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Earned Value Management Made Simple<br />

October 28, 2011<br />

Frances B. Craig, Founder and CEO, <strong>Unanet</strong> <strong>Technologies</strong><br />

www.unanet.com<br />

Anthony Bone, Managing Director/Senior Consultant, Lexem Strategy LLC<br />

www.lexemstrategy.com<br />

Copyright © 2008 <strong>Unanet</strong> <strong>Technologies</strong><br />

1


� Objectives<br />

Objectives<br />

� What contractors need to know about EVMS, how to respond to RFPs,<br />

and how to comply with contract requirements<br />

� When EVMS is appropriate to service type contracts<br />

� Earned Value – not just as a Federal contract requirement, but as a<br />

capability for your organization<br />

� New directions in Civilian Agencies such as Agile Development and<br />

EVM<br />

2


� EVM Introduction<br />

� Practical Implementation Scenarios<br />

� Q&A<br />

Agenda<br />

3


Why is Earned Value of interest?<br />

� As a project management “best practice”<br />

� Provide visibility into project status taking both cost &<br />

schedule into account<br />

� Demonstrate value to stakeholders<br />

� Federal Government requires it on an increasing<br />

number of projects<br />

� OMB Circular A-11 Part 7 and FAR updates require its<br />

use on certain system acquisition projects<br />

4


Government Contractors<br />

EVMS requirement<br />

� DoD recommends a project value threshold of $20M below which a full EVMS does not<br />

need to be used. Projects between $20M and $50M must use EVMS and above $50M<br />

the EVMS must be formally validated.<br />

� Office of Management and Budget (OMB) said that EVMS should be used on “All new<br />

major IT projects, ongoing major IT developmental projects, and high risk projects.”<br />

� OMB decided to leave thresholds to the discretion of the agencies<br />

� “EVMS application should be based on the particular agency facts and circumstances rather<br />

than specifying a threshold in the FAR. In accordance with OMB Circular A-11, Part 7, agencies<br />

have the authority to establish dollar thresholds and EVMS applicability criteria.”<br />

� NASA has adopted the same $20M / $50M thresholds as the DoD. Other agencies have<br />

specified the following:<br />

GSA and DOE: $20M<br />

FAA: $10M<br />

EPA: $5M<br />

DoT: $6M<br />

DoEd: $6M with a ‘lighter’ version


What is Earned Value?<br />

� “Earned Value” is the value of completed work<br />

expressed in terms of the budget allocated to<br />

perform that work.<br />

� A management tool to integrate the work scope<br />

of a program with the schedule and cost elements<br />

for optimum program planning and control.<br />

6


Introduction to<br />

Earned Value (1)<br />

7


� Create time-phased<br />

budgets: Budgeted Cost of<br />

Work Scheduled = PV<br />

� Collect Actuals<br />

� What does the comparison<br />

tell you?<br />

Introduction to<br />

Earned Value (1)<br />

8


Introduction to<br />

Earned Value (1)<br />

9


Introduction to<br />

Earned Value (2)<br />

EV = Budgeted Cost of Work Performed<br />

Schedule Variance = EV - PV<br />

10


Introduction to<br />

Earned Value (3)<br />

Cost Variance = EV – Actual Cost<br />

11


Introduction to<br />

Earned Value (4)<br />

By viewing all three metrics in<br />

together, an integrated view<br />

of cost and schedule<br />

performance is obtained<br />

12


Basic calculations<br />

EVM Element Calculation<br />

Planned Value (PV) (Budgeted Cost) Based on PMB<br />

Earned Value (EV) (Performed Cost) Based on EVMS<br />

Actual Cost of Work Performed (AC) Based on EVMS<br />

Schedule Performance Index (SPI) EV/PV<br />

Schedule Variance (SV) EV-PV<br />

Cost Performance Index (CPI) EV/AC<br />

Cost Variance (CV) EV-AC<br />

Estimate at Completion (EAC) AC/% Complete<br />

13


Work Breakdown Structure<br />

Define the work at the level of detail required<br />

14


Work Breakdown Structure<br />

15


The EVMS Standard<br />

Often known simply as ANSI 748<br />

16


Some Other Relevant<br />

Government References<br />

� NEW: Interim Business Systems Rules DFARS 252.234-7002<br />

� NDIA & PMSC Earned Value Management Intent Guide<br />

� For each of the 32 guidelines, it provides: the value to<br />

management, an intent statement, typical attributes, and examples<br />

of objective evidence.<br />

� Google ‘NDIA EVMS intent guide’<br />

� OMB Circular A-11, Part 7 & OMB Memo M-05-23<br />

� June 28, 2010 – OMB 10-27 – Information for Federal IT dashboard<br />

� Federal Acquisition Regulations<br />

� Part 34.2 – Earned Value Management System<br />

� Part 52.234-4 – EVMS Compliance by CFA<br />

� Defense Acquisition University<br />

� https://acc.dau.mil/evm<br />

17


1. Organization (5 criteria)<br />

EVMS Guidelines<br />

32 Criteria - 5 Major Categories<br />

♦ The work to be performed and the organization to do it<br />

2. Planning, Scheduling and Budgeting (10 criteria)<br />

♦ Time-phased, resource-loaded baseline<br />

3. Accounting Considerations (6 criteria)<br />

♦ Recording and accumulation of costs<br />

4. Analysis and Management Reports (6 criteria)<br />

♦ Reports of planned vs. actual costs & schedule<br />

5. Revisions and Data Maintenance (5 criteria)<br />

♦ Control changes to baseline<br />

18


EVMS Guidelines<br />

32 Criteria<br />

19


Ten ‘Core/Abridged’ Criteria<br />

Treasury & HHS Guidelines<br />

For projects valued at $1 - $10M (HHS) or


EVMS Certification<br />

� Software is not ‘EVMS certified’, much like timekeeping software is not DCAA certified<br />

either.<br />

� When contract size justifies (typically $50M per year) DCMA may evaluate and certify an<br />

organization’s specific EVMS procedures & processes (often called an EVMS Process<br />

Description). The evaluation would include:<br />

� comparison of their formal EVMS Process Description with the ANSI/EIA 748 Guidelines<br />

(identifying which, if any, are not appropriate and why)<br />

� evaluation of training programs for staff in appropriate EVMS knowledge, and<br />

� review of the ongoing internal EVMS Surveillance program to ensure that the EVMS procedures &<br />

processes are adhered to.<br />

� One part of the certification process would look at how software tools are used to<br />

support the formal process in the following areas:<br />

� Estimating<br />

� Scheduling<br />

� Budgeting<br />

� Financial Accounting System<br />

� Cost Management (integration of ACWP, BCWS, BCWP)<br />

� Reporting<br />

21


Practical Implementation Scenarios<br />

22


Successful Attributes<br />

� EVM provides valuable insight on project performance – whether<br />

for internal or external stakeholders<br />

� EVM is one integrated system<br />

� At project level<br />

� At task level<br />

� Summarized by WBS<br />

� Robust controls over who has access to what data<br />

� Easy to Understand, Use and Maintain by Project Managers<br />

� Can manage large or small project teams and labor contracts<br />

� Complies with ANSI 748<br />

Copyright © 2011 <strong>Unanet</strong> <strong>Technologies</strong><br />

23


Core EVM Processes<br />

• Create Project Schedule/Work Breakdown Structure<br />

• Build Budget and establish Baseline<br />

• Perform Work and Collect Actual Costs<br />

• Determine Progress; Track Statuses; Diagnose Issues<br />

• Snapshot Periodic Status<br />

• Measure Performance and Provide EVM Dashboards<br />

and Reports<br />

Copyright © 2011 <strong>Unanet</strong> <strong>Technologies</strong><br />

24


EVM Implementation<br />

Create EVM Implementation Plan for RFP Responses<br />

Highlight ANSI Process Areas:<br />

Organization (SOW, WBS, Authorization)<br />

Planning & Budgeting (Schedule, Budget, Measurement)<br />

Accounting Data (Time and Expenses)<br />

Report & Analyze (CPR and Variance Explanations)<br />

Control Baseline Changes<br />

Should Explain:<br />

Processes<br />

Tools<br />

Organizational Responsibility<br />

Copyright © 2011 <strong>Unanet</strong> <strong>Technologies</strong><br />

25


� A detailed schedule tied to the SOW, WBS and<br />

major milestones<br />

� Organizational responsibility<br />

� Proper scheduling techniques<br />

� Use of clear relationships/dependencies<br />

� Limited use of constraint dates<br />

Organize & Plan<br />

� Definition of Work Packages and EVM techniques<br />

� Clearly defined budgets by resources at the<br />

work package level<br />

26


Create/Import WBS<br />

Define the work at the level of detail required<br />

27


Build Budgets<br />

28


� Enter budgets at task (or project) level<br />

Assign budgets<br />

� This allows calculation of a time-phased budget<br />

� This is the Budgeted Cost of Work Scheduled (BCWS), or<br />

Planned Value (PV)<br />

29


Collect actuals<br />

� Timesheets and Expense Reports collect actual<br />

costs<br />

� Other costs can be imported, as necessary<br />

� Approvals ensure only authorized charges are<br />

made<br />

� Assignments ensure that charges are made only<br />

to the right WBS elements<br />

30


Determine progress<br />

� Authorized users determine progress, or what has been<br />

“earned”<br />

� Task Completed Percent could be estimated, or earning<br />

rules such as 0-100, 50-50, 25-75 manually applied.<br />

Should be based on physical performance/milestones.<br />

31


� Monthly CPR report at least by WBS<br />

� Good monthly variance explanations<br />

� Use of metrics by project team, PM and upper<br />

management<br />

� Weekly or Monthly Schedule Analysis<br />

EVM Reporting<br />

32


Earned Value Report Criteria<br />

33


Earned Value Report<br />

34


Earned Value<br />

by WBS Level<br />

35


Threshold Reporting<br />

Highlight Variances to Stakeholders<br />

36


Earned Value Chart<br />

37


Schedule and Cost<br />

Performance Indices<br />

38


� Monthly reconciliation & logs<br />

Control Baseline Changes<br />

� No changes to historical data unless you are<br />

fixing errors or dealing with accounting<br />

adjustments<br />

� Back up detail for baseline changes<br />

39


Audit Budget Changes<br />

Project or Task Level<br />

40


Manage Plans, Budgets<br />

and Actuals<br />

41


Forecast Staffing<br />

Forecast of labor hours by organization and/or project<br />

42


Summary<br />

� EV provides valuable insight on project performance – whether for internal or external<br />

stakeholders<br />

� Systems like <strong>Unanet</strong> supports Earned Value Management in one integrated system<br />

� At project level<br />

� At task level<br />

� Summarized by WBS<br />

� Robust controls over who has access to what data<br />

� Compliance with EVMS takes a combination of procedures & tools<br />

� It is essential for any organization to develop and document their methodology for<br />

use with <strong>Unanet</strong> to best support the EVMS criteria<br />

� Training for staff on process and tools<br />

� Ongoing surveillance that processes are being followed<br />

� <strong>Unanet</strong> features, together with your accounting system, can support an EVMS<br />

program<br />

� There is a <strong>Unanet</strong> White Paper available which discusses how <strong>Unanet</strong> supports the 32<br />

EVMS Criteria.<br />

43


Thank You!<br />

Anthony Bone<br />

703-727-2416<br />

arbone@lexemstrategy.com<br />

www.lexemstrategy.com<br />

Copyright © 2006 <strong>Unanet</strong> <strong>Technologies</strong><br />

44

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