Earned Value Management System (EVMS)

Video Series – Common Problems Found in EVMS and Recommended Corrective Actions – 1 & 2 of 5

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Parts 1 & 2 of our video series on Common Problems Found in EVM Systems and Recommended Corrective Actions are live.  These videos review our popular blog series with the same name. 

 

Subjects Covered in the videos:

Part 1

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

Part 2

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:
Common Problems Found in EVM Systems – Recommended Corrective Actions – Part 2

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EIA 748-D Released – Change Notes

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EIA 748 D Released

Portions extracted from the EIA-748-D © SAE International (with permission).

Are you aware that a revision to the Society of Automotive Engineers (SAE) / Electronics Industry Alliance (EIA)  Standard 748 Earned Value Management Systems, has been released? The new revision is SAE / EIA 748-D. Officials have been discussing the changes at recent industry conferences.

Sections 2.1-2.5 – No Changes to EVMS Guidelines

No changes have been made to the 32 EVMS Guidelines in Sections 2.1-2.5 of the standard. The changes are primarily clarifications of the existing text:

Section 1 – Additional 4th Note

Section 1 “Scope of EVMS” previously “Introduction” in 748-C now has an additional 4th Note:

“Note 4: There are occasions where it is beneficial for complementary systems or methodologies (e.g., Enterprise/ Manufacturing Resource Planning, Agile Software Development, Theory of Constraints) to interface with the EVM System. These complementary systems or methodologies can be used to deliver functionality and value to the customer while EVM provides a standardized method for measuring progress and reporting across the contract. The EVMS documentation should describe the interface content as well as the recurring control process to maintain data conformance and system compliance.” © SAE

Section 2.6 –  Six Additional Terms

Section 2.6 “Common Terminology” includes six additional terms:

ACTIVITY OR TASK: An element of work with an expected duration in the network schedule that is performed during the course of a project. Activities generally have expected resource requirements used to determine the budget for the work effort. One or more activities may relate to a work package.

AUTHORIZED UNPRICED WORK (AUW): A contract scope change which has been directed by the customer’s contracting officer but has not yet been fully negotiated/definitized. It includes a value, excluding fee or profit, typically associated with the authorized, unpriced change order.

ELEMENT OF COST (EOC): The categories of cost such as labor, material, subcontractor, and other direct costs as defined by company accounting practices.

OVER TARGET SCHEDULE (OTS): A replanned schedule baseline that extends beyond contract milestone dates, delivery dates, or completion date. An OTS is usually accompanied by an increase in budgets resulting in a corresponding Over Target Baseline (OTB). It typically requires customer approval to implement.

RISK AND OPPORTUNITY (R&O): An uncertain future event or situation that could impact the ability to achieve overall project requirements within defined cost, schedule, and technical objectives. Risk has two components: (1) the probability (or likelihood) of a particular outcome and (2) the consequences (or impact) of that outcome. The consequences of risks are typically thought of as negative that may need to be mitigated to minimize the impact to the project. A risk event with positive consequences is referred to as an opportunity that may be captured as a benefit to the project.

SUMMARY LEVEL PLANNING PACKAGE (SLPP): An aggregation of far-term work efforts (scope, schedule, and budget) that are not able to be identified at the control account level but can be distributed to reporting level WBS elements.

Section 2.6 – Term Changes

Section 2.6 “Common Terminology” includes changes/clarifications to existing terms:

ESTIMATE AT COMPLETION (EAC): The current estimated total cost for authorized project work. It equals the cumulative to date Actual Cost of Work Performed (ACWP) plus the estimated costs to complete (Estimate to Complete or ETC) the authorized work remaining.

LEVEL OF EFFORT (LOE): Support type activities that lack measurable output or product that cannot be discretely planned or objectively measured in a practical manner. LOE automatically earns performance with the passage of time, an earned value technique.

MANAGEMENT RESERVE (MR): An amount of the total budget set aside for unplanned, in scope effort that may arise during the course of the project which cannot be identified in advance and is used to handle execution risks. Management reserve budget should be commensurate with the level of project risk. It is not part of the Performance Measurement Baseline (PMB).

OVER-TARGET BASELINE (OTB): A Performance Measurement Baseline (PMB) that exceeds the Contract Budget Base (CBB). It is implemented to produce a realistic schedule and budget plan for the project’s remaining work. It typically requires customer approval to implement.

Section 2.7 – 3 Additional References

Section 2.7 “List of Suggested References” has been updated to include 3 additional references. The complete list is below:

– NDIA IPMD EVMS Intent Guide
– NDIA IPMD IBR Guide
– NDIA IPMD Surveillance Guide
– NDIA IPMD EVMS Acceptance Guide
– NDIA IPMD EVMS Application Guide
– NDIA IPMD Planning and Scheduling Excellence Guide (PASEG)
– NDIA IPMD Industry Practice Guide for Agile on Earned Value Management Programs (New)
– NDIA IPMD Master Definitions List for IPMD Guides (New)
– NDIA IPMD Earned Value Management System Guideline Scalability Guide (New)

Sections 3 thru 5

In Section 3.2.1 WBS Dictionary, discussion regarding segregation by WBS element for direct costs has been removed.

In Section 3.3.1 Control Accounts, discussion regarding guidance that a Control Account shall not span multiple WBS elements has been removed.

In Section 3.3.1, a new figure, Figure 1 – Establishing Control Accounts was added.

In Section 3.4.3 Subcontract/Procurement Schedules, the phrase “high risk” has been removed.

In Section 3.8.2 Cost Performance, The Labor Rate and Efficiency variance calculations were corrected. The corrected equations are below.

• Labor Rate Variance Calculation = Actual Hours x (Earned Rate – Actual Rate)
• Efficiency Variance Calculation = Earned Rate x (Earned Hours – Actual hours)

In Section 3.8.2 Cost Performance, the acronym “EAC” has been replaced with “ETC”.

In Section 3.10.2 Authorized Changes, discussion regarding allowable changes for optimum utility has been removed.

In Section 4 System Documentation, the term “GEIA” has been replaced with “SAE”.

In Section 5.1, Evaluation Process, the term “officer” has been replaced with “authority”.

In summary, EIA 748-D has added/modified a few items for clarification but does not change any of the implementation, reporting, surveillance, or enforcement aspects of Earned Value Management Systems.

Purchase a copy of the standard here: https://www.sae.org/standards/content/eia748d/

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EVM Consulting | Corrective Action Response

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Corrective Action Response

How do I respond to a Corrective Action Request?

In EVM Consulting, we deal with Corrective Action Requests (CARs) on a regular basis, so we have plenty of real-world experience. We created an outline of valuable information about DRs / CARs based on our collective experience. Part 1 of the guide is designed to inform you of why CARs are received and who issues them, so you can work to prevent them. Part 2 will prepare you to respond to a CAR in an effective and efficient way.

Corrective Action Response: Sources – Part 1 of 2

In Part 1 of the series we illuminated the varied sources of Corrective Action Requests:
1) Standard Surveillance Instruction (SSI)
2) Agencies that do not use the DCMA for surveillance, such as the Department of Energy.
3) Integrated Baseline Review (IBR)
4) Procedures that are compliant with the EIA-748 Guidelines
5) Contract Performance Report (CPR)
6) Integrated Project Management Report (IPMR)
7) Integrated Master Schedule (IMS)
8) Discrepancy Reports (Levels I-IV)

 

Corrective Action Response: Planning and Closure – Part 2 of 2

In part 2 of the series, we addressed responding to a Corrective Action Request (CAR):
1) Review the DRs/CARs with the customer
2) Organize for successful CAP management
3) Begin a thorough Root Cause Analysis
4) Develop and evaluate Corrective Action Plans
5) Develop verification closure steps
6) Develop a detailed Integrated Master Schedule for CAP implementation
7) Submit CAP and CAP IMS to the customer for approval prior to implementing the Corrective Actions
8) Implement Corrective Action Plans and track progress to successful completion
9) CAR closure and follow-up

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EVM Training – Decision Making and Charlie Munger – Tendency Toward Misjudgment – Part 4

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EVM-Training-Decision-Making-Charlie-Munger-Part-4-Tendency-Toward-Misjudgment

This is the fourth and final blog in this series about the human tendency toward misjudgment. In Parts 1, 2, and 3 we learned about Charles (Charlie) T. Munger, Vice Chairman of Berskshire Hathaway and partner of Warren Buffet, and his listing of 25 innate human tendencies toward misjudgment that we harbor. In those three blogs we learned much from him and we will continue that learning in this blog. Charlie was born in 1924 so, at the time of this blog, Charlie he is 94, a wise old man from whom we should learn.

As mentioned previously, I went through each of the 25 “tendencies” that are defined and discussed by Charlie and tried to think about how the tendency could disadvantage or could potentially aid decision making.

Kantian Fairness

The first of the tendencies discussed here is the “Kantian Fairness Tendency.” This does not apply to all people from all cultures around the world, but it certainly does to those you are most likely to be engaged with; those at your place of work. The tendency is that people tend to give and expect fair treatment. It is something innate and reinforced with something learned. An example would be the way people line up to wait and the way they expect others to obey the unwritten rules of waiting in line. People expect to be treated fairly and will wait their turn for that. Applying this tendency to decision-making, people expect the decision process to be fair. If it were to be skewed and unfair, they would hesitate to participate. Being unaware that there is such a bias can be dangerous to the decision-making process. If unfairness could be introduced and carefully hidden, the outcome could be skewed. Any unfairness must be rooted out, no matter how difficult.

Influence-from-Mere-Association

The second tendency covered in this fourth blog is subtle. It is the “Influence-from-Mere-Association Tendency.” Munger points out the problem with this tendency by explaining that if something good happened to us in the past, we will be more influenced by things that were associated with that good event or outcome. Something that is associated with a known good thing is not weighed and measured by the same standards as something that is a stand-alone non-associated item. But we do not really know in all cases that the things we are considering really factored into the previous success at all. If we are told that or assume that or just plain “know that” from company lore, we are on dangerous ground. We would need to know the exact cause and effect chain for the good outcome in the past to be sure we are dealing with a positive associated influence. About the best we can do is be skeptical and challenge things that are presented as associated with previous good outcomes. Our process should require proof of association when association is a factor.

Social-Proof

The third tendency here is one we should all be very familiar with. Munger calls it the “Social-proof Tendency.” You might know it by the name “groupthink” or “the herd instinct.” We need to understand that people tend to act and think as the others around them act and think. This tendency can become an issue in a team or group charged with deciding a crucial issue. Will the members have the strength for independent thought and action or will many of them “go along to get along”? The instinct can be much worse if the situation is a high stress one. The herd must react quickly to stress and the first movement, of the first spooked members, could lead to a stampede. Our decision process has to be sensitive to this and counter it is if needed. Deciders must be coached to avoid being a blind follower and to value independent thought and action. If necessary, the process might have to require mixing the attendance or substituting more independent-minded people.

Contrast Mis-reaction

Another powerful tendency is also one that can be easily exploited against the process. This is the so-called “Contrast Mis-reaction Tendency.” This can be seen as the reaction toward what is perceived as the lesser of two evils. We have all been taught that it is good to compare and contrast choices; but that is only useful when enough truth is known about the choices. A manipulative manager might use this tendency for mis-reaction by explaining to the deciders that there are two outcomes. The first is Outcome A which is described by the manager in such terms as to leave no doubt this is a terrible choice. The second one is Outcome B, also not good, but which appears to be so much better that A; by contrast, our reaction is a mis-reaction toward the one that is automatically more appealing. In this way, the unknowing members of the team see the obvious contrast and are drawn to the outcome favored by the manager while, to them, the whole process appears above board. Our process must be made to present all the choices and to treat them factually, so an uninfluenced choice is made. A good decision-making process does not make false contrasts.

There is not enough time to cover all the tendencies fairly. To do that, you should attend a Humphreys & Associates workshop to explore the entire subject of decision making.

Crucial Decision

In closing, I am going to postulate a situation where the authority to make a crucial decision is assigned, in a high stress situation, to a weak “groupthink team” with a strong leader who has a bloated opinion of himself. The team has been shown some very limited choices, some of which have been described as distasteful ones. The leader is in denial and trying to avoid loss. He wants to force a quick decision. How do you rate the chances of this scenario yielding a good well-considered decision, now that you can see the underlying tendencies to misjudgment?

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