Technical

EVMS
Cost Schedule

PROJECT MANAGEMENT
USING EARNED VALUE
(and the Problems & Lessons
Learned from it)
Jim Pennington – Business Operations Director
jim.pennington@lmco.com
Dated November 2007
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 Technical

EVMS AGENDA
Cost Schedule

• OMB objections and requirements for EVMS

• What is EVMS?
• Implementing Directives
• Traditional versus Earned Value Accounting
• How does EV fit into the Program Management Life Cycle
• Problems and Lessons Learned over the PM EVM Life Cycle
• Comments

Backup Charts
• Essential Elements of EVM
• Tailored Earned Value Management

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 Technical
What is Earned Value and when does OMB
EVMS
Cost Schedule
want it implemented

According to the Third Edition of Earned Value Project Management by Fleming and Koppelman,

"Earned Value is a technique to better manage projects. It is not intended for use on continuing
business processes, operations that have no unique deliverables. Earned Value is for the
management of one-time-only projects, and portfolios of projects within an organization".

In alignment with this statement OMB mandates the use of EVMS within OMB Circular A-11 for
major development/ modernization/enhancement (DME) projects, but not all DME projects.

OMB Circular A-11 defines a major project as:

– A system or project requiring special management attention because of its importance to
the mission or function of the Agency, a component of the Agency, or another organization;
– Is for financial management and obligates more than $500,000 annually;
– Has significant program or policy implications;
– Has high executive visibility;
– Has high development, operating, or maintenance costs; or
– Is defined as major by the Agency’s capital planning and investment control process
– In addition, OMB memorandum M-05-23 asked each agency to work with OMB to identify
“high risk” projects by August 15, 2005. Circular A-11 defines high-risk projects as those
requiring special attention from oversight authorities and the highest levels of agency
management.

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 Technical
Where is the Earned Value Requirements and
EVMS
Cost Schedule
Standards the Process Defined

Agencies follows the requirements set forth in:

• ANSI/EIA STD – 748
• OMB Circular A-11, Part 7, Federal Acquisition Regulation Case
2004-019
• OMB Memorandum M-04-24 (dated 8/23/04)
• OMB Memorandum M-05-23 by using the NDIA EVMS Intent
Guide, NDIA PMSC Surveillance Guide (dated 8-4-05)
• NDIA* Program Manager’s Guide to the Integrated Baseline
Review (IBR) Process, and EVM Implementation Guide

To provide for a uniform approach to implementing EVMS and to

confirm that the processes and procedures continue to satisfy
the guidelines as they change

Note * = NDIA – National Defense Industry Association Program Management Systems

Committee Working group

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 Technical

EVMS
Cost Schedule

Technical

EVMS
Cost
Schedule

EVMS is the primary project management tool that

integrates the technical, schedule and cost aspects
of the project or contract scope of work

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 Technical

EVMS
Why is Earned Value Information important
Cost Schedule to the Program Manager

A Program or Project’s Technical, cost and schedule performance

are interrelated

Problems in one area can, and usually will, cause problems in the
other areas

You can design and build the fastest, toughest and lightest widget
in the world, but if it costs too much, or is late:
 It may adversely affect the total funding required to
complete
 Could impact ability to get funding for future projects or may
required greater effort to obtain enough funding for
programs later in the future

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 Technical

EVMS
Cost Schedule

Earned Value (EV)

...is a predetermined amount of value that is claimed, or earned,
when the corresponding work is accomplished.

# of Pages

# of Sys Lines of
Reqmts Code

# of Widgets

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 Technical

EVMS Earned Value Management provides

Cost Schedule

• Objective rather than subjective project status information

• Cost and Schedule impact of known problems
• Identification of problems not previously recognized
• Capability to trace the problem to the source
• Quantitative measure of schedule deviation in dollars
• Performance measured against a program oriented
baseline

EARNED VALUE DOES NOT GUARANTEE SUCCESS

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 Technical

EVMS
Some Implementing Directives
Cost Schedule

GOVERNMENT
• Mandatory procedures for major defense acquisition programs (DoDI
5000.2-R)
• Defines policies governing earned value
• Earned Value Management Information Guide (EVMIG)
• Provides detailed discussions of the EV criteria
• Written for the Government program offices
• OMB Directives to Agencies:
• OMB Circular A-11, Part 7, Federal Acquisition Regulation Case 2004-019
• OMB Memorandum M-04-24 (dated 8/23/04)
• OMB Memorandum M-05-23 by using the NDIA EVMS Intent Guide, NDIA
PMSC Surveillance Guide (dated 8-4-05)

INDUSTRY
• Industry guidelines for Earned Value Management Systems (ANSI-ESI
748)
• Industry Standard for Earned Value
• Incorporated in DoDI 5000.2R

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 Technical

EVMS Earned Value Management Terms

Cost Schedule

ACWP = Actual cost of work performed (Basically costs

extracted from work in process)
BCWP = Budgeted cost of work performed (Earned
Value)
BCWS = Budgeted cost of work scheduled (Budget
spread to time)
BAC = Budget at completion (Total budget for a given
task)
CVAR = Cost variance (BCWP-ACWP)
EAC = Estimate at completion
SVAR = Schedule variance (BCWP-BCWS)

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 Technical
TRADITIONAL VS EARNED VALUE
EVMS
Cost Schedule ACCOUNTING
Budget versus Actuals

Time
Now

Time

All we really know is that we spent more than we planned

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 Technical TRADITIONAL VS EARNED VALUE
EVMS
Cost Schedule ACCOUNTING
(Using EVM approach)

Time
Now

Time

Earned value provides an objective measure of work

accomplished. It tells you what you got for what you spent
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 Technical

EVMS
Cost Schedule

PROGRAM MANAGEMENT PROCESS

PROGRAM MANAGER NEEDS

Initiate Develop a realistic

Organize
Project Management Cycle

work and plan of work scope,

teams budget, and
Plan schedule

Authorize work properly

Execute
Control Performance Understand
Changes reporting variances
Control
Corrective Forecast of
Actions final cost and
Close Out schedule

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 Technical

EVMS
Cost Schedule

PROGRAM MANAGEMENT PROCESS

EARNED VALUE MANAGEMENT

Initiate • Organize
Project Management Cycle

• Plan work scope – schedule and budget

• Authorize work
Plan • Control changes
• Report performance
Execute • Understand variances
• Corrective actions
• Forecast final cost and schedule
Control

Close Out

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 Technical

EVMS
Cost Schedule

Earned Value Problems

&
Lessons Learned
over the Program Management
EVM Life Cycle

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 Technical
Initiate Phase of Program
EVMS
Cost Schedule
Problems and Lessons Learned
Problems Lessons Learned
• Baseline is not stable • Establish early baseline basis
• EVM Staffing Resources not in place • Have contractor or internal personnel
at time of ATP
identified during negotiations
• Program Management as not assigned
• PMs must plan to execute program like
responsibilities to CAMs
• it was proposed (Work per SOW)
Program Team is not experienced or
trained • Have Program Team (PMs, CAMs,
• IBR (Integrated Baseline Review) EVM and Customer) trained together
Deliverables not defined • Establish specific contract SOW app.
• Contracting Officer or COTR wants to for EVM and for Integrated Schedule
deviate from SOW or Contract EVM • Keep CO and COTR (& PM) diligent on
direction w/o proper modifications proper contracting practices
• Different set of assumptions from the • Develop clear walkdown of deltas in
proposal submittal
Scope and assumptions (document)
• Variance Thresholds are not defined
• Variance Thresholds by % & $ off plan
• Variance Analysis Guidelines not
agreed upon prior to start • Analysis must be to a specific level of
WBS, contents identified & Corr. Action

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 Technical
Planning Phase of Program
EVMS
Cost Schedule
Problems and Lessons Learned
Problems
• No set deadline to freeze plan
(Continuous Churn)
• IPTs (Integrated Product Teams) are
not working to same schedule
• Baseline Changes are not controlled at
the beginning (Loss of string from Prop
to Baseline-Rates, Sch, Scope)
• IBR (Integrated Baseline Review)
delayed due to baseline flux or
continued negotiations
• No plan for Contract Changes (No
CCB board and/or no COTR involved )
• Program Management Reserve and
Undistributed Budget not well defined
• Current Forecasts and recovery plans
do not change the baseline planning
Lessons Learned
• Establish a EVM Implementation
schedule and hold everyone to it
• IPTs must complete earlier for IMS
integration with other teams and tasks
• Contractor should be able to walkdown
Proposal as Submittal to IBR Baseline
• Push to hold IBR schedule and work
SOW, schedule or scope changes later
(as formal changes / plan maintenance)
• Must have established CCB with PM,
Finance, Contracts, IPTs (Govt / Contr)
• Undistributed Budget is not Reserve, if
it is not needed convert to PM Reserve
• Only Customer approved changes
impact the Baseline (Establish a
window for change approval and
freeze the plan for near term changes)
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 Technical
Execution Phase of Program
EVMS
Cost Schedule
Problems and Lessons Learned
Problems
• Program seems to not meet the EVM
reporting schedule
• Status or Earned Performance inputs
are not consistent with period cutoffs
• No established Performance Criteria
identified for tasks and completion
• Errors or Inconsistent Reporting
• Inconsistent Subcontractor or
Procurement Status
• No reconciliations of Ledger Actuals to
EVM (Accrued Costs)
• Program Management does not use or
analyze the EVM information
• PMs manage to the IMS or Schedule
and EVM data must be incorrect
• Program Plan Risks are not defined or
PM Reserve is not earmarked
Lessons Learned
• Establish a EVM Status and Reporting
Business Rhythm
• EVM Staffing Resources not in place at
time of ATP
• Must have EV method and completion
criteria defined for tasks (agreed upon)
• CAM/EV data reviews prior to release
• Establish a ICD approach for Vendor and
Subcontractor Accruals / Receipts
• Have defined reconciliation process to
validate EVM ACWP reported & deltas
• Make EV data part of monthly review
deliverables and status reviews
• Report number of late IMS workpackage
starts and completions by WBS
• Risks that have not been realized should
have MR allotted plus mitigation plans
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 Technical
Control Phase of Program
EVMS
Cost Schedule
Problems and Lessons Learned
Problems
• Contract Changes are too frequent and
formal plan changes are not timely
• Variance Analysis is too vague or is not
determined in a timely manner
• IPTs do not take ownership of their
variances or mitigation plans
• Program has a large cost and/or
schedule variance that plan is relevant
• Program does not properly close
workpackages when replanned
• Scope Creep and workscope/rate trades
from well minded PMs and CO/COTRs
• Inconsistent EVM performance and
reporting over the life of the program
• EVM process adherence is not
objectively evaluated or tested
Lessons Learned
• CCB process should be defined and
IPT provide estimates at CCB meetings
• EVM and variance root cause analysis
must be timely to be effective
• IPT must be given labor reports by
name to validate charges and resp.
• Program should establish a over target
or baseline replan to make plan valid
• You must close incomplete tasks and
replan them as new tasks with replan
• Small unapproved changes and creep
drive variances & impacts future work
• Contractor should have proven and
documented process to operate
consistently
• Establish a Joint Surveillance Plan
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 Technical
Close Out Phase of Program (or task)
EVMS
Cost Schedule
Problems and Lessons Learned
Problems
• Last months of program, data appears
to be incorrect
• Final Estimates to Complete are off by a
large amount
• Costs continues to come into the
workpackage after it is completed
• Indirect rate impacts hit after the
program or task is completed
• Subcontract or Material Costs does not
match Ledger
• Final EVM Report does not match
current Invoice Totals or Balances
Lessons Learned
• Be sure contractor does not get sloppy
w/ charging practices (>95%)
• Be sure final EACs include remaining
material commitments, labor suspense
• Be sure all charge accounts closed,
clear suspense & transfer bad charges
• Understand contractor financial
calendar and rate adjustment process
• Have contractor complete a walk-down
of the EVM ACWP and the ledger $s
• Contractor should create a projection
when all costs will be final and on the
books of record
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 Technical
Closing Comments
EVMS
Cost Schedule

• With the problems on the FBI Virtual Case File Program, IT programs will
continue to have additional OBM scrutiny and needs for oversight

• If you are going to spend the money on EVM, use it (effectively!)

• Manage the EVM process, do not let the process manage you

• Do not just look at the big variances, drive for better analysis and corrective
actions that are meaningful (remember you have a boss too!)

• One little rule: If your TCPI is 1.06 after being more than 15%,
You will not recover to the original baseline! (LMC history)

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 Technical

EVMS
Questions and Answers
Cost Schedule

Comments or Questions??

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