Earned Value Management System (EVMS)

EVM for Biotech and Pharma – Part I Implementation and Training

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Updated December 13, 2017

 

EVM for Biotech and PharmaAs you know, the Earned Value Management System (EVMS) is a management process with characteristics that are absolutely logical to manage projects whether there is an external customer or not. The EVMS is also required by the Federal Government on DOD, DOE, FAA, NSA, DOT, DOJ, NASA, etc. contracts over $20M.

With the phasing in of the Affordable Health Care Act and recent funding for research and preparation in the event of bio-terrorism, other branches of the Government, such as Health and Human Services (HHS) and Biomedical Advanced Research and Development Authority (BARDA), are becoming more involved in the healthcare sector. Implementing and using EVMS is a baseline requirement for biotech and pharmaceutical firms awarded large contracts by the Federal Government.

This will require companies and universities that receive funding to understand and implement Earned Value Management and that key project personnel, including management and executives, will require high quality Earned Value Training.

Why EVM and Government Contracts

Earned Value Management has been used since the 1960’s and has become the standard by which the Government measures and evaluates the management and reporting processes on projects awarded to contractors. Initially, it was implemented on projects; such as the development of satellites, long-range missiles, fighter aircraft, etc., but has become the US Government’s gold standard to manage the technical, schedule and cost progress of projects and to identify and manage risk and opportunities.

In order for defense contractors to be eligible for large contracts, they are required to follow the 32 Guidelines of the EIA-748-C which can entail system design and development and a substantial learning curve. Earned Value Management company-wide training and proper implementation becomes critical for project efficiency, future funding and to meet Government requirements.

Integral to EVM are the uses of the Integrated Master Plan (IMP)/Integrated Master Schedule (IMS) and risk and opportunity management.  The Integrated Master Schedule is the basis for developing the Performance Measurement Baseline (PMB) which in turn, is the basis for measuring performance on a project.   Measurement of progress against the baseline provides early identification of problems and helps to identify and mitigate costs and risks, while also identifying opportunities, by implementation of appropriate corrective actions.

Earned Value Management Systems for Project Management

The basic concept of the Earned Value Management System is more than a unique project management technique.  The EIA-748-C contains 32 Guidelines that define a set of requirements that a contractor’s management system must meet. The objectives of an EVMS are:

  •  Relate time phased budgets to specific contract tasks and/or statements of work
  • Relate technical, schedule and cost performance information
  • Furnish valid, timely and auditable data/information for proactive management action and decision making
  • Provide the basis to capture work progress assessments against the baseline plan to facilitate realistic project costs and completion dates
  • Supply managers with a practical level of summarization for effective decision making

Once a contractor’s EVM System is designed and implemented, there are significant benefits to the contractor and to the customer:

  • Contractor benefits include increased visibility and control to quickly and proactively respond to issues which makes it easier to meet project technical, schedule, and cost objectives
  • Customer benefits include confidence in the contractor’s ability to manage the project, early problem identification, and objective rather than subjective contract cost and schedule status

Earned Value Management Training

Experienced project managers will tell you that understanding the scope, schedule and costs of a project is essential to its success. The primary objective of the EVMS is to ensure that all elements of a project are planned, authorized, managed, and controlled in a consistent and cost-effective manner.  There is an increasing demand for training for organizations beyond the traditional aerospace and defense related construction, software, research and development, and production environment to now include non-defense companies to implement and use the Earned Value Management System.

EVM for Biotech and Pharma

Biotech and Pharma companies are not strangers to dealing with government regulations and requirements. Most have gone through rigorous Food and Drug Administration (FDA) processes to receive approval of compounds and/or devices. Nonetheless, learning how to design and use an EVM system can take a considerable investment of time and money, but is an essential requirement for initial and ongoing funding.

In addition to the EIA-748-C, there are numerous documents that give direction regarding the implementation and use of an EVM system.  Some of these are the National Defense Industrial Association (NDIA) Integrated Program Management Division (IPMD) EIA-748 Intent Guide, Cost Accounting Standards (CAS), Data Item Descriptions (DID), Military Standards (MIL-STD) such as MIL-STD-881, the Earned Value Management System Interpretation Guide (EVMSIG), and many others.  We have helped many organizations to ensure that they do not overkill or underkill based on their desired management system characteristics.  H&A personnel understand the requirements and are able to “size” those requirements to meet company and customer requirements.

Although Biotech and Pharma are relatively recent industries to use EVM, Humphreys & Associates (H&A) has been providing Earned Value Management training and implementation services for over 35 years. H&A provides self-paced online, classroom and private training courses, and can assist in all aspects of Earned Value Management Implementation.

For more information about EVM training or support, or with questions about your company’s requirements, please contact the Humphreys & Associates corporate office.

EVM for Biotech and Pharma – Part I Implementation and Training Read Post »

EVM Material Earned Value – Price vs. Usage Variance Analysis – Part 3

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Last Updated May 22, 2025

Earned Value Management (EVM) control account managers (CAMs) with material cost elements are required to conduct price vs. usage material cost variance analysis as a normal part of their root cause analysis.  This analysis is the material counterpart to conducting a labor rate versus hours (efficiency or volume) cost variance analysis.

Material price/usage analysis looks at the two components of a material cost variance:

  • Price.  How much of the cost variance was caused by the unit price paid for the material item differing from the earned value unit price for the material?
  • Usage.  How much of the cost variance was caused by the earned value for the quantity of the material differing from the actual quantity of the material?

A common question is: “How can we do this when we have thousands of material items to account for on a project?”

The answer: Not all material items have to be tracked discretely to conduct an adequate price/usage analysis, with the general rule of thumb of discretely tracking about 80% of the material dollars.

Some contractors set a policy where material will be tracked discretely if it breaks a specific dollar value (for example, anything above a $5,000 unit price).  Other contractors conduct what is called an “80/20” analysis of their estimated bill of materials (BOM).  The concept here is that on most programs, approximately 20% of the material items (larger dollar items) represent about 80% of the material dollars on the program, with the other 80% of the BOM being the smaller dollar items that total about 20% of the material dollars.  In this case, the discretely measured items are any of the items in the top 20% of the BOM.

Some contractors do this segregation by the unit price of each material item.  Others make the division based on the extended price (unit price times the number of units to purchase), sometimes placing a high volume/low price item on the discretely tracked 20% list.  Either method is acceptable.

Even with this discrete material segregation, the price/usage analysis still needs to be performed.  The difference is discrete items are tracked separately (e.g., a $250,000 radar antenna dish) from a commodity grouping (such as all connecting bolts – average planned price of $10 per pound).

The variance analysis method is the same for discretely measured items and for the homogeneous groupings of material items where:

Price Variance = (BCWP Unit Price – ACWP Unit Price) x ACWP Quantity

Usage Variance = (BCWP Quantity – ACWP Quantity) x BCWP Unit Price

Another common question is “Where do I get this sort of information?”

Most material departments or supply chain management teams use software tools to maintain a database of all materials the company receives as well as what particular projects receive.  While the material management system is generally used to identify material deliveries, late deliveries, material availability for transfers or borrow-paybacks, etc., they generally have the unit price and quantity purchased information necessary for the CAMs (or at least the material department) to perform the price/usage analysis required.  It may require special runs, or sorts, of the BOMs or inventories that are maintained, but the information is usually available.

The CAMs can use the material management system data and perform their algorithms to do the price/usage calculations described above.  Generally, these systems contain enough information to discretely measure every part number to the lowest unit price item on the project.  Earned value management, however, does not require reporting price and usage analysis on “connecting bolt #123 with a price of $0.0000134 per unit.”

Also see these related blogs:

Humphreys & Associates is available for EVM consulting, CAM certification and additional information on this topic. Contact us today.

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Earned Value Management System Success – 7 Steps

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An Earned Value Management System is a common contractual requirement on US federal government agency projects and on some foreign government agency projects. Earned Value Management is an effective tool to provide more visibility into project performance for government customers and for internal management.

As with any new concept or tool, success is dependent on how the system is implemented. Upfront planning can mean the difference between success and failure. Based on more than three decades of experience helping hundreds of companies implement an Earned Value Management System, Humphreys & Associates is well versed in what it requires to create a compliant, effective Earned Value Management System (EVMS).

The seven steps below can help to expedite and manage the implementation of a compliant EVM System. Successful implementation can greatly enhance productivity and the bottom line.

Earned Value Management System Success – 7 Steps

Step 1 – Management Team Commitment

Commitment and support from the management team is essential to the success of the EVMS implementation. Without it, the process will fail. Establishing an implementation team responsible for developing the strategic plan and schedule is a critical initial step. Read more…

Step 2 – Pre-Implementation Assessment & Gap Analysis

Before implementing an EVMS, it important to have a clear understanding of the state of the current project control system. This is essential for determining the full scope of the implementation effort. Comparing the current processes and procedures to the 32 guidelines in the EIA-748 Standard for Earned Value Management Systems is part of the process.

Internal EVM experts or an independent third party commonly conduct this assessment, sometimes referred to as a requirements analysis or gap analysis.

The intent is to produce fact-based information useful for creating a realistic implementation plan. What are the processes, tools, and training that need to be enhanced or implemented? Based on this knowledge, an implementation plan and schedule can be produced that defines the specific tasks and milestones to accomplish the end objectives.  Read more….

Step 3 – System Structure and Integration

At the beginning of the system enhancement or design stage, it is useful to focus on each of the subsystems that support the nine EVMS process areas and how they integrate with each other. When the customer’s reviewing agency reviews the company’s EVMS, it will look at each of the following process areas:

  • Work Organization
  • Planning and Scheduling
  • Work/Budget Authorization
  • Accounting
  • Indirect Management
  • Management Reporting and Analysis
  • Revision sand Data Maintenance
  • Material Management
  • Subcontract Management

The EIA-748 32 guidelines are the foundation for determining if an EVMS meets the requirements for a compliant system. Developing flow diagrams and storyboards are useful tools at the beginning of the design phase to note what needs to be added or enhanced to create a fully integrated EVMS as well as to satisfy the EIA-748 guidelines. Read more…

Step 4 – The System Description Document

The primary document for describing the system and how it satisfies the EVMS guidelines is the EVM System Description. Internal formal procedures support this document. The system description and related procedures are meant to be the all-inclusive explanation of the EVMS characteristics and how the system is used to manage a project from inception to completion.

The EVMS storyboard and system description are complementary work efforts. An excellent starting point for the system description is to develop an outline that describes the subsystems for each of the nine process areas. Read more…

Step 5 – Training

Training is an important part of the implementation process. This includes upper level management, project managers, functional managers, control account managers (CAMs), and analysts. The training should reflect the EVM System Description, as the government reviewing agency’s team will assess whether or not a project is following the company’s EVM System Description. The development and execution of the training plan as part of the overall implementation plan helps to ensure the various end-users complete the training they need. Read more…

Step 6 – System Implementation

System implementation on a pilot project requires dedicated teamwork and is the most time consuming of the seven steps. An easier approach is to implement the EVMS on a new project so that all project artifacts reflect the system description at the onset.

Projects that run effectively and efficiently often translate into higher profit margins and result in more company business. Read more….

Step 7 – Operation and Use Verification

Once in place, periodic internal reviews, sometimes called self-surveillance, can be done to ensure that the EVMS implementations on the various projects continue to comply with the company’s EVM System Description. This helps to prevent the system from atrophying over time. It also provides an opportunity to address additional training needs, resolve common implementation issues, and enhance the system.

Independent third parties can also assist with the self-surveillance process. This provides an added benefit by using experienced outside consultants who regularly perform mock compliance or certification and other types of reviews. The outside consultant team can also update a company on the latest issues the government agency review teams are focusing on, provide a fresh look at how an EVMS is used on a project, or bring new ideas to the table that can improve the company’s EVM System.

Similar to the implementation and use of the EVMS, it is important to establish a repeatable process for self-surveillance, capture the results, identify the problem areas, identify actions to address the root cause of the problems, and track them to closure. Read more….

For a full-length copy of this article, see our EVMS Educational Center.

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Earned Value Management Misconceptions – 5 Common EVMS Errors

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Earned Value Management  Misconceptions – 5 Common EVM Errors

Earned value management misconceptions can introduce errors into a project control system. If your company is exploring a potential contractual need for using earned value management or implementing an Earned Value Management System (EVMS) to gain a competitive edge, dispelling common misconceptions is a useful exercise.

First, it is important to understand that the purpose of an EVMS is to provide:

  • Reliable, timely, actionable information that can be used to manage a project more effectively
  • Repeatable processes that foster credibility and goodwill with customers

Second, it is critical to keep in mind that when implementing an EVMS:

  • Do not make it more difficult than it needs to be
  • Avoid the “learning by mistakes” approach, which can increase costs and end-user frustration levels

Here are 5 of the most common misconceptions Humphreys & Associates consultants frequently encounter and some observations to help dispel them:

1. If you install software you have everything you need for a EVMS

False. Software toolsets can assist in the EVM process, but software is just one component. An EVM System requires instilling a disciplined and repeatable process that integrates all of the project control subsystems. This includes work organization, planning and scheduling, budgeting, accounting, work performance and analysis cycles, estimating what it will take to complete the remaining work (in time and resources) and managing changes to ensure the process provides useful information from project inception to completion.

The people using the project control system are a critical component to the successful execution and completion. All project stakeholders must actively use the system including upper level management, project managers, integrated product team (IPT) leads, schedulers, and control account managers (CAMs).

Beware of those who suggest that implementing a software tool set alone equates to an EVMS. Read more…

2. An EVMS prevents budget overruns or schedule delays

False. Unfortunately, this is a common misconception of both contractors and government program offices.

Properly used, an EVMS is an early warning system. It provides the means to identify issues early and proactively address them before they influence the ability to meet contractual requirements whether technical, schedule, or cost. Knowing how to identify risks and opportunities is an integral part of an EVMS. It is essential that managers at all levels know how to use the information the EVMS provides so they can respond quickly to deviations from a baseline plan.

EVM is a robust and effective tool when used correctly. Read more…

3. Variances are a bad thing

False. This is common misconception of both contractors and government project managers. The worst part of this misconception is that it causes people to do unwise things, such as hiding schedule or cost variances or producing rosy estimates at completion.

Hiding variances negates the whole purpose for implementing an EVMS. Variances are the early warning mechanism of an EVMS. Most projects endeavor to produce a reasonable and executable baseline plan, but what typically occurs is that work will deviate to some degree from the plan.

The performance variances and indices provide the ability to quickly identify deviations from the plan and determine the impact to the project.

That means management can be proactive and keep the project on track. Read more…

4. An EVMS is too rigid, requires too much detail

False. An EVMS does not inherently require more detail. A common error made by companies new to EVM is to drive the data down into too much detail, which can over complicate the planning and scheduling, budgeting, performance measurement, analysis, and change control processes.

What EVM does require is a defined logical approach to produce technical, schedule, cost, and risk data that are then fully integrated and tailored to the needs of each project. That means more upfront planning is required to determine the level of detail needed to manage the work effort based on risk, cost, and other factors for management visibility.

EVMS most certainly adds a level of discipline to the project management process. Frequently, the “too rigid” label is a result of self-induced pain or lack of understanding.

What is easy to overlook are the hazards, business risks, and costs related to ad hoc processes or project management by heroics. This results in regularly failing to meet objectives (overruns, late deliveries, last minute scrambles to the finish line), lack of visibility into the real status of the project (which results in unpleasant surprises for management), quality issues, rework, or unhappy customers and high frustration levels.

EVM principles can be used to improve the management and control of any project. Read more…

5. There is always a high cost to implement and use an EVMS

False. The implication in the statement above is that EVM provides limited or negative return on investment. This is a common argument when new business processes are introduced, especially when familiar processes are already in place; EVMS is a contractual requirement. To win certain contracts, an EVMS is required – for good reason. In these cases, management’s choice is either implement or decline to bid.

There is always a price tag for implementing new processes. The focus should be on determining the gap between what processes a company is currently using compared to the EIA-748 32 Guidelines. It may be a narrow or large gap – that gap determines the scope of the system design and implementation processes needed.

What is important to remember (and often missed) is that EVM is a set of proven project management principles that are applicable to any project. It can improve the ability of a company to meet commitments, increases management visibility, which helps to prevent expensive surprises and demonstrates a high level of project management maturity that can be used to a competitive advantage. All of these factors can reduce the overall cost to execute projects and, in turn, increase the company’s profit margin.

Yes, there is a cost to implement a disciplined project management process. But there are also significant, avoidable costs should a government or other large customer decides a company’s project control system is insufficient or is not implemented properly. Expensive emergencies and lost contracts can be averted by investing in proactive upfront planning.

Your credibility and goodwill with customers as well as your company’s ability to win projects may well warrant investing in a well-executed EVMS. Read more…

For a full-length version of this post, see Humphreys & Associates EVMS Education Center.

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