threshold
< $50M but > $20M • Compliance with industry EVM standard • No formal EVM system validation
• Contract Performance Report (tailored*) • Integrated Master Schedule (tailored*) • Integrated Baseline Reviews
• Ongoing surveillance
* Tailored: to meet the needs of the Project Manager and team.
Cost or Incentive Less Than Threshold
< $20M • EVM optional (risk-based decision) • Cost-benefit analysis required
EVM Regulatory Requirements and Industry
Standards
- Federal agencies and the current administration remain focused
on program performance
◦ Earned Value Management requirements in Federal Government
Request for Proposals (RFP)
◦ DoD Instruction 5000.2 Operation of the Defense Acquisition System
◦ Defense Federal Acquisition Regulation Supplement (DFARS) Subpart
234.2
◦ EVMS FAR clauses-FAR 52.234-2, 52.234-3, and 52.234-4.
◦ ANSI/EIA 748
◦ OMB Circular A-11
EVM Regulatory Requirements and Industry
Standards
- National Defense Industrial Association (NDIA) Guides
◦
ANSI/EIA 748 Intent Guide:
Maintains the explanations as to the purpose and attributes expected for ANSI/EIA 748 compliance◦
Application Guide:
Describes for all organizations implementing anANSI/EIA 748 compliant EVMS, the importance of planning the EVM application through all phases of the acquisition life cycle
◦
System Acceptance Guide:
Evaluates whether the EVMS is capable of meeting the intent of ANSI/EIA-748 and obtain EVMS compliance recognition that will meet current and future requirements for an approved EVMS◦
Integrated Baseline Review Guide:
Identifies the IBR Process and integrates the IBR with risk management within the framework of the IBR Process◦
Surveillance Guide:
Defines a standard industry surveillance approach, encourages efficiencies through the use of a uniform process, and gives consistent guidance for companies implementing the ANSI/EIA 748 EVMS guidelinesEVM Regulatory Requirements and Industry
Standards
DoD proposed amendment to the DFARS
- DFARS amendment proposed to improve the effectiveness of DoD oversight
of contractor business systems
◦ Proposed rule first published January 15, 2010
◦ Based on comments received and revisions, the revised proposed rule was published again December 3, 2010 with a request for comments
- Concerns identified with several features of the proposal affecting EVMS
◦ Proposed rule requires the Contracting Officer to disapprove a contractor’s EVMS when the initial validation is not completed within a 16 month period from contract award
› DCMA EVM Center responsible for EVMS validation has not successfully demonstrated ability to complete a system validation within this timeframe
◦ Proposed rule provides for EVMS disapproval and withholding of payments when as little as one deficiency is identified in a “high-risk” ANSI/EIA 748 guideline
› Determining “compliance” with a guideline can be very subjective
› A finding on a single program does not necessarily indicate that the overall system is deficient
EVM Regulatory Requirements and Industry
Standards
DoD proposed amendment to the DFARS
- Concerns identified with several features of proposal affecting EVMS
(cont’d)
◦ ANSI/EIA standard was designed to be flexible in its application on the
management needs of individual projects with unique requirements and risks › One size does not fit all
› Guidelines are purposely high-level and goal oriented
◦ The strict success criteria being established by this proposed rule for an EVM system demands compliance with individual guidelines rather than the overall system adequacy and will be difficult to be met by any DoD supplier
◦ The focus of an EVM review should be to determine if the system is providing actionable information and trends for use by the PMs to keep projects on track and accurately predict final outcomes
◦ The proposed rule does not allow for tempering findings based on risk, the
degree of potential harm to the government that could result from the identified deficiency, or any other factor that would indicate whether a deficiency is
material in nature
Current EVM Environment
Five leading issues shaping Earned Value Management
challenges today
1. Federal Budget Pressure
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Major defense contractors briefed by Secretary Gates on the need to cut
budgets
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Gates made pre-emptive, internal DoD cut of $100B over 5 years
(August 10, 2010)
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Cuts at defense contractors already started:
• 600 executives accepted buyouts recently.
• Seven business units combined into three, 1,000 workers cut.
• Hundreds let go this year from other defense contractors.
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Procurement of Product and Services moving toward more fixed price and
best value
Bottom line: More budget pressure = more scrutiny on all defense programs.
“The Defense Department must take a hard look at every aspect of how it is organized, staffed and operated”
Defense Secretary Robert M. Gates, May 8, 2010
Current EVM Environment
Five leading issues shaping Earned Value Management
challenges today
2. EVM Center reviews continue to find significant
EVMS-related deficiencies
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Since late 2006 through FY10 the EVM Center will have conducted 127
supplier EVMS implementation events
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195 individual supplier facilities with EVM requirements are undergoing
surveillance by local CMOs
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Of 42 contractor site EVMS compliance assessments as of July 2010:
› All 5 guideline areas were > 60% Non-Compliant (change from 53% Jan 2010)
› Highest non-compliance: Planning, Scheduling and Budgeting (82%),
Analysis and Management (80%), (change from 76%) and Accounting (77%) › Lowest non-compliance: Revisions and Data Maintenance (75%) and
Organization (73%)
Source: David Kester, Director, EVM Center, August 26, 2010, NDIA Program Management Systems Committee Conference, Crystal City, VA
“Lockheed Martin Loses Defense Approval of F-35 Cost-Tracking”
Current EVM Environment
Five leading issues shaping Earned Value Management
challenges today
EVM System validations since 2007 *
1. Bell Helicopters, Hurst, TX 2. Agusta-Westland,
Cocina-Costa, Italy
3. Raytheon, Tucson, AZ 4. GA-ASI, San Diego, CA 5. LM IS&GS, Omaha, NE 6. Rolls Royce, Bristol,
England
7. Via Sat, Carlsbad, CA 8. LMMS2, Syracuse, NY
* Source: Yancy Qualls, Manager of Integrated Program Scheduling, Bell Helicopter, “Achieving Earned Value Management and Program Success with Oracle’s Primavera,” Oracle’s EPPM Virtual Summit, November 2010.“ An updated DCMA chart including the additional EVMS validations was not available.
Current EVM Environment
Five leading issues shaping Earned Value Management
challenges today
3. Aging workforce – Loss of EVMS skills and experience
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Cadre of C/SCSC and EVMS experienced resources are retiring.
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Skilled/experienced schedulers are at a premium
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Need for full integrated understanding across planning, baselining and
execution controls is a premium
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Great opportunity for younger workers to enter the industry
4. Baseline Controls Integration Complexity
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Many companies continue to encounter difficulties integrating baseline
planning and earned value management compliance with the rest of the
enterprise due to a number of reasons that include the following:
◦ Fragmented Estimating and EVM systems and processes as well as differing
business unit practices and cultures
◦ Lack of real time integration and automation with Supply Chain in baseline
demand planning
◦ Real time analytics for performance reporting, risk and issue corrective action
Current EVM Environment
Five leading issues shaping Earned Value Management
challenges today
5. DCMA-DCAA Coordination
Resolution of “disagreement” between DCMA EVM Center and DCAA puts
contractors in the middle. EVM Center did not give DCAA enough time to
review contractor performance.
- The report recommended the EVMC “work with DCAA to establish reasonable due
dates for conducting audits, hold discussions with DCAA to help resolve disagreements, and issue a written report on the results of earned value management reviews.
- The DoD IG said DCMA's Tucson Contract Management Office should “ensure
that contracting officers adequately resolve DCAA-reported deficiencies” and should “suspend or withdraw the acceptance of an earned value management system and implement appropriate contractual actions and remedies for
significant system deficiencies.”
- DCMA is often open to collaboration and cooperating in updating baseline plans
due to new system solutions and/or migrations.
DCMA will look to DCAA findings when approving EVM systems and Contractor Purchasing systems
The Future EVM Environment
Data Analytics – Use data to improve program performance
- Defense Cost and Resource Center (DCARC) is using Contract Performance
Report (CPR) EVM data for instant analysis
◦ Emphasis on meaningful program EVM data
◦ Executive level will use quantitative data to ask questions
- NAVAIR Cost Department – “Radically” improve program performance
◦ Data to Information to Knowledge to Actions = Performance
◦ Innovation, rapid insight, life cycle cost oversight
◦ Enables Command Information Center visual reporting of program status
◦ Demands data transparency and integration
◦ Leverages Tree-mapping technology
Sources:
Gary R. Bliss, Director-Performance Assessment & Root Cause Analysis (PARCA), Office of the Under Secretary of Defense for Acquisition, Technology and Logistics.
David E. Burgess, Director-Cost Department, NAVAIR, August 26, 2010, NDIA Program Management Systems Committee Conference, Crystal City, VA
Thank you
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