Earned Value Management It Is Not Optional Any More! January 23, 2008 Charles Talley, PMP PM, Enterprise Communications Initiative.

Earned Value Management It Is Not Optional Any More!

January 23, 2008

Charles Talley, PMPPM, Enterprise Communications Initiative

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U. S. Department of Labor

I. IntroductionII. History of EVM in the GovernmentIII. Recent Developments IV. Effects of EVM on the Project Acquisition and

Management ProcessV. Winning Projects Under the New EVM Rules VI. Managing Successful Projects using EVM VII. How the Government will use your EVM ReportsVIII. Questions

Agenda

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Why This Presentation

Government Computer News, 07/05/06 Acquisition councils finalize EVM rule By Rob Thormeyer

the Civilian Agency Acquisition and the Defense Acquisition Regulations councils said the rule was not altered significantly from its April 2005 draft...

“Small businesses may avoid all EVMS costs by

Federal acquisition officials finalized a rule, effective today, that details how agencies should implement an earned-value management system for managing major acquisitions.

choosing not to participate in EVMS solicitations, or may offset such costs to implement a compliant EVM system through cost reimbursement on resulting government contracts,” the rule said.

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Why EVM?

70% of projects are: over budget or behind schedule52% of all projects finish at 189% of their initial budgetSource: The Standish Group

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Developments That Moved the Government Toward EVM

• 1950’s: The Department of Defense recognizes that its increasingly complex weapon systems development contracts demand more sophisticated management techniques than were generally used in industry.

• 1960’s: DoD mandates a uniform DoD procedure for compliance by industry called Cost/Schedule Control Systems Criteria (C/SCSC) which evolves into EVM.

• 1970’s and 1980’s: DoD continues to push an EVM standard as the way to track and report progress on weapons systems contracts.

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Recent Developments

• 1990’s: Several pieces of legislation and guidance make EVM the standard for all agencies to measure and manage project performance, including: – Government Performance Results Act (1993)– Federal Acquisition Streamlining Act (1994)– Clinger-Cohen Act (1996)– ANSI/EIA Std 748 (1998)

• 2000’s: OMB continues to establish requirements for adequate performance measurement and reporting, including:– OMB Circular A-11, Part 7, Section 300– OMB Memorandum M-04-24 (Expanded E-Gov)– OMB Memorandum M-05-23 (Improving IT Project Planning and

Execution)– FAR EVM Clause Implemented

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The Clinger-Cohen Act: Federal IT Projects Are Managed to Specific

Standards

First and foremost, laws governing federal IT Capital Planning requiring: • IT baseline assessment analysis• Monitoring and evaluation methods and techniques• Techniques for defining and selecting effective performance measures• Examples of and criteria for performance evaluation• Project time/cost/performance management• Creation of the OCIO

Learn More:https://acc.dau.mil/CommunityBrowser.aspx?id=22170http://www.dod.mil/cio-nii/cio/cca-comp.shtmlhttp://www.dod.mil/cio-nii/cio/dodit/competencies.htm PS: Your firewall may require you to select “Continue to this website (not recommended)”. It is OK;, these are all government websites.

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The President's Management Agenda, announced in the summer of 2001, is an aggressive strategy for improving the management of the Federal government. It focuses on five areas of management weakness across the government where improvements and the most progress can be made.

Source: www.whitehouse.gov/omb

President’s Management Agenda(PMA)

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“Agencies must use a performance-based acquisition management system, based on the ANSI/EIA Standard 748, to obtain timely information regarding the progress of capital investments. The system must also measure progress towards milestones in an independently verifiable basis, in terms of cost, capability of the investment to meet specified requirements, timeliness, and quality.”


OMB Circular A-11/Exhibit 300

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“…to achieve a “green” level of performance for this initiative, your agency’s actual performance cannot vary from its cost, schedule and performance goals by more than 10 percent. To achieve a “yellow” level of performance, your agency’s cost, schedule and performance overruns and shortfalls for all major information technology (IT) projects must average less than 30 percent.” Source: www.whitehouse.gov/omb and

OPM PMA Scorecard

OMB Memo M-04-24

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Human Competitive Financial E-Gov Budget/Perf. Human Competitive Financial E-Gov Budget/Perf.

Capital Sourcing Perf. Integration Capital Sourcing Perf. Integration

AGRICULTURE

COMMERCE

DEFENSE

EDUCATION

ENERGY

EPA

HHS

HOMELAND

HUD

INTERIOR

JUSTICE

LABOR

STATE

DOT

TREASURY

VA

AID

CORPS

GSA

NASA

NSF

OMB

OPM

SBA

SMITHSONIAN

SSA

Current Status as of September 30, 2003Progress in Implementing the President's

Management Agenda

Arrows indicate change in status since evaluation on June 30, 2003.

Executive Branch Management Scorecard

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Full implementation of EVMS for IT projects includes five key components:

1. Comprehensive agency policies;

2. EVMS requirements in contracts or agency in-house project charters;

3. Compliance reviews of agency and contractor EVM Systems;

4. Periodic system surveillance reviews to ensure the EVMS continues to meet the guidelines in ANSI/EIA-STD-748; and

5. Integrated Baseline Reviews to finalize the cost, schedule and performance goals.


OMB Memo M-05-23

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The FAR Mandates for EVM

“This final rule amends the Federal Acquisition Regulation to implement Earned Value Management System (EVMS) policy in accordance with OMB Circular A–11, Part 7 and the supplement to Part 7, the Capital Planning Guide.

The FAR will require the use of an EVM System that complies with the guidelines of ANSI/EIA Standard - 748, in major acquisitions for development, and in other acquisitions in accordance with agency procedures.

Federal Acquisition RegulationsFederal Register / Vol. 71, No. 128 / Wednesday, July 5, 2006 / Rules and Regulations

An agency shall conduct an Integrated Baseline Review (IBR) when EVMS is required.”

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SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition regulations Council (Councils) amended the Federal Acquisition Regulation (FAR) to implement earned value management system (EVMS) policy. FAR coverage is essential to help standardize the use of EVMS across the Government. The proposed rule specifically impacts contracting officers, program managers, and contractors with earned value management systems.

The FAR Rule

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What the FAR Says About EVM

7.105 Contents of written acquisition plans.Discuss, as appropriate, what management system will be used by the Government to monitor the contractor’s effort. In addition, discuss how the offeror’s/contractor’s EVMS will be verified for compliance with the American National Standards Institute/Electronics Industries Alliance (ANSI/EIA) Standard-748, Earned Value Management Systems.

34.202 Integrated Baseline Reviews.(a) When an EVMS is required, the Government will conduct an Integrated Baseline Review

(IBR).(b) The purpose of the IBR is to verify the technical content and the realism of the related

performance budgets, resources, and schedules. It should provide a mutual understanding of the inherent risks in offerors’/ contractors’ performance plans and the underlying management control systems, and it should formulate a plan to handle these risks.

34.201 Policy.An Earned Value Management System (EVMS) is required for major acquisitions for development, in accordance with OMB Circular A-11. The Government may also require an EVMS for other acquisitions, in accordance with agency procedures.

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32 Guidelines/Criteria of the ANSI/ISO 748-A

Provides basic guidelines for companies to use in establishing and applying an integrated Earned Value Management System (EVMS). These guidelines are expressed in fundamental terms and provide flexibility for each company to optimize its system and be fully accountable for the effectiveness of its usage.

2.1 Organization of the Project 5 Criteria

2.2 Planning, Scheduling, and Budgeting 10 Criteria

2.3 Accounting Considerations 6 Criteria

2.4 Analysis and Management Reports 6 Criteria

2.5 Revision and Data Maintenance 5 Criteria

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Role of the NDIA

EVM Acceptance GuideWorking Release (2006)

EVM Surveillance Guide (2004)

EVM Application GuideWorking Release March 2007

EVM Intent Guide (2006)

Program Manager’s Guide to the Integrated Baseline Review(2003)

Integrating Risk Management with EVM (2005)

© Permission to copy and distribute this document is hereby granted provided that this notice is retained on all copies, that the copies are not altered and that NDIA PMSC is credited when the material is used to form other copyrighted documents

Serves as Subject Matter Experts to the Federal Government for ANSI/EIA 748-A

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The DOL EVMS Policy

• Projects required to participate– Level 3 (Major) Initiatives (> $5M Total Investment)– <60% of Development, Modernization & Enhancement (DME) complete– >$1M annual expenditure in DME– Others as decided by management

• Interoperable among Agencies• High Management Visibility• Infrastructure Related• Involving Financial Systems or Data

• These projects submit earned value updates to the OCIO monthly for review– Updates come in a MS Project plan file– Quarterly updates are forwarded to OMB– If the 10% thresholds are breeched a corrective action plan is required– Documentation of changes in scope/schedule/budget

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Why EVM?Because You Gotta !

OMB! (Circular A-11, Part 7)

"Agencies must use a performance based acquisition management system, based on ANSI/EIA Standard 748, to measure achievement of the cost, schedule, and performance goals."

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EVM Statistics

Once a project is 10% complete, theoverrun at completion will not be lessthan the current overrun.

Once a project is 20% complete,the CPI does not vary from its currentvalue by morethan 10%.

The CPI and SPI are statistically accurate indicators of final cost results.

Source: Defense Acquisition University

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Now that I have made Bruce feel like he is carrying the same load as this poor donkey, I will give him an opportunity to respond.

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How are You Going to Use EVM?

• Meet the requirements we have talked about?

• Manage your contractors?

• Manage your internal efforts?

• Manage the development process?

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Meet the requirements

• This is tooooooooo confusing!

• I don’t want to look at all of those figures!

• Just get me by the audit!

• Make sure no questions are asked!

• It costs toooooo much!

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Manage contractors

• Establishes – Expectations– Goals– Milestones– Measurements

• Provides a methodology for reviewing contractor performance

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Manage internal efforts

• Establishes – Expectations– Goals– Milestones– Measurements

• Provides a methodology for reviewing employee performance

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Manage the development process

• Good management data

• Increased probability of success

• People know how they are being measured.

• Establishes a methodology to have all parties playing from the same game plan.

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How the Contractor will use EVM

• Make the Government Super Stars!!!

• Manage the process

• Find problems in the execution, plans

and processes.

• Make the contractor look Good!!!

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Providing EVM Information

• Dash Board

• Periodic (Monthly) Reports

• Graphics

• Microsoft Project

• Data Bases

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Additional Costs

• EVM Personnel• EVM Training for all managers• EVM Software• Links to Accounting• Certification

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EVM Certification

YOU WANT ME TO DO WHAT!!!!!!!• Only Agency authorized to certify is DCASMA• Must be sponsored by another agency• Must pass all 32 areas of ANSI/EIA Standard

748-98A • Takes about one year to complete

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Short Falls

Things to Look Out For!!!

• Total Reliance on the Contractor

• Development of Appropriate WBS

• Being Able to Audit

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Become a Partner with Your Contractor!

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Our Donkeys may not be Pretty,but they can handle the load!

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By this time we are all feeling like this, but in reality the EVM requirements are very doable.

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EVM and the Exhibit 300

• OMB Circular A-11, Part 7, Section 300 - a tool to plan, budget and manage capital assets

• Known as Exhibit 300, also the OMB 300 Report

• Demonstrates to Management and OMB:– There is a good business case for the project– Good PM discipline is being employed– Identify poorly performing assets (behind schedule, over

cost, lacking in capability)

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How will OMB use the exhibit 300s

300.8 How will OMB use the exhibit 300s?

1. To make both quantitative decisions about budgetary resources consistent with the Administration’s program priorities, and qualitative assessments about whether the agency’s programming processes are consistent with OMB policy and guidance.

2. All information necessary to complete an exhibit 300 should already exist as part of the agency's overall Information Resources Management activities and within project specific documentation.

3. The materials used to produce the exhibit 300 should be readily available to OMB upon request.

4. If additional supporting information is necessary, OMB will request from agencies the supporting evidence used to produce the exhibit 300.

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Exhibit 300 – EVM Information

Section A: Overview10. Did the Project Manager review this Exhibit? Yes/No11. Contact information of Project Manager? Name, Phone Number

& E-mailSection C: Acquisition/Contract Strategy (All Capital Assets)2. If earned value is not required or will not be a contract

requirement for any of the contracts or task orders above, explain why:_________

(Sarbanes-Oxley for PMs)

(I ask OMB if “Because it is too hard” would be an acceptable answer here)

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Their response was not what I had hoped.

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Exhibit 300 – EVM Information

Section C: Cost and Schedule Performance (All Capital Assets)

1. Does the earned value management system meet the criteria in

ANSI/EIA Standard – 748? Yes / No

2. Is the CV% or SV% greater than ± 10%?

(CV%= CV/EV x 100; SV%= SV/PV x 100) Yes / No

a. If “yes,” was it the? CV, SV or Both

b. If “yes,” explain the causes of the variance:

c. If “yes,” describe the corrective actions:

3. Has the investment re-baselined during the past fiscal year? Yes / No

a. If “yes,” when was it approved by the agency head?

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1. Actual Start is past the Planned Start2. Actual Finish is past the Planned Finnish3. AC does not equal Actual Dollars Spent4. No AC and Actual Dollars Spent > $05. 100% Complete with Negative SV

6. No EV with AC7. No AC with EV

8. Negative Fixed Cost

9. Milestones with Actual or Baseline Cost10. No WBS number11. Summary Task with Costs/Resources12. Tasks Not Saved to Baseline13. Lowest Level Tasks

Deal w/Tasks with cost/work past the status date

Final Integrity Checks to Accurate EVMS Processing

MS Project Filters that DOL Currently Uses

Potential High EVM Impact Issues

Helping MS Project Help You

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“As a result, government managers and auditors should find in the Cost Guide guiding principles for use as they assess (1) the credibility of a program’s cost estimate for budget and decision making purposes and (2) the program’s status using EVM.”

Government Accountability Office (GAO) Cost Assessment Guide

EVM Drivers in the Public Sector

GAO Cost Assessment Guide has 21 Chapters and 4 cover the use of EVM as it relates to the auditing of government contracts.

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What it means if you are not doing EVM now!

Maybe the bullet has not hit you yet, but what about the next one?

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Questions

We have covered a lot of material and now we would like to answer any questions you might have.

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List of EVM References

1. Office of Management and Budget

http://www.whitehouse.gov/omb

2. Defense Acquisition University

https://acc.dau.mil/evm

3. National Defense Industrial Association (NDIA) http://www.ndia.org/Template.cfm?Section=Procurement&Template=/ContentManagement/ContentDisplay.cfm&ContentID=1109

4. Defense Contract Management Agency

http://guidebook.dcma.mil/248/guidebook_tools.htm

5. Federal Acquisition Regulation at Acquisition Central

http://acquisition.gov/comp/far/index.html

6. National Aeronautics and Space Administration

http://evm.nasa.gov/

7. PMI College of Performance Management

http://www.pmi-cpm.org/pages/about/1.60.what_is_evm.html

8. Office of the Under Secretary of Defense (Acquisition, Technology & Logistics) http://www.acq.osd.mil/pm/

9. Association for the Advancement of Cost Engineering

http://www.aacei.org/certification/EVP/welcome.shtml

Earned Value Management It Is Not Optional Any More! January 23, 2008 Charles Talley, PMP PM, Enterprise Communications Initiative.

Documents

evm standard

effects of evm

evm clause

evm reports

history of evm

department of labor

compliant evm system

project acquisition