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Merging Earned Value Management System Descriptions

by Humphreys & Associates on September 1, 2024

Are there best practices that apply when a company with an approved/certified Earned Value Management System (EVMS) acquires another company that also has an approved/certified EVMS in place? What happens with the EVM System Descriptions as well as related processes and procedures? What about the various project control tools being used? How do you level set the project control proficiency levels of personnel using the EVMS? Schedule and cost level of detail and data architecture also come into play. For example, project performance data is often used at the corporate level for financial analysis, portfolio analysis, and external reporting and may require data to be organized in a specific manner. Is the EVMS providing reliable status, forecast completion date (FCD), and estimate at completion (EAC) information to management? 

What are your options?

H&A earned value consultants have observed different approaches and often assist companies with determining their strategy. Assuming you are the acquiring company, you could:

  1. Require the acquired company to use your EVMS. 
  2. Let them continue using their EVMS for an agreed upon timeframe or indefinitely.
  3. Take the best of both and establish a new and improved EVMS.  

Each option has its pros and cons. There are also other implications for at least the acquired company. DCMA will need to conduct an Integrated Baseline Review (IBR) and/or a compliance review if the acquired company’s EVMS assessment is no longer applicable. If you make significant modifications to your EVM System Description, DCMA will need to review the revised System Description to determine whether it still complies with the EIA-748 Standard for EVMS guideline requirements.

Things to Consider

  • What do you want to achieve?

    If the goal is to establish a common EVM System Description across the corporation, the strategy will need to reflect that. Define the business objectives that clearly articulate the benefits of using a standardized approach that can help to create and implement the plan to achieve your goal. In this example, that could narrow your path forward to either option 1 or 3 depending on the state of your EVMS.

  • What is the state of your current EVM design and System Description?

    Do you already have a best in class corporate level system in place? If yes, option 1 is a good fit. The strategy would be to create a plan to transition the acquired company to your EVMS. A single EVMS is easier to maintain and to train people on how to use it effectively. Commonality makes it easier to move personnel between projects.

    Perhaps your company is fine with different EVM Systems at a business unit level. For example, perhaps the business units have a different customer base (DoD versus DOE), and the requirements are different. In this case, it may make sense to go with option 2. We recommend being prepared to do an in-depth assessment of the acquired company’s EVMS to become familiar with it, gain an understanding of how project personnel use it, and evaluate the quality of the schedule and cost data. It is imperative that you have a good understanding of the strengths and weaknesses of the acquired company’s EVMS. You may find best in class practices that you could incorporate into your EVMS. On the other hand, you may discover issues you need to address with a corrective action plan. Some of them may be as simple as providing desktop instructions for the schedulers or control account managers (CAMs). The more difficult are actions taken to change the culture such as resistance to providing visibility into the data.

    Option 3 may be good path in situations where you know there are components in your EVMS that need to be streamlined or enhanced. It provides an opportunity to fix known issues with your EVM design or System Description. It could also be an opportunity to replace a mix of software tools or home-grown tools with a standard set of commercial off the shelf (COTS) schedule, cost, and analysis as well as risk tools. Integration with a standard Agile tool may also come into play. In this case, your strategy may be to create a working group from both companies to create a best in class corporate EVMS. 

  • Structure of the EVM System Description.

    There may be “layers” to it that makes it easier to accommodate unique business unit environments. For example, perhaps you have established a corporate level System Description that states what the company does to comply with the EIA-748 guidelines when an EVMS is contractually required or what is required to satisfy internal management needs for project/portfolio analysis (no external customer management system or reporting requirements). The corporate level system should define specific rules all business units are expected to follow. The business units define how they comply with the corporate requirements (their specific process). A good approach is to also allow project managers to define project directives to specify project unique requirements as long as they comply with the corporate and business unit requirements.

    In this example, option 1 is a good fit. The strategy would be to help the acquired company to establish revised EVM processes that align with the corporate requirements similar to other business units in the corporation.

Other Considerations

Your strategy and tactical plan must address identified risks and opportunities. A common challenge is resistance to change. A potential risk mitigation approach could be to bring in the acquired company’s personnel as part of a joint corporate management team with the goal to create a single best in class EVMS. It is essential to establish ownership in the new or revised process. An example from one H&A client illustrates the importance of taking ownership in the EVMS as part of a successful transition.

“We didn’t force what we had on them, nor did we give in. We have a corporate EVM System Description. When we acquired the company, we brought them in to do a revision of the System Description, as the decision was made that we will operate as one company. They are now using that System Description and are using the same EVM cost tool. We are working other initiatives to harmonize other systems. It was surprisingly not contentious. We incorporated their leads into the organization with minimal disruption. We also have corporate training, which they supported and some of their legacy folks are leading that. The company as a whole changed, rather than forcing our way on them. Not many major differences between us, but inclusion of the folks from the acquired company as well as business groups was key. Frankly, one of our legacy divisions was harder to work with than anyone from the company we acquired.” – EVMS Director, A&D Contractor

While this is an example of where things went well, your risk mitigation approach should be prepared for situations where the teams do not agree upon the documented process, tools, or training that could result in an impasse. Knowledge of the current internal environment and personnel mix can help to determine the best mitigation strategy. A strong leadership team must be in place to ensure teams are working to achieve common objectives and to amicably resolve differences with a target completion date.

The tactical plan must also include a robust training plan that covers the revised EVMS process, procedures, and any new tools. This is critical to ensure project personnel gain a good understanding of what changed, who is responsible for what, workflow, requirements such as data coding or level of data detail, and how to use the tools effectively. Role based training is often useful to ensure project control personnel, schedulers, CAMs, and others are following the documented procedures specific to their day-to-day tasks. Desktop instructions are also useful to ensure project personnel are using the software tools effectively in alignment with the documented process and procedures.

What to do if you find yourself in this situation?

It often helps to start with a gap analysis of your or the acquired company’s EVM design and System Description as well as assess how project personnel implement the system and the quality of the data. H&A earned value consultants often conduct an EVMS gap analysis to provide a fact-based and independent analysis of the EVMS, project personnel proficiency levels, and quality of the schedule and cost data. Once you are able to identify and quantify the strengths and weaknesses of the system, you are in a better position to determine your best strategy that aligns with your corporate business objectives and goals.

Over the years, H&A earned value consultants have observed first-hand what strategies and tactics for designing and implementing a best in class EVMS ensures success in a variety of business environments. We can also help you avoid common pitfalls that can derail the best laid plans – it is often the case a client didn’t realize there were hidden risks, or they had made incorrect assumptions.

We can help you determine the right strategy for your situation. Call us today at (714) 685-1730 to get started.

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EVM and Unified Risk Management

by Humphreys & Associates on August 1, 2024

Working with numerous clients, H&A earned value consultants have observed many instances where project management teams consider the risk and opportunity (R&O) management process to be something technical in nature, run by engineers and focused on the technical aspects of the project’s product. Meanwhile, there is often a separate risk process going on much less formally to consider risks in terms of the project’s schedule and cost goals. This bifurcated approach is a source of risk itself.

Procuring agencies such as the DoD, NASA, DOE, and others have published their own risk management guides. The Government Accountability Office (GAO) has various reports on this topic including examples of their findings. DCMA mentions risk in their Business Practice 4  Guideline Evaluation Template (GET) Process/Implementation Verification Points often used by contractors to check whether their earned value management system (EVMS) meets the intent of the EIA-748 Standard for EVMS guidelines. The exact questions asked by DCMA are important but the overall idea that risk and EVMS are co-dependent is the critical aspect. This is also true for the DOE. They identify risk management as one of the 10 subprocesses necessary for an EVMS.

Setting the Stage

Risk is defined as a factor, element, constraint, or course of action that introduces an uncertainty of outcome that should it occur, could negatively impact the ability to meet the project’s planned technical, schedule, or cost objectives. Negative impacts are sometimes called a threat where the objective is to mitigate the risk. A realized risk becomes an issue that must be resolved to minimize the impact. An opportunity is defined as a positive risk where the objective is to capture the beneficial impacts. Opportunities are not as common as threats.

R&O management is defined as the process of identifying, assessing, and responding to risks and opportunities throughout the project’s life cycle. The goal of R&O management is to identify potential risks and opportunities, determine the likelihood or probability the risk or opportunity will occur, and determine the impact should a risk be realized, or an opportunity is captured. Risks and opportunities are prioritized so that those with greater impact and a higher probability of occurring receive a greater share of resources and attention.

In this blog, we are using the term risk with a focus on the negative impacts or threats to a project.

Example of Common Project Risks and Risk Assessment Approach

H&A’s senior management routinely reviews literature, considers our work with clients, and discusses with our earned value consultants the main contributors to project failure. These findings are updated regularly and presented in H&A training materials as an Ishikawa Fishbone Cause and Effect diagram. Figure 1 is an example of this type of diagram. 

Figure 1: Example of an Ishikawa Fishbone Case and Effect Diagram

Figure 1: Example of an Ishikawa Fishbone Case and Effect Diagram

When this approach is used for risk assessments, each contributing risk is assessed, and the response documented. An example of a risk/response table is shown below for the first three identified risks.

Risk ItemGood Example of a Real Project Response to an Identified Risk
Poor communicationsGoals are known and documented. Communications plan is in place. Have an established cadence for weekly internal and customer meetings to quickly resolve issues. An internal project performance management dashboard is updated daily with current data. Updated IMS and risk register are broadcast weekly to the team. A strong business rhythm has been established.
Scope creepWork scope (requirements and SOW) are well defined and a change control process is in place. Performers are trained in spotting scope creep and how to handle potential changes in scope.
Inaccurate cost estimateImplemented a process enabling cost estimators to search historical actual cost data, identify analogous tasks, substantiate, and document the basis of estimate. For high risk areas, techniques such as the Delphi method, SMEs, and non-advocate reviews are used. Performance is constantly monitored to spot work elements where the actual costs do not align with the budgeted costs or the estimate at completion (EAC) is triggering internal variance at completion (VAC) thresholds. 

This same type of approach can be used by the project control team to create risk Ishikawa diagrams to identify technical risks that could impact the ability to achieve schedule and cost goals. Likewise, risk Ishikawa diagrams can be used to identify risks in the integrated master schedule (IMS) and time phased budget or estimate to complete (ETC) and EAC.

A Unified Approach to Risk

A unified approach includes technical, schedule, cost, and other risk identification and assessment that is an integral part of a contractor’s EVMS. R&O management should be integrated into the EVMS subsystems including work organization, planning and scheduling, work authorization and budgeting, management analysis and reporting, and change management. 

Identified risks are analyzed and quantified to develop a risk handling strategy. Where applicable, risk mitigation tasks have been entered into the IMS. Ideally a schedule risk assessment (SRA) has been completed to gain an understanding of duration risks that can help to improve the accuracy of the schedule. Assuming the IMS is resource loaded and leveled, the result is a more accurate time phased budget plan as it incorporates the risk handling strategies when the performance measurement baseline (PMB) is established. The R&O process also provides the necessary rationale for determining the budget amount set aside for management reserve (MR).

The R&O assessments should be a normal part of generating the Variance Analysis Reports (VARs) and updating the ETC and EAC. These assessments can also drive the need for processing baseline change requests (BCRs) as well as determining the best approach for corrective actions. 

Using Directed Searches of Identified Risks

To facilitate a unified approach, we recommend establishing a cadence of standing risk review sessions that are conducted in a methodical way to ensure the project manager, integrated product team (IPT) leads, control account managers (CAMs), schedulers, and financial analysts routinely walk through the identified risks that have the potential to impact the project’s IMS or time phased cost.

The intent is to establish a framework such as Ishikawa diagram to guide the risk review session, a directed search of the identified risks should anything further need to be addressed. It is important that a “does anyone have a risk to suggest” approach is not used. Every topic should be covered in every session by walking the Ishikawa risk items. Most of the time it will be a quick “no change” response. Separate Ishikawa diagrams could be used to guide the discussions for the contributing technical, schedule, and cost risks. The meeting room should have the ability to view the live IMS, cost data, and performance analysis data. Team members should be prepared to take notes during the meeting to compile action items.

Figure 2 is an example of a basic Ishikawa diagram of IMS risks the project control team could focus on for the risk review session. This would reflect the project control team’s identified risks to the IMS they routinely monitor.

Figure 2: Example of an IMS Ishikawa Fishbone Case and Effect Diagram

Figure 2: Example of an IMS Ishikawa Fishbone Case and Effect Diagram

For example, updating the current schedule every reporting period has the potential to compromise the integrity of the IMS to provide accurate forecast information about the project’s remaining work. Perhaps the project control team has identified a list of contributing schedule status risks, risk response, and example directed questions for each review meeting. These questions could be focused at the CAM level. The following table is a simple example. 

Risk ItemRisk ResponseExample Directed Questions
IMS critical or driving pathsVerify logic. Verify traceability exists and has not been damaged by updates. Review constraints, deadlines, and milestones. Perform data quality check, correct errors.Did milestones move? Did the end date move? What were the baseline dates for starts or finishes that fall into the period?What were the forecasted dates for starts and finishes that fall into the period?What did not happen? Why?
RealismCalculate and assess the Baseline Execution Index (BEI) and Current Execution Index (CEI). Compare the ratio of actual performance to the ratio of future performance.Is the BEI/CEI result within goals? Are there performance discrepancies? Does the forecast need to be updated to align with reality? Is the forecast showing the performance the team can achieve based on what has been achieved?
Quality of ETC/EACVerify updates are occurring. Compare current ETC/EAC to previous ETC/EAC.Has the ETC been updated? What changed and why? For example, for activities with material requirements, price or usage variances may impact the ETC/EAC. For activities with labor requirements, availability or personnel changes may impact future work effort ETC/EAC.

The same approach would be used for guided budget and cost risk discussions. Tailored cause and effect diagrams should be created for a company business environment and each project’s unique characteristics.

Interested in learning more?

H&A’s training courses purposely include content on R&O management and integrating it into the EVMS. H&A’s Project Scheduling as well as Advanced Earned Value Management Techniques (AEVMT) workshops in particular include more discussion on R&O topics.

A company’s EVMS should be designed to aid the identification and management of risks and opportunities. For example, during the process of developing the schedule and budget baseline, activity durations, resource requirements, and budget distribution can be refined to reflect identified and assessed risks. Proactively identifying and managing risks improves project performance. The expectation of specific risks occurring leads to contingency plans that lower the likelihood and impact of risks as well as the establishment of schedule margin and MR to address identified and assessed risks.

Call us today at (714) 685-1730 to get started.

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