Earned Value Management System (EVMS)

Introduction to Earned Value Management Systems (EVMS)

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We are starting a new series that will share some of the adapted video content from our EVMS Workshops. This first video is a brief overview of Earned Value Management, what it is, where it came from, and why it was developed.

More EVMS Training

If you liked this video you can purchase the entire course below. This video is an excerpt from the Department of Defense (DOD) version of this eLearning module. We also offer the same course customized for the Department of Energy’s (DOE) specific Earned Value Management (EVM) implementation/requirements, as well as a version of the course customized for NASA’s EVM implementation/requirements.  

— Purchase This Course —
EVMS DOD Virtual Learning Lab

— Purchase the DOE Version of this Course —
EVMS DOE Virtual Learning Lab

— Purchase the NASA Version —
EVMS NASA Virtual Learning Lab

EVMS Document Matrix

Not sure what the different requirements are between the DOE and NASA? Can’t remember if Cost and Software Data Reporting (CSDR) is required for an NSA contract? Check out our easy to read Earned Value Management Systems Document Matrix

All Online Courses

All Online Courses Available from Humphreys & Associates

Other Posts in this Series

Introduction to Earned Value Management Systems (EVMS) Read Post »

Quality Cost Estimates

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Quality Cost Estimates

The Foundation for a Realistic Performance Measurement Baseline (PMB)

If you have been involved in an Integrated Baseline Review (IBR), you can appreciate why a clear understanding of the project’s contractual scope of work and technical requirements is so important.  Without that understanding, it is impossible to create an executable Performance Measurement Baseline (PMB).  The intent of the IBR is to demonstrate to your customer you have created a realistic schedule and cost baseline plan that reflects a shared understanding of the work scope requirements as well as identified technical, schedule, cost, or resource risks that may impact the ability to execute the work as planned.

So, how do you demonstrate to your customer that your schedule and cost baseline plan is realistic for the agreed upon scope of work?  That’s where the quality of the cost estimate and related basis of estimate (BOE) information come into play.  The quality of the PMB is a direct reflection of how the project control team arrived at their cost estimate for the work scope along with documented BOE details that clearly communicates their rationale and assumptions.  The project control team needs this foundation to define the project’s sequence of activities, durations, and resources to do the work that reflects the known requirements and identified risks.

What are the characteristics of a quality cost estimate?

A quality cost estimate:

  • Reflects a shared understanding of the scope of work and technical requirements. This is often the root cause of an unrealistic cost estimate.  The IBR is a perfect opportunity for all parties to confirm the customer’s requirements and expectations.
  • Is data driven. That means the proposal or project control team has access to relevant historical actual costs for analogous tasks, parametric data, or other documented and substantiated basis for the cost estimate.  The source data for the cost estimate can be traced back to the system of record, internal standards for completing common repeatable tasks, or published industry standards.  Where possible, the use of engineering judgement cost estimating methods is minimized because they introduce a level of unknowns.  The risk of cost growth increases because objective facts and data aren’t available for other people to verify the cost estimate rationale or assumptions are reasonable.
  • Includes useful documented rationale with risk/opportunity assessment. The BOE should capture what source data was used for the cost estimate, why it was relevant, assumptions, what factors or other calculations were used to arrive at the cost estimate, what is included or excluded, identification and evaluation of likely risks and opportunities, and other details useful for explaining the cost estimate.  This is invaluable information the project control team needs to create a realistic schedule and cost baseline.  This rationale, or clearly documented rationale someone else can follow, is frequently the missing piece.  Lack of useful documented rationale can handicap the project control team during the planning phase right after contract award – and for the duration of the project.

How do quality cost estimates help improve the PMB?

The project control team, project manager, and the customer need quality cost estimates and useful documented rationale so they can verify:

  • The integrated master schedule (IMS) sequence of activities, resource assignments, and skill mix reflect how the project teams intend to do the work as well as handle identified risks and opportunities.
  • Sequence of schedule activities and resource assignments are the foundation for the time phased budget.
  • The appropriate level of schedule margin and management reserve are established for the project.
  • Useful earned value techniques are selected for the activities and work packages. In addition to technical requirements, the BOE documentation can often provide additional details that can help the project control team define accomplishment criteria or quantifiable backup data so it is easier to objectively measure completed work.

These cost estimates and documented rationale are also invaluable for:

  • Variance analysis and identifying why significant deviations from the baseline plan occurred – whether in work performance or actual costs incurred to do the work. Did an unexpected event occur?  Perhaps the risk assessment process needs a revisit.  Were the assumptions incorrect?  Why did that happen and what could be done differently to either capture or clearly communicate those assumptions?
  • When the project control team needs to process a baseline change request. They can review the source data, rationale, and assumptions to identify what was different from what actually occurred.  Or, in the case where there is a change in the scope of work, the project control team can identify the cost estimate and BOE factors they need to update to reflect the revised scope of work.  It provides a fact-based foundation to explain why the change was required and to determine what updates need to be made to the schedule activities, resource assignments, and time phased budget.
  • Providing fact-based information useful for maintaining a credible estimate to complete so it more accurately reflects the likely completion date and estimate at completion whether for interim deliverables or the entire project.
  • Rolling wave planning. As more becomes known about the future work requirements, the cost estimate and BOE can be refined to reflect the agreed upon statement of work, assumptions, risk and opportunity assessments, and other details needed to adequately plan, budget, and manage the work.

Cost estimate quality improves with each project. 

A realistic PMB reduces the likelihood of schedule and cost growth “surprises” that negatively impact a company’s bottom line or the customer’s program budget.  As work is completed, the performance and actual cost data become useful historical source data for the next proposal or project.  Each cycle improves the quality of the source data proposal or project control teams can use to substantiate their cost estimates and produce useful BOE documentation for the next project’s PMB.

Need help with preparing for an IBR or standardizing your process for producing cost estimates and BOE rationale? Contact us today.

Quality Cost Estimates Read Post »

Who We Are

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Humphreys & Associates, Inc. has advocated and promoted the integration of technical, schedule, and cost components to achieve the full benefit of using performance measurement. We have a long tradition of leadership in the industry and providing innovative EVMS processes to apply to project management challenges. We are committed to providing exceptional EVMS consulting services to every client.

H&A is proud of the many veterans who are associates in our company. 50% of our staff, including our founder, are military veterans with a strong work ethic and a “get it done” attitude.

Our Industry Experience

If it flies, swims, goes deep under the water, hovers, blasts out of a tube, or goes into orbit, our associates have been on many of the projects that yielded those capabilities.

H&A’s deep industry experience and knowledge base spans aerospace and defense, engineering, construction, utilities, energy, scientific research, and cutting edge technology in design, development, and production environments. Our consultants have worked with all branches of the US Department of Defense, Department of Energy, NASA, and many other US government agencies. We have supported over 900 companies and government agencies and provided training for nearly 900,000 individuals.

Consulting Services

Humphreys & Associates offers a complete range of EVMS consulting services for the entire project life cycle. From proposal preparation and management, system gap analysis, to mock compliance reviews or third party validations, Humphreys & Associates is the authority on EVMS.

Professional EVMS Evaluation

H&A can evaluate the systems, processes, procedures, practices, and reports currently in place.

H&A can provide the support and expertise to assist you throughout the EVMS Design and Documentation Process, and the EVMS Implementation process.

H&A can provide in-house support to assist your team, on cost, schedule, and risk management to assist contractors to develop, enhance, or maintain an integrated master schedule, performance measurement baseline, or estimate to complete.

H&A can provide our proven training throughout the process.

Conclusion

Whether you are just getting started with earned value management or are ready to shift in high gear, we can be your partner to plan and execute complex projects. Contact us today.

Who We Are Read Post »

Video – Earned Value: Fun with Numbers or Real Management Data?

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Do you know basic Earned Value Management terms and how they relate to an EVMS graph? Before watching this video take the quiz and see if you can identify all of the parts of the EVM graph example.

If you are not sure about a specific term, use the links below to skip to that term’s definition.

0:41 – Management Reserve
2:33 – Schedule Variance
3:13 – Budget At Completion
3:27 – Budgeted Cost for Work Scheduled
3:50 – Variance At Completion
4:42 – Estimate At Completion
5:36 – Actual Cost of Work Performed
5:55 – Estimate to Complete
6:08 – Cost Variance
6:27 – Program Overrun
6:40 – Time Now
6:48 – Budgeted Cost for Work Performed
7:05 – Forecasted Program Schedule Slip
7:23 – Estimated Completion Date
7:28 – Planned Completion Date

Read the blog post at: 

Earned Value: Fun with Numbers or Real Management Data – Answers (part 2)

Video – Earned Value: Fun with Numbers or Real Management Data? Read Post »

Earned Value Consulting – Common Problems Found in EVMS and Recommended Corrective Actions

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Humphreys & Associates (H&A) has the opportunity to work with many kinds of clients who operate EVM Systems for all kinds of customers. We are regularly called on to help them our clients review and improve their EVMS.

H&A has identified several recurring EVMS issues and also the most common ways to prevent or correct these issues.

Common Problems in EVMS and Recommended Corrective Actions – Part 1

 

Video Links:

1:37 – The Estimate at Completion (EAC) is systemically out of alignment with cumulative performance with no justification

3:38 – Poor Variance Analysis and Reporting (VAR)

5:23 – Lack of Effective Subcontract Management

 

Read the Blog Post:

Common Problems Found in EVM Systems – Recommended Corrective Actions – Part 1

Common Problems in EVMS and Recommended Corrective Actions – Part 2

 

Video Links:

0:26 – Poor Use of the Percent Complete Earned Value Technique

3:07 – Data Integrity Issues

5:01 – Poor Scope Language in the WBS Dictionary and/or Work Authorization Documents

 

Read the Blog Post:

Common Problems Found in EVMS Reviews and Recommended Corrective Actions – Part 2

Common Problems in EVMS and Recommended Corrective Actions – Part 3

 

Video Links:

0:15 – IMS Health Problems

3:30 –Data Item Noncompliance

5:17 –Planning Package Mismanagement

 

Read the Blog Post:

Common Problems Found in EVM Systems and Recommended Corrective Actions – Part 3

Common Problems in EVMS and Recommended Corrective Actions – Part 4

 

Video Links:

0:16 – Misalignment between BCWP and ACWP

3:07 – Freeze Period Violations

5:00 – Failed Data Traces

 

Read the Blog Post:

Common Problems Found in EVM Systems and Recommended Corrective Actions – Part 4

Common Problems in EVMS and Recommended Corrective Actions – Part 5

Video Links:

0:22 – Inappropriate use of PERT and LOE

3:55 – Misuse of Management Reserve

6:48 – Administrative Control Account Managers (CAMs) Selection

 

Read the Blog Post:

Common Problems Found in EVMS and Recommended Corrective Actions – Part 5

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Who Owns Subcontractor Management Reserve (MR)?

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Who Owns Subcontractor Management Reserve?

Subcontractor, Prime Contractor… Customer?

There has long been discussion regarding who “owns” a subcontractor’s Management Reserve (MR).  Some believe that since the entire contract value was awarded by the prime contractor to the subcontractor, the MR belongs to the prime.  Unfortunately, they might have been influenced by some of their customers who believe a prime contractor’s MR belongs to the customer – even to an extreme in which the customers interject themselves in the prime contractor’s decision process in using their MR. So contractors might figure that if the customer is doing that to them, they should do the same to their subcontractors.

DCMA Cross Reference Checklist

They may try to justify this by pointing out that in the DCMA Cross Reference Checklist (CRC dated 22 March 2019) Guideline # 14 Sub-question b asks:  

“Is major subcontractor Management Reserve (MR) incorporated and traceable to the prime contractor’s EVMS?”

While this might sound to some as though it justifies the argument that the MR belongs to the prime, it really doesn’t.  The actual guideline 14 question is simply asking if the contractor implementing EVMS (in this case the subcontractor) simply does or does not “Identify management reserves and undistributed budget.”  Since the subcontractor is implementing their management system on their contract with the prime, the only requirement is that the subcontractor identifies a Management Reserve (MR) amount (which could be zero, by the way). If they do, then (strangely) subquestion b puts the onus on the prime contractor to reflect the subcontractor’s MR in their EVM system [i.e., strange because how would a subcontractor demonstrate to a review team that their MR is being reflected in the prime’s EVM System?]. This question would be more appropriate if the subcontractor was also the prime to a lower-tier subcontractor.

Reporting vs. Ownership

The above only addresses the reporting of a subcontractor’s MR, but what does the government documentation actually say about the “ownership” of the subcontractor’s MR?

Note: A point to remember in this entire discussion is that the Guidelines, the EVMIG, the Cross Reference Checklist (CRC), and the EVMSIG were written to apply to any contractor required to implement EVMS on a contract – whether they be a prime contractor to a government customer or a subcontractor to a prime contractor (their “customer”).

EVMSIG Chapter 3 Introduction

The EVMSIG Chapter 3 Introduction (pg. 17) says this about MR:

“An allowance is made for a portion of the CBB to be withheld outside of the PMB as Management Reserve (MR) for internal management control purposes. MR is intended to provide the contractor with a budget to manage risk within the established contract scope (Guideline 14).”

As this introductory paragraph points out, MR is established by the contractor (or the subcontractor) for their internal management control purposes to have budget to manage risk within the contract scope. There is no mention of customer involvement in the decision-making process.

Para 3.9 (Guideline 14), Intent of Guideline

A more definitive statement in the EVMSIG is: “Para 3.9 (Guideline 14), Intent of Guideline” in the second paragraph – bullets and underlines have been added for emphasis:

  • “MR belongs to the contractor Program Manager, not the Government,…” [ergo, NOT the prime in a prime/ sub relationship]
  • [It] “provides the contractor with a budget for unplanned activities within the current program scope. MR enables program management to respond to future unforeseen events within the work scope of the program by distributing budget to mitigate program risks.”
  • “To establish MR, the contractor’s program management sets aside budget based on the program’s risk management process and assessment.”
  • [MR] “is not a source of funding for additional work scope or the elimination of performance variances.”
  • “MR is not a contingency fund and may neither be eliminated from contract prices by the customer during subsequent negotiations nor used to absorb the cost of contract changes.” And finally,
  • “MR belonging to a major subcontractor must be incorporated into the prime contractor’s EVMS with traceability to the subcontractor’s reported MR.”

Subcontractor Reports

This last bullet specifically points out that the MR belongs to the subcontractor, and that it must be reflected in the prime’s EVMS as reported by the subcontractor.  Some choose to include a subcontractor’s MR in their own MR value; having it there, however, increases the risk of having the prime think they have more MR to use when, in fact, they do not.  The subcontractor’s MR is not the prime’s to use, so the prime would need a very good mechanism in place to keep the two MR amounts separated.  This needed segregation becomes more complicated if the prime has more than one subcontractor.  Regardless of where the contractor places the subcontractor MR, EVMS requires it to be traceable to the MR value the subcontractor reports.

A Contractor’s Control Mechanism

Management Reserve (MR) is something that is allowed to provide a contractor with flexibility in handling the unknowns on a contract.  It doesn’t matter if it is a prime contractor to a government customer or a lower-tier subcontractor to a higher level (or prime) contractor.  MR is a contractor’s control mechanism and should not be subjected to any level of customer involvement.  The guidelines and implementation/ interpretation documentation try to control improper uses of MR (e.g., covering performance variances, performing out of scope work, etc.), but customers – at all levels – should not interject themselves in a contractor’s decision-making process on the use of MR. Remember also, if customers involve themselves in that process, there is a risk that their perceived “direction” to the contractor could make them complicit in poor MR decisions.

Who Owns Subcontractor Management Reserve (MR)? Read Post »

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