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EVMS Variance Analysis — EVMS Analysis and Management Reports

By Humphreys & Associates / April 2, 2015 / DCMA, EVM Analysis, NDIA, VAR, Variance Analysis Report

DCMA, EVM Analysis, NDIA, VAR, Variance Analysis Report

A Variance Analysis Report (VAR) that includes specific information about the cause, impact, and corrective action “provides management with early insight into the extent of problems and allows corrective actions to be implemented in time to affect the future course of the program” [reference: NDIA, IPMD EIA-748 (Revision D) EVMS Intent Guide]. Unfortunately, variance analysis is an easy target for criticism during EVMS reviews. There are many examples of inadequate variance analysis to choose from, but what they all have in common is the lack of specific information on the “why, what, how, when, and who” of any variance. The variance analysis reporting requirements are found in the EIA-748 (Revision D) Guidelines in Section IV., Analysis and Management Reports, Guidelines 22-27.

EIA-748 Guidelines Section IV. Analysis and Management Reports
22	2-4a	Control Account Monthly Summary, Identification of CV and SV
23*	2-4b	Explain Significant Variances \| Earned Value Management
24	2-4c	Identify and Explain Indirect Cost Variances
25	2-4d	Summarize Data Elements and Variances thru WBS/OBS for Management
26*	2-4e	Implement Management Actions as Result of EVM Analysis
27*	2-4f	Revise EAC Based on Performance Data; Calculate VAC

A VAR that includes specific information and data about a problem will allow management to make informed decisions and mitigate project risk. Getting specific about variance analysis reporting includes the following elements.

Overall:

Emphasis on the quantitative, not qualitative
Emphasis on the specific, not the general
Emphasis on significant problems, not all problems
Define abbreviations and acronyms at first use
The Control Account Manager (CAM) is the most knowledgeable person to write the variance analysis report but will need information from the business support team

Cause:

Isolate significant variances
Discuss cost and schedule variances separately
Clearly identify the reason (root cause) for the variance (ties to the corrective action plan)
Clear, concise explanation of the technical reason for the variance
Provide cost element analysis
- Labor – hours, direct rates, skill mix, overtime (rate & volume)
- Material – unplanned requirements, excess quantities, unfavorable prices (price & usage)
- Subcontracts – changing requirements, additional in-scope work, schedule changes
- Other Direct Costs – unanticipated usage, in-house vendor
- Overhead (indirect) – direct base, rate changes
Identify what tasks are behind schedule and why

Impact:

Describe specific cost, schedule, and technical impact on the project
Project future control account performance (continuing problem)
Address effect on immediate tasks, intermediate schedules, critical path, driving paths, risk mitigation tasks
Describe erosion of schedule margin, impacts to contractual milestones or delivery dates, and when the schedule variance will become zero (this may only mean the work getting completed late (BCWP_cum =BCWS_cum); and does not necessarily mean getting “back on schedule”
Describe any impact to other control accounts
Assess the need to revise and provide rationale for the Estimate at Completion (justify ETC realism – CPI to TCPI comparison, impacts of corrective action plan, risk mitigation, open commitments, staffing changes, etc.)
Note: If there is a root cause, there will be an impact. It could be related to cost, schedule, lessons learned to be applied to future activity, an update required to a process to support the corrective action or a re-prioritization of resources to meet a schedule.

Corrective Action Planning:

Describe specific actions being taken, or to be taken, to alleviate or minimize the impact of the problem
Include the individual or organization responsible for the required action
Include schedules for the actions and estimated completion dates (ECD)
If no corrective action is possible, explain why
Include results of corrective action plans in previous VARs.

Ask yourself, is the analyses presented in a manner that is understandable? Does the data support the narrative? Does the variance explanation provide specifics of:

“why” the problem occurred,
“what” is impacted now or in the future,
“how” the corrective action is being taken,
“when” the corrective actions will occur,
“when” the schedule variance will become zero, and/ or the work gets “back on schedule”
“who” is responsible for implementing the corrections?

Remember, a well-developed Variance Analysis Report can reduce the risk of a Corrective Action Request (CAR) during an EVMS review.

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DoD Earned Value Management System Interpretation Guide | EVMSIG

By Humphreys & Associates / April 2, 2015 / ACAT, DoD EVMS, EVM, EVMSIG, GAO, IPMR

ACAT, DoD EVMS, EVM, EVMSIG, GAO, IPMR

The updated DoD Earned Value Management System Interpretation Guide (EVMSIG), dated February 18, 2015 was released in March, 2015.

This DoD update, per the GAO, focuses on “(1) problems facing the cost/schedule control system (CS2) process; (2) progress DOD has made with reforms; and (3) challenges DOD faces in fostering and managing potentially significant changes”.

The update commences with:

EVMSIG INTRODUCTION

1.1 Purpose of Guide

Earned Value Management (EVM) is a widely accepted industry best practice for program management that is used across the Department of Defense (DoD), the Federal government, and the commercial sector. Government and industry program managers use EVM as a program management tool to provide joint situational awareness of program status and to assess the cost, schedule, and technical performance of programs for proactive course correction. An EVM System (EVMS) is the management control system that integrates a program’s work scope, schedule, and cost parameters for optimum program planning and control. To be useful as a program management tool, program managers must incorporate EVM into their acquisition decision-making processes; the EVM performance data generated by the EVMS must be timely, accurate, reliable, and auditable; and the EVMS must be implemented in a disciplined manner consistent with the 32 EVMS Guidelines prescribed in Section 2 of the Electronic Industries Alliance Standard-748 EVMS (EIA-748) (Reference (a)), hereafter referred to as “the 32 Guidelines.”

The DoD EVMS Interpretation Guide (EVMSIG), hereafter referred to as “the Guide”, provides the overarching DoD interpretation of the 32 Guidelines where an EVMS requirement is applied. It serves as the authoritative source for EVMS interpretive guidance and is used as the basis for the DoD to assess EVMS compliance to the 32 Guidelines in accordance with Defense Federal Acquisition Regulation Supplement (DFARS) Subpart 234.2 and 234.201 (References (b) and (c)). The Guide provides the DoD Strategic Intent behind each guideline as well as the specific attributes required in a compliant EVMS. Those attributes are the general qualities of effective implementation that are tested in support of determining EVMS compliance as it relates to the 32 Guidelines. As applicable, the DoD Strategic Intent section may clarify where differences in guideline interpretation exist for development and production type work. DoD agencies and organizations charged with conducting initial and continuing EVMS compliance activities will establish amplifying agency procedures and/or guidance to clarify how they are implementing this Guide to include the development of evaluation methods for the attributes associated with each of the 32 Guidelines.

1.2 EVM Policy

The Office of Management and Budget Circular No. A-11 (Reference (d)), the Federal Acquisition Regulation (FAR) Subpart 34.2 and Part 52 (References (e) through (h)) require federal government agency contractors to establish, maintain, and use an EVMS that is compliant with the 32 Guidelines on all major capital asset acquisitions. Based on these federal regulations and the DoD Instruction 5000.02 (DoDI 5000.02) (Reference (i)), the DoD established the Defense Federal Acquisition Regulation Supplement (DFARS) 234.201 (Reference (c)), which prescribes application of an EVMS, via the DFARS 252.234-7002 EVMS clause (Reference (j)). When EVM reporting is contractually required, the contractor must submit to the government an Integrated Program Management Report (IPMR) (DI-MGMT-81861) (Reference (k)) to report program cost and schedule performance data. The IPMR is being phased in to replace the Contract Performance Report (CPR) (DI-MGMT-81466) and the Integrated Master Schedule (IMS) (DI-MGMT-81650). Hereafter, for simplicity purposes, the term “IPMR” is used to reference legacy or current CPR/IMS DIDs. There are times in this Guide when the IMS reference is to an output of the contractor’s internal management system, i.e., a work product, which may not be referred to in the same context as the IPMR. [The full EVMSIG update is found here.]

Furthermore, also in March, 2015 the GAO released its “Report to the Committee on Armed Services, House of Representatives: Defense Acquisition | Better Approach Needed to Account for Number, Cost, and Performance of Non-Major Programs”.

An overview:

The Department of Defense (DOD) could not provide sufficiently reliable data for GAO to determine the number, total cost, or performance of DOD’s current acquisition category (ACAT) II and III programs (GAO-15-188 “Better Approach Needed to Account for Number, Cost, and Performance of Non-Major Programs” overview). These non-major programs range from a multibillion dollar aircraft radar modernization program to soldier clothing and protective equipment programs in the tens of millions of dollars. GAO found that the accuracy, completeness, and consistency of DOD’s data on these programs were undermined by widespread data entry issues, missing data, and inconsistent identification of current ACAT II and III programs. See the figure below for selected data reliability issues GAO identified. [The full GAO-15-188 document is found here.]

DoD Earned Value Management System Interpretation Guide | EVMSIG Read Post »

Using the Same Rate for BCWS and BCWP

By Humphreys & Associates / November 6, 2014 / ANSI, BAC, BCWP, BCWS, EVM, EVMS, NDIA

ANSI, BAC, BCWP, BCWS, EVM, EVMS, NDIA

There is often an EVMS project managers debate regarding which rates to use for common budget costing EVMS data elements. For Actual Cost of Work Performed (ACWP), it is fairly obvious as the most recently approved actual rates are applied. A planning rate is generally used for BCWS and BCWP, but many in the EVM project management industry use incorrect rate application for the BCWP calculation. In some cases EVM contractors use a weighted average rate; the percent complete in hours multiplied by the dollarized BAC to derive the BCWP in dollars. This method is noncompliant with the EIA-748 Guideline 22 which states that if work is planned on a measured basis, then the BCWP must be calculated on a measured basis using the same rates and values. In other words, the rate and methods used to calculate BCWS and BCWP must be the same. As shown in Example #1, it can be seen that work planned in hours (BCWS) was performed as scheduled (BCWP) each month. Each hour was planned at a rate of $100/hour until the end of the calendar year when the rate increased to $105/hour. In this example, the rates used to calculate BCWS and BCWP are the same.

Example #2 below illustrates a very common scenario. In this example work that was planned in November and December was not completed until the next year. In January, the rate increased from $100 to $105. What should the BCWP in dollars be for both January and February?

For both January and February, the original 10 hours planned was earned at $105/hour equaling $1,050. The work that was planned in November and December, but completed late in January and February, was earned at its planned rate of $100/hour resulting in $1,000 of BCWP. The sum ($1,050 + $1,000) equals the BCWP of $2,050 in each month. See the Example #3 graphic below:

Even though the rate was escalated in the new year, the BCWP that should have been earned in the prior year is calculated using the rate that was originally planned. The same approach would be logical if the work planned at $105 per hour were performed ahead of schedule in let us say, December of the prior year. It would be earned at $105 per hour even though it was performed in a time frame where the planning rate is $100 per hour. In some instances, business systems are programmed to earn as a percent of the entire Budget at Completion (BAC). This could result in an inaccurate BCWP dollar value. As an example, let us assume 10 hours are earned in September. If those 10 hours were 1/8 of the total BAC, then the BCWP dollars associated with this 10 hours would be $102.50 per hour and the contractor would be earning too much for those 10 hours. They must earn at the planned $100 per hour! Thus the rate used for BCWP is the same as for BCWS and is compliant with Guideline 22; one earns in the same manner as they plan to earn.

In summary, EVM concepts require that in order for the work to be complete, cumulative values of BCWS and BCWP must equal the BAC. So, from a common-sense standpoint, if BCWP is earned at a different rate than that used for planning the BCWS, the Control Account (or even the Contract) cannot be closed properly. Examples:

If BCWP earns at a lower rate, the BCWP would be, say, 98% of the BAC when the actual work is done.
Likewise, if BCWP earns at a higher rate, the BCWP would be, say, 105% of the BAC when the actual work is concluded.

Both of these scenarios violate the EVM concepts.

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Corrective Action Response: Sources – Part 1 of 2

By Humphreys & Associates / December 6, 2013

Skip to Part 2 of Corrective Action Responses addresses Planning and Closure

Sources of Corrective Action Requests

A healthy part of any system, including an Earned Value Management System (EVMS), is regular review and surveillance by both those who operate within the system (the contractor) and those customers who rely on information from the system to manage programs. The DCMA and the DCAA have the responsibility to conduct surveillance for all Department of Defense (DoD) contract efforts that require Earned Value regardless of whether a validated system is required. Similar guidelines exist for those agencies that do not use the DCMA for surveillance, such as the Department of Energy.

In addition, other reviews such as an Integrated Baseline Review (IBR) or technical program reviews are also conducted during the life cycle of most programs. Normal results of system surveillance and program reviews are findings or issues discovered during the review. The findings are usually documented in Corrective Action Requests (CARs) and Discrepancy Reports (DRs). Often, the DR form is used to identify the finding, which is delivered to the contractor in the CAR form.

The current guidance used by the DCMA for conducting surveillance is the Standard Surveillance Instruction (SSI), which can be found on the DCMA Guidebook. In addition to system surveillance, the DCMA EVM Center conducts Compliance or Validation reviews that may result in corrective actions required by the contractor. Currently the DCMA is evolving its approach to the compliance evaluation of DoD contractor systems. Because of a desire to standardize across its reviewing organizations and the reduction in resources available to conduct on-site reviews, the DCMA is transitioning to establishing predefined success criteria and testing methods to evaluate the compliance of each guideline using data submitted by the contractor.

This does not change the components of a compliant EVMS; it merely adjusts the priority of the review steps required for a compliance rating. Regardless of the method, a complete EVMS should consist of:

A set of procedures that are compliant with the EIA-748 Guidelines and followed by the contractor organization;
System output, or data, that is valid, reliable, and auditable. This data will have demonstrable integrity and compliance to EVM requirements;
A disciplined work force that uses the EVMS to manage programs and accurately inform the customers of current status, future conditions, and management decisions.

Discrepancy Reports are documented whenever issues are discovered during the system review that involve non-compliance with contract requirements, including the EIA-748 and the Data Item Descriptions (DID) for the Contract Performance Report (CPR) or the Integrated Project Management Report (IPMR), or the Integrated Master Schedule (IMS). The finding is documented in a Discrepancy Report (DR), which identifies the EVM Process Group (Organizing, Scheduling, Accounting, etc.) and the specific guideline regarding the finding. Additional information might include the source of the issue such as the CAM name, Control Account title, or the process document that was reviewed. The DR may also include attachments or exhibits which provide examples of the discrepancies.

The DCMA, or the DCAA, may choose to communicate the DRs in the form of a CAR. The severity of the findings determines the level of the CAR issued:

Level 1: For more minor issues that require no special management attention to correct. Usually directed to the working level personnel of the contractor.
Level II: For non-compliance that is systemic in nature and could adversely impact cost, schedule, or performance if not corrected. A Level II CAR may be the result of Level I issues that are found across several programs or involve several CAMs. They are issued to the contractor’s management level responsible for the process with a copy to the Administrative Contracting Officer (ACO).
Level III: For non-compliance where cost, schedule, technical performance, resources, or management process issues have unfavorably affected program performance and have not been corrected. These may also be issued when the Corrective Action Plans associated with Level II CARs have been unsuccessful. In addition, noncompliance with any of the sixteen foundational guidelines will immediately be classified as a Level III CAR. Level III CARs are issued to the contractor’s top tier business manager at the site where the discrepancies were noted. This CAR level may trigger other reviews such as a review for cause or a compliance review, which could result in a suspension of the contractor’s EVMS validation.
Level IV: Generally results from an escalation of a Level III CAR, but issued to the contractor’s corporate level. They are often used to advise the contractor of contractual penalties; such as payment withholds, termination for default, suspension, etc.

Both Level III and IV CARs may result in a “business system” withhold. DFARs 252.242-7005* identifies 6 business systems that may result in payment withholds if significant deficiencies are found, these are: Accounting, Earned Value Management, Cost Estimating, Material Management and Accounting, Property Management, and Purchasing. Deficiencies found in a single business system may result in up to a 5% withhold; however, if there are multiple business systems cited for deficiencies the withholds may be as much as 10%.

At this point, the submittal of a quality and timely Corrective Action Plan (CAP), and following through with implementation of the actions is critical. If the contractor submits an acceptable CAP within 45 days of the Contracting Officer’s (CO) intent to withhold payments, and the CO believes the contractor is implementing the plan, the withholds may be reduced to 2%. However, if at any time the CO determines that the contractor is not following through on the corrective actions, the payments may be increased to 5%.

When the CO determines that corrective actions are implemented and are expected to correct the significant deficiencies, the CO will discontinue withholding payments and release any payments previously withheld. Previously withheld payments are not released when the withhold is reduced from 5% to 2%; only when the corrective actions are proven to correct the findings.

In part 2 of Corrective Action Response, we will address Planning and Closure.

*Resource blog – DFARS 252.234-7001 – “Thou Shalt Do Earned Value”

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EVM Systems – The 16 Foundational Guidelines

By Humphreys & Associates / August 22, 2013

The Earned Value Management System (EVMS) – Standard Surveillance Instruction (SSI) (latest revision February 2012) defines the Defense Contract Management Agency (DCMA) standardized methodology to conduct contractor surveillance on EVM Systems. This includes assessment of contractor processes and procedures to ensure the 32 EIA-748 Guidelines are being followed when contractually required.

Of the 32 Guidelines, sixteen are considered high-risk or foundational for EVM Systems. This means that if the requirements of those Guidelines are not met, considered noncompliant, the Earned Value Management System may not produce accurate, reliable and auditable data such that it provides the customer with the information necessary to reliably manage a program.

The 16 Foundational Guidelines are highlighted below in red.

Each year, the DCMA prepares a surveillance schedule which includes the five EVMS Areas and associated Guidelines to be reviewed and the programs/contracts involved. Of the 32 Guidelines, the 16 high-risk Guidelines are evaluated every year and all 32 Guidelines evaluated within a 3 year period. By concentrating on these 16 high-risk Guidelines, resources for both the Government and the contractor can be used more efficiently. Concerns with non-high risk Guideline(s) could be surfaced during reviews and these can then be scheduled for additional surveillance. Generally, a minimum of four surveillance events are planned covering the five EVMS Areas in a given year.

If guideline noncompliance were found in any of the high risk guidelines, this signifies that there are shortcomings in the system and the information produced from that system is not reliable for management purposes.

Although the Standard Surveillance Instruction requirements are that those Guidelines that are not foundational be reviewed by the DCMA at least every three years, it is still incumbent on the contractor to ensure that those Guidelines remain compliant.

The 16 foundational guidelines are:

ORGANIZATION

Guideline 1: Define the authorized work elements for the program.

Guideline 3: Provide for the integration of the company’s planning, scheduling, budgeting, work authorization and cost accumulation processes with each other, and as appropriate, the program Work Breakdown Structure (WBS) and the program organizational.

PLANNING AND BUDGETING

Guideline 6: Schedule the authorized work in a manner, which describes the sequence of work and identifies significant task interdependencies required to meet the requirements of the program.

Guideline 7: Identify physical products, milestones, technical performance goals, or other indicators that will be used to measure progress.

Guideline 8: Establish and maintain a time-phased budget baseline, at the Control Account level, against which program performance can be measured.

Guideline 9: Establish budgets for authorized work with identification of significant cost elements (labor, material, etc.) as needed for internal management and for control of subcontractors.

Guideline 10: To the extent it is practical to identify the authorized work in discrete work packages, establish budgets for this work in terms of dollars, hours, or other measurable units.

Guideline 12: Identify and control level of effort activity by time-phased budgets established for this purpose. Only that effort which is immeasurable or for which measurement is impractical may be classified as level of effort.

ACCOUNTING CONSIDERATIONS

Guideline 16: Record direct costs in a manner consistent with the budgets in a formal system controlled by the general books of account.

Guideline 21: For EVMS, the material accounting system will provide for:

Accurate cost accumulation and assignment of costs to Control Accounts in a manner consistent with the budgets using recognized, acceptable, costing techniques.
Cost performance measurement at the point in time most suitable for the category of material involved, but no earlier than the time of progress payments or actual receipt of material.
Full accountability of all material purchased for the program including the residual inventory.

ANALYSIS AND MANAGEMENT REPORTS

Guideline 23: Identify, at least monthly, the significant differences between both planned and actual schedule performance and planned and actual cost performance, and provide the reasons for the variances in detail needed by program management.

Guideline 26: Implement managerial actions taken as a result of earned value information.

Guideline 27: Develop revised estimates of cost at completion based on performance to date, commitment values for material, and estimate of future conditions. Compare this information with the performance measurement baseline to identify variances at completion important to company management and any applicable customer reporting requirements including statements of funding requirements.

REVISIONS AND DATA MAINTENANCE

Guideline 28: Incorporate authorized changes in a timely manner, recording the effects of such changes in budgets and schedules. In the directed effort prior to negotiation of a change, base such revisions on the amount estimated and budgeted to the program organizations.

Guideline 30: Control retroactive changes to records pertaining to work performed that would change previously report amounts for actual costs, earned value, or budgets.

Guideline 32: Document changes to the performance measurement baseline.

For more information on these guidelines or to inquire about EVMS implementation and remediation, contact Humphreys & Associates.

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7 Principles of Earned Value Management Tier 2 System Implementation | EVM Analysis

By Humphreys & Associates / August 12, 2013 / Earned value analysis, EVM Analysis, VAR, Variance Analysis

Earned value analysis, EVM Analysis, VAR, Variance Analysis

Updated: Watch our review video of 7 Principles of Earned Value Management Tier 2 System Implementation Intent Guide

The Assistant Secretary for Preparedness and Response (ASPR) issued the “7 Principles of Earned Value Management Tier 2 System Implementation Intent Guide,” 21 December 2011. Since most of BARDA acquisitions are unique in that they are not Information Technology (IT) projects or Construction projects, they developed a tiered approach to applying EVMS. Tier 1 are construction and IT contracts and will require full ANSI/EIA-748 compliance. Tier 2 contracts are defined as countermeasure research and development contracts that have a total acquisition cost greater than $25 million and have a Technical Readiness Level of less than 7. Tier 2 contracts will apply EVM principles that comply with the 7 Principles of EVM Implementation. Tier 3 are countermeasure research and development contracts between $10 million and $25 million and will require EVM implementation that is consistent with the 7 Principles approach. The focus of this implementation guide is on the Tier 2 contracts.

The Intent Guide contains explanations for each Principle, a Glossary of Terms, a Supplemental EVM Implementation Guideline, and Sample EVM Documents. The Supplemental EVM Implementation Guideline contains recommendations regarding EVM process flows, tools, the necessity to integrate the EVM engine with the accounting system, basic documentation requirements, ranges of implementation costs, recommendations on requirements for support personnel, and use of the 7 Principles on Tier 3 programs.

The Intent Guide defines Tier 2 as: “For countermeasure research and development contracts that have total acquisition costs greater than or equal to $25 million and have a Technical Readiness Level (TRL) of less than 7 will apply EVM principles for tracking cost, schedule and technical performance that comply with the 7 Principles of EVM Implementation.”

The 7 Principles of Earned Value Management

1. Plan all work scope to completion.

This Principle includes development of a Work Breakdown Structure (WBS) and WBS Dictionary that includes all of the work scope. It is also recommended that detailed scope definition be accomplished at the work package level.

2. Break down the program work scope into finite pieces that can be assigned to a responsible person or organization for control of technical, schedule and cost objectives.

This Principle defines the schedule requirements. Most scheduling functions are required including network scheduling, horizontal and vertical traceability, forecasting schedule start and complete dates, and critical path analysis. The contract milestones must also be included in the schedule.

This Principle also discusses the organizational requirements. The Control Account Manager must be identified but there is no requirement for the costs to roll up through organizational elements; this, and development of an Organization Breakdown Structure (OBS) is recommended if it can be done in a cost effective manner.

3. Integrate program work scope, schedule, and cost objectives into a performance measurement baseline plan against which accomplishments can be measured. Control changes to the baseline.

This Principle is discussed in the Intent Guide in two parts. The first, 3a, regards integration of scope, schedule, and cost objectives into a performance measurement baseline. The schedule can be either resource loaded or the budgets loaded into a cost tool and a time-phased control account plan generated. The cost tool must be linked to the schedule tool to ensure baseline integration. The planning includes both direct and indirect dollars.

This Principle also defines the use of undistributed budget and management reserve.

The second part of this Principle, 3b, is the requirement to control changes to the baseline. This requires that contractual changes be incorporated to the baseline in a timely manner.

Budget logs are to be used to track both external and internal changes. All changes are to have documentation that explains the rational/justification for the change and the scope, schedule and budget for that change.

4. Use actual costs incurred and recorded in accomplishing the work performed.

This Principle requires that actual costs be accumulated in a formal accounting system consistent with the way the work was planned and budgeted. A work order or job order coding system must be used to identify costs to the control account and allow summarization through higher levels of the Work Breakdown Structure. The use of estimated actuals is also required for material and subcontractors to ensure that earned value data is not skewed.

5. Objectively assess accomplishments at the work performance level.

This Principle requires that schedule status and earned value assessment must occur at least monthly. The allowable earned value techniques are discussed as well as the requirements of for the use of each.

6. Analyze significant variances from the plan, forecast impacts, and prepare an estimate at completion based on performance to date and work to be performed.

This principle is also divided into two parts. The first, 6a, regards the analysis of variances from the plan. The earned value system must be able to calculate cost and schedule variances, at least cumulatively, on a monthly basis. The system should also be able to provide the Cost Performance Index (CPI), the Schedule Performance Index (SPI), and the use of the To-Complete Performance Index (TCPI) is also encouraged. Variances that exceed the contract variance thresholds must be explained in terms of the cause, impact and corrective action. Although this Principle does not discuss the preparation of a Variance Analysis Report (<abbr=”Variance Analysis Report”>VAR) by the CAM, Principle 7 does require that Program Managers hold their CAMs accountable to write a proper Variance Analysis Report (Earned Value Management Analysis).

The second part of this Principle, 6b, requires that an Estimate at Completion (EAC) be prepared based on performance to date and the work remaining to be performed.

7. Use earned value information in the company’s management processes.

This Principle regards Program Management use of the earned value data to manage the program’s technical, schedule and cost issues and how that data is used in the decision making process.

Although much of the language in the Intent Guide is similar to that of typical guidance documents for the EVMS requirements, it must be remembered that the EVMS Guidelines are not being implemented, only the 7 Principles. The Principles define an approach to managing programs with the basic requirements of Earned Value; such that the cost of the system is minimized, but only those elements necessary to manage these types of programs are necessary. This allows for further system flexibility and reduces the documentation needed. For instance, in Principle 1, the requirements of the WBS Dictionary could be expanded to contain the information that would normally be included on the Work Authorization Document. If this were done, Work Authorization Documents are not necessary because the WAD content normally contained would be embodied in the WBS dictionary; and the associated cost is reduced over the life of the program.

With the 7 Principles there is no need for an EVM compliance review. An Integrated Baseline Review (IBR), also known as a Performance Measurement Baseline Review (PMBR), could be required.

The 7 Principles Comparison to the EIA-748 32 Guidelines

For those who are more accustomed to the EVMS Guidelines as described in the EIA Standard, EIA-748, in the table below the 7 Principles are loosely identified to the 32 Guidelines and Guideline areas. This does not mean that all of the requirements must be met with the 7 Principles only that they can be cross-referenced. Several of the Guidelines are not specifically identified but could be considered as incorporated by reference. The indirect cost requirements are incorporated by planning the work with both direct and indirect dollars; therefore, it is implied that budget, earned value, and actual costs would also include both direct and indirect costs.

The appendix also contains the requirement that the EVM Engine needs to be integrated with the company’s accounting system. Further, some programs may also be required to be compliant with the Cost Accounting Standards. Guideline 20, “Identify unit costs, equivalent units costs, or lot costs when needed” is not included; this more than likely would not be a requirement for HHS or BARDA programs.


7 Principles of EVM Tier 2 System Implementation Cross-Reference to the EVMS Guidelines
Principle Number	Principle Title	EVMS Guidelines	Guidelines not Specifically Indentified	ANSI/EIA-748 Areas
Principle 1	Plan all Work Scope	1		Organization
Principle 2	Break Work into Finite Pieces and Define Person/Organization Responsible for Work	2, 5, 6	4	Organization
Principle 3a	Integrate Scope, Schedule and Budget into a Performance Baseline	3, 7, 8, 9, 10, 11, 14	13	Planning & Budgeting
Principle 3b	Control Changes to the Baseline	15, 28, 29, 30, 31, 32		Revision & Data Maintenance
Principle 4	Use Actual Costs Incurred and Recorded in Accomplishing the Work Performed	16, 17, 18, 21	19, 20	Accounting Considerations
Principle 5	Objectively Assess Accomplishments of the Work Performance “Level	12, 22		EVM Analysis & Management Reports
Principle 6a	Analyze Significant Variances fomr the Plan	23, 25	24
Principle 6b	Prepare and Estimate at Completion based on Performance to-data and Workd to be Performed	27
Principle 7	Use EVM information in the Company’s Management Processes	26

Recommendations for Enhancement to the Intent Guide

The 7 Principles Intent Guide was issued in December 2011. In June 2012 the requirements for the Integrated Program Management Report (IPMR) was issued; this will replace the Contract Performance Report (CPR) for contracts issued after June 2012. When a revision to the Intent Guide is issued, the IPMR should be included.

The Intent Guide is a “what to do” document and contains little on “how to do it”. Internal procedural documents should be required to define how a company will implement the Guide requirements.

Principle 6a requires that the cost and schedule variances be calculated at least on a cumulative basis and only recommends calculation of the current month. The current month calculation should be a requirement since both the CPR and the IPMR require current month reporting.

Summary

The “7 Principles of Tier 2 System Implementation Intent Guide” requires the basic elements of earned value and the documentation necessary to demonstrate that earned value is being adequately implemented on Tier 2 programs. H&A personnel understand the requirements and are able to “size” those requirements to meet company and customer needs. Click to request a PDF copy of the Intent Guide.

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, as well as training tailored to specific industry needs, 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.

7 Principles of Earned Value Management Tier 2 System Implementation | EVM Analysis Read Post »