EVM Terminology Archives - Page 9 of 16

Incorporating Stop Work Orders Part 2 – Restarting the Work

By Humphreys & Associates / October 20, 2014 / AWU, EVMS, PMB, SWO

Updated December, 2020

Stop Work Order (SWO) – Recap of Part 1

A SWO is a temporary suspension of work enabling the customer to re-evaluate the contracted work. The customer has a number of reasons to issue a Stop Work Order:

A change in mission requirements eliminating the need for some or all of the contract scope,
A need to complete some or all the work scope within funding limitations.
Advancement in the state-of-the-art that alters the contract requirements.
Production or engineering breakthroughs that change the current contractual approach.
Realignment of programs that changes the emphasis on the current contract.

A Stop Work Order could affect the entire contract or could be focused on a specific deliverable item, component, or function. A key concept about Stop Work Orders is that they are temporary. The Federal Acquisition Regulations envision that Stop Work Orders are resolved within 90 days but allow that the timeframe can be different subject to customer and contractor agreement. The resolution of a Stop Work Order will result in a new contractual direction (a new contractual work order) to:

Resume the contract (restart the stopped work – unchanged);
Resume the contract with a revised work approach (technical, schedule, and/or cost);
Delete a portion of the currently stopped work scope (Delete Work Order); or possibly
Canceling the entire contract (contract termination order).

Besides Deleting Work Scope, What Else Can Happen with a Stop Work Order (SWO)?

Stop Work Orders, in addition to disrupting contract execution, create much administrative confusion and affect the Performance Measurement Baseline (PMB) in the Earned Value Management System (EVMS). Stop Work Orders typically result in one or more actions:

Deleting work and its budget from the contract (covered in Part 1 of this article),
Proposing/negotiating the new course of action,
Implementing the revised approach in the PMB,
Proposing/negotiating a Request for Equitable Adjustment, and/ or
Preparing a framework for making a Claim against the customer.

Part 1 of this SWO article addressed the deleting of work scope and budget from the contract (partial deletion or contract cancelation). This Part 2 of the SWO article addresses the remaining actions involved in restarting the work (either existing or modified scope/ budget).

Stop Work Order (SWO) Decision – Resume Work

The SWO decision by the customer may be to resume the work on the contract – either with the existing scope or with a modified scope (reflecting deleted work or a reworking of the remainder of the contractual effort). Such starting and stopping of work on any contract will have cost impacts on the contractor and any involved subcontractors and vendors, such as:

Termination costs
Line shutdown / Startup costs
Retooling costs
Personnel costs (lay-off/ rehire)
Inventory/ storage costs
etc.

As discussed in Part 1, these costs should be isolated and accumulated by all affected parties in order to establish and justify any Claim or Request for Equitable Adjustment (REA) that may be required as part of the restarting of work.

Treat the Stop Work Order as Authorized Unpriced Work (AUW).

The letter from the customer’s contracting officer that initiates the Stop Work Order typically contains direction to take several actions in addition to stopping the effort on some or all of the work scope. First, as indicated above, the customer is engaged in an evaluation exercise to plot a different course for the remaining contracted work. The customer usually requires assistance of the contractor to develop the following:

Costs associated with what-if studies.
Addressing revised technical parameters of the end item(s).
Alternate technical approaches.
Deliverable item quantity changes, deletions, additions, alternate schedules.
Alternate funding profiles.

Even if the decision is to restart the work with no change in scope, a 90 day (or longer) delay in the work will likely have an impact on the schedule, cost, and even the technical approach required to complete the work. Since this information is directed by the customer in the Stop Work Order letter, it constitutes Authorized Unpriced Work. Second, the Stop Work Order letter, or a subsequent letter, will likely include a request for a proposal for the revised approach. Production of this proposal is directed by the contracting officer as a result of the Stop Work Order and also constitutes AUW. [NOTE: Contractors often establish a charge number to collect proposal preparation costs, but fail to treat the proposal as a work scope item and establish a budget for the proposal.] Once the contractor has established estimates for the work scope associated with the Stop Work Order, the Contract Budget Base Log should be updated for the Authorized Unpriced Work and included in Undistributed Budget, separately identified from the “stopped work” currently in UB. Alternatively, these costs could be included as part of a Request for Equitable Adjustment (REA) or as part of a legal Claim associated with costs of the SWO action.

Budgets should be distributed for any work associated with, or as a result of, the Stop Work Order.

The contractor should follow its EVMS procedures for authorizing and issuing work scope and budgets for any tasks that result from the Stop Work Order decision. It may be most effective to have a single control account assigned to the contractor program office with multiple work packages/charge numbers for the various tasks.

At various points in the Stop Work Order process, the contractor must wait for the customer.

Upon receipt of the information requested from the contractor, the customer evaluates the information, makes decisions about the contract path forward and/or additional funding, executes contractual actions which could include terminating, modifying, or restructuring the contract. The contractor should continue to track costs of these additional delays and contractual actions for any subsequent REA or Claim actions.

Replanning after Stop Work Order resolution follows the contractor’s EVMS procedures, just as done for the initial planning of the Performance Measurement Baseline (PMB).

In effect, because the contract work was closed out at the cumulative Budgeted Cost For Work Performed (BCWP) value, the Stop Work Order has wiped the slate clean for all future work. In the best case, the customer issues a fully negotiated contract modification when lifting the Stop Work Order; however, the reality is that the customer usually issues an Authorization to Proceed and sets the proposal negotiations for a later date. In either case, EVMS procedures should be followed, whether or not the authorization is unpriced work or a negotiated contract change. The contractor must perform at least the following steps:

Revise the CWBS, its associated dictionary, and control account structure as necessary,
Reissue Work Authorizations based on the modified contract,
Develop the schedule and critical path,
Plan the control account budgets,
Issue budgets to Control Accounts for near term work until negotiations for the AUW conclude,
Establish Management Reserve (as applicable),
Update logs (CBB, MR, UB).

In summary, responding to the Stop Work Order and restarting the work, the contractor is to follow their EVMS procedures for planning and budgeting. The graphic below provides a roadmap for implementing a Stop Work Order.

EVMS & PMB: Stop Work Order Roadmap — Stop Work Order (SWO) Roadmap for Performance Measurement Baseline (PMB)
within Earned Value Management Systems (EVMS)

The final steps are to continue on with the contract as negotiated through the SWO, and file any required REA for budget/ schedule consideration, or Claims for costs incurred associated with the SWO actions.

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Incorporating Stop Work Orders Part 1 – Deleting the Work

By Humphreys & Associates / September 26, 2014 / Statement of Work (SoW), Stop Work Order, SWO

Statement of Work (SoW), Stop Work Order, SWO

Updated December, 2020

Are you confronted with a Stop Work Order and wondering what to do? Stop Work Orders (SWOs), in addition to disrupting contract execution, create much administrative confusion and affect the Performance Measurement Baseline (PMB) in the Earned Value Management System (EVMS).

Stop Work Order (SWO)

A SWO is a temporary suspension of work enabling the customer to re-evaluate the contracted work. The customer has a number of reasons to issue a Stop Work Order:

A change in mission requirements eliminating the need for some or all of the contract scope,
A need to complete some or all the work scope within funding limitations.
Advancement in the state-of-the-art that alters the contract requirements.
Production or engineering breakthroughs that change the current contractual approach.
Realignment of programs that changes the emphasis on the current contract.

A Stop Work Order could affect the entire contract or could be focused on a specific deliverable item, component, or function. A key concept about Stop Work Orders is that they are temporary. The Federal Acquisition Regulations envision that Stop Work Orders are resolved within 90 days, but allow that the timeframe can be different subject to customer and contractor agreement. The resolution of a Stop Work Order will result in a new contractual direction (a new contractual work order) to:

Resume the contract (restart the stopped work unchanged);
Resume the contract with a revised work approach (technical, schedule, and/or cost);
Delete a portion of the currently stopped work scope (Delete Work Order); or possibly
Canceling the entire contract (contract termination order).

Stop Work Orders typically result in one or more actions:

deleting work and its budget from the Contract,
proposing/negotiating the new course of action,
implementing the revised approach in the PMB,
proposing/negotiating a Request for Equitable Adjustment, and or
preparing a framework for making a Claim against the customer.

Deleting the Work

This article addresses the first of these actions: deleting the work.

Issue Direction

The first step after receiving any Stop Work Order is to issue directions to all affected parties to cease work immediately. Affected parties include Control Account Managers (CAMs), major subcontractors, other team members, and vendors. Your direction should be issued in writing. For CAMs, documents described in the EVM System Description should be used. Typically these documents are revised Work Authorization Documents (WADs) or program directives. For other parties where a subcontract or purchase order exists, the contractor’s authorized representative should issue a formal Stop Work Order (SWO) for the purchase order or subcontract. The SWO process should also provide instructions for the collection of costs related to the stoppage/ delay of work.

Status the Schedule and Earned Value

Inherent in the stoppage of the work is the statusing the schedule and earned value as of the effective date specified in the Stop Work Order. Statusing the schedule and earned value at the Stop Work Order effective date provides the basis for all subsequent actions. If the fiscal period ends within a few days of the Stop Work effective date, it may be reasonable to wait until that date to perform the status exercise (subject to customer approval).

Close the charge number associated with the Work designated by the SWO and Transfer Budgets

The next step is to close the charge number associated with the work designated by the SWO and transfer associated budgets to Undistributed Budget. Following the company EVMS procedures, Baseline Change Requests (BCRs) must be executed to transfer all Budgeted Cost of Work Remaining (BCWR). Unopened control accounts affected by the Stop Work Order are easy; just transfer the entire amount of the control account budget and its associated Statement of Work (SOW).

Difficulties arise for open control accounts (i.e. work-in-process) or control accounts that are partially affected by the Stop Work Order. Work-in-process control accounts should be closed at the cumulative earned value as of the Stop Work Order date determined in the previous step. [NOTE: In extreme cases where the customer is considering deleting an entire scope of work, the SWO may direct all budget associated with that work scope be transferred to UB for possible subsequent deletion from the contract. In this case, the contractor should include in the Claim framework the capturing of costs for any work already accomplished.]

In other words, in order to close any account under normal SWO actions, the Budget at Completion (BAC) and the cumulative Budgeted Cost For Work Scheduled (BCWS) are set equal to the cumulative Budgeted Cost for Work Performed (BCWP). The remaining budget (the BAC prior to closing the control account less the BCWP) should then be transferred to Undistributed Budget. It is important to close the control accounts at the cumulative BCWP value and retain the Cost Variance for the work that is closed.

If the control account were to be closed by setting BAC and cumulative BCWP to either the cumulative Budgeted Cost For Work Scheduled (BCWS) or to the cumulative Actual Cost of Work Performed (ACWP) where cost variances exist, the BCWR transferred to Undistributed Budget would not be representative of the original work left to be done (understated if an overrun existed; overstated if an underrun existed). Consequently, if the SWO decision were to be “restart the work with no changes”, the budget for distribution to complete the remaining work would also be incorrect, because the close-out was not set to the work that was completed (cumulative BCWP).

Partially Affected Accounts

Control accounts that are partially affected by the Stop Work Order can be handled in one of two ways:

The first is to close the control account to UB entirely by following the process described above and then issue the remaining scope and budget for the work unaffected by the Stop Work Order to a new control account.
The second method is to process Baseline Change Requests to remove the BCWR for specific work packages and/or planning packages and leave the control account open for the unaffected work scope. [Unless, of course, the entire contract must stop work until the SWO decision is made.]

Any Summary Level Planning Packages (SLPP) affected by the Stop Work Order should also be closed with scope of work (SOW) and its budget transferred to Undistributed Budget (UB).

All the above work closure actions are to help ensure that no further work is performed on the stopped work (or on the contract, as appropriate).

SWO does not Eliminate Cost Variance

Implementing a Stop Work Order is not an opportunity to wipe out existing cost variances. Contractors and customer program offices often believe that a Stop Work Order presents a great opportunity to wipe the slate clean and start over. In implementing this desire, they set BCWS and BCWP equal to ACWP which erases all cumulative variances. As indicated above, this approach also understates or overstates (i.e., a two-way street) the Budgeted Cost of Work Remaining by the amount of the cost variance that exists at the time. When the time comes to replan the remaining work after the SWO is resolved, there might be too much or too little budget remaining to cover the work because the work was not closed out at the true amount of work accomplished (cumulative BCWP).

The proper approach to deal with the cost variance at the point of the Stop Work Order is to show the variances at the time of the close out of the work, and as necessary, handle the variance issue in the negotiations of the contract modification for the revised work scope or the Request for Equitable Adjustment. Naturally, the contractor wants to erase any unfavorable variances and have the amount added to the Contract Target Cost (CTC)/Negotiated Contract Cost (NCC). Too often the customer succumbs to the contractor’s pleading. The cost variance, however, should continue to exist, and the Contract Target Cost should not be changed for the work scope completed up to the Stop Work Order.

Deleting the Work from the Contract

All the above simply sets the stage for the SWO decision – simply moving the remaining work to UB does NOT delete any work. This article assumes the SWO decision is to delete stopped work, so the customer will typically issue a Delete Work Order (contractual direction of some sort) with instructions to the contractor about what is to be deleted. This could be:

Delete the remaining work that was not already accomplished;
Delete ALL the specified scope of work – even if some portion of the work is already done;
Delete the entire contract (contract termination)

To complete the deletion of work, the contractor would reduce the PMB, UB, and the CBB by the amount specified, thus reducing the Contract Target Cost (CTC) by that amount. The contract itself would be reduced by this CTC amount and the associated profit/ fee for that work.

It is important to follow the customer direction exactly! For example, say the customer is deleting an entire scope of work worth $5Million, but since you already accomplished $2Million worth of that effort, you only put $3Million in UB. When the customer removes the entire scope of work and reduces the CTC (and so the CBB, PMB, and UB) by $5Million, you could end up in a $2Million “Negative UB” condition – which is not allowed under EVMS rules. The proper way to handle this is through the legal Claims process for you to be reimbursed the costs for the work you accomplished (which includes costs for subcontractors and vendors , etc. who will likely be filing Claims against your company). [NOTE: Remember also that under the original contract, you were probably already paid for some portion, if not all, of the accomplished work.] You would also have to store and eventually dispose of items already produced for the customer – that they no longer want. All these should be included in your establishment of a Claims framework.

[NOTE: A Request for Equitable Adjustment (REA) is typically not appropriate for deleted work. This is because the work and budget are no longer on the contract, so there is no budget or schedule to “equitably adjust.” REAs are appropriate for work resumption decisions that will be discussed in Part 2 of this article.]

In summary, make sure you follow these steps to Delete Work when responding to a Stop Work Order:

Stop the existing work by issuing official written documents.
Status the schedule and earned value as of the Stop Work Order effective date.
Execute EVMS procedures to move the scope and the associated Budgeted Cost of Work Remaining (BCWR) from control accounts to Undistributed Budget.
When the Delete Work Order is received, remove the scope and budget specified by the customer from UB, PMB, CBB, and the CTC as the customer deletes the scope from the contract itself (including associated fee/ profit).

If you have questions on this topic, feel free to contact Humphreys & Associates.

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Control Account Manager’s Log – A Valuable Tool

By Humphreys & Associates / September 12, 2014

It is not always easy on a rapidly changing project for a Control Account Manager (CAM) to keep track of where the Control Account is with regard to the current scope, schedule, and budget status and the history behind revisions, both directed and requested, approved or disapproved, and incorporated or pending actions.

The Control Account Manager’s Log is a valuable tool the CAM could use to keep track of all of the transactions affecting control account scope, schedule and budgets. This tool is most helpful to the CAM when there have been multiple Baseline Change Requests (BCR) submitted that are not necessarily approved in the order submitted (if approved at all) or are not approved as submitted; i.e., Program Manager approval varies from the CAM’s submittal. Using this type of Log, the CAM can track change requests as they are approved, rejected or altered. The CAM can update the Log with the change in scope, schedule, and budget for every change. The CAM can also compare what was submitted to what was actually approved and ensure that the scope, schedule, and budget amounts on updated Control Account Work Authorizations are correct for each transaction, or at least understand any reasons for the differences.

An example CAM Log is shown below. Obviously, the example can, and should, be tailored to fit the organization’s requirements. For example, the budget shown below is a total; one may want to show budget elements in terms of labor, materials, or other direct costs. If the organization issues budgets through overhead costs to the CAMs, then a logical breakout would be to show those as well as the direct budget elements.

For example, as you can see in the second transaction adding WBS 6.6.3.5, the entire amount was approved, increasing the total budget to $2,086,570. For BCR 171, however, the CAM submitted a request for $11,310 in September; in October the Project Manager’s decision was to approve only $11,200 from Management Reserve (MR), raising the total budget to $2,097,770. Meanwhile, BCR 194 was submitted requesting $121,320, but that BCR has not yet been approved, and since then three other transactions have taken place (AUW 101, BCR 162 approved, and BCR 182 was submitted but not yet resolved).

As you can see, without a CAM level log, it could easily become very difficult for a CAM to keep track of the control account’s budget.

Feel free to call or email us if you have any questions regarding this article. Your comments are always welcome.

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Ensuring CPI to TCPI Comparisons are Valid at the Total Contract Level

By Humphreys & Associates / August 29, 2014

Have you been in a meeting when presenters show differing To-Complete Performance Index (TCPI) values at the total contract level for the same contract? In these situations, the presenters have made different assumptions about the inclusion of Undistributed Budget and Management Reserve (MR) in the TCPI calculations. So let’s use some sample values and show different ways the TCPI can be calculated at the total contract level.

As a reminder, this is the formula for TCPI:

Consider the following extract from the lower right portion of Format 1 of the Integrated Program Management Report (IPMR) (Contract Performance Report (CPR)).

When comparing the TCPI to the CPI at the total contract level, the most realistic approach is to calculate the TCPI at the level of the Distributed Budgets. Stated differently, the TCPI should be calculated without Undistributed Budget and Management Reserve. The Cost Performance Index (CPI), BCWP divided by ACWP, represents the cost efficiency for the work performed to date. Notice in the above table that the BCWP and ACWP values in the rows for “Distributed Budgets by WBS”, “Subtotal”, and “Total” are the same; therefore, the CPI calculation will be the same for any of these data levels. The TCPI represents the cost efficiency necessary to achieve the reported EAC. The “Distributed Budgets by WBS” contain approved budgets as well as performance data against those budgets. The CPI and TCPI compared at this level of data certainly provide a valid comparison of past performance to projected performance. The CPI for the above data is 0.73 while the TCPI is .92.

Since the difference between the CPI and TCPI is greater than 0.10, the control account managers (CAMs) and the analysts should research the reasons that the future performance indicates improvement and provide EAC rationale.

Calculating the TCPI at the Performance Measurement Baseline level (i.e. including Undistributed Budget in the BAC and EAC) yields a different TCPI than at the Distributed Budget level. Mathemati-cally, the TCPI will be the same for the Distributed Budgets and PMB only if the value of the Estimate to Complete (EAC – ACWP) equals the budgeted value of the remaining work (BAC – BCWP). In that case, the TCPI will be 1.0. If the contract has an unfavorable cost variance and projects an overrun on future work, the TCPI at the PMB level (includes UB) will be higher than the TCPI calculated at the Distributed Budget level (does not include UB).

For the data in the above table, the Distributed Budget TCPI = 0.92 but increases to 0.94 if Undistributed Budget is included in the calculation. The Undistributed Budget, with the same value added to both BAC and EAC, represents a portion of the Estimate to Complete (ETC) that will be performed at an efficiency of 1.0. In an overrun situation at the distributed budget level, the disparity between the CPI and TCPI increases when Undistributed Budget is included in the TCPI because more work must be accomplished at a better efficiency to achieve the EAC. In the above data, the disparity between CPI and TCPI increased from 0.19 to 0.21.

Calculating the TCPI at the total contract level with Undistributed Budget and Management Reserve in both the BAC and EAC yields TCPI values very close to TCPI values calculated at the distributed PMB level. The UB and MR values included in the BAC and EAC increase the proportion of the remain-ing work that is forecast to be completed at an efficiency of 1.0 and push the TCPI toward the 1.0 val-ue. The larger the values of UB and MR, the more the TCPI will diverge from the TCPI calculated at the Distributed Budgets level. Using this approach for the sample data above, the CPI is 0.73 and the TCPI is 0.94.

Calculating the TCPI at the total contract level, but not including Management Reserve in the EAC, creates a significant disparity between the CPI and TCPI. This situation represents the classic “apples to oranges” comparison: the work remaining in the formula includes MR, but the funds estimated do not. Obviously, with a higher numerator, the TCPI would be higher than any of the other approaches discussed above. Using this approach for the sample data above, the CPI is 0.73 and the TCPI is 1.06. While situations arise where exclusion of MR from the EAC makes sense, it is still important to review the project manager’s rationale with respect to MR application. Most situations assume that MR will be depleted during contract performance; consequently, it should be added to the EAC at the PMB level.

In summary, be sure you understand what is included in the TCPI calculation before you make comparisons to the CPI at the total contract level. The following table summarizes the CPI and TCPI for the sample data in this article and highlights the differences in the TCPI when calculated at the various data summary levels.

To ask about this topic or if you have questions, feel free to contact Humphreys & Associates.

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Keeping Track of Budgets, Changes, and IPMR Data

By Humphreys & Associates / August 15, 2014

For projects, the moment the baseline is established it is subject to change and a disciplined approach in the change process must be in effect. The source of project changes can be either external or internal. External changes frequently affect all aspects of a contractor’s internal planning and control system and are generally for effort that is out-of-scope to the contract. Contract changes impact the Contract Budget Base (CBB) and are distributed to the Performance Measurement Baseline (PMB), which includes the distributed budgets containing control accounts, and Summary Level Planning Packages, and to the Undistributed Budget.

These changes may also impact the Management Reserve (MR) budget if the decision were made to withhold reserve from the budget for the change. The Work Breakdown Structure (WBS) serves as the framework for integrating changes within the project’s structure. Internal changes operate much the same, but they do not change the CBB. The most common reasons for internal changes are the allocation of MR for contractually in-scope effort, replanning of future work, and converting planning packages to work packages.

The Earned Value Management Systems Guidelines require that all changes, regardless of the source, be incorporated in a timely and disciplined manner. Consequently, the project needs to have a formal change process and procedures in place. Following these processes and procedures will also help minimize disruptions in the current effort while changes are being incorporated. An undisciplined change control process has the potential to create timing or quality issues that will lessen the baseline’s effectiveness as a management tool.

Baseline changes must also be tracked to ensure baseline integrity. The most effective way to do this is to establish baseline logs to track all approved changes. These can include the Contract Budget Base (CBB) Log, as shown below, the Management Reserve (MR) Log, and the Undistributed Budget (UB) Log. In addition, a log may be established to track all approved, unapproved and unresolved change requests.

Once established, these logs must be maintained and reconciled to the data reported in the Integrated Program Management Report (or Contract Performance Report) that is delivered to the customer on a monthly basis. This reconciliation helps validate that the PMB accurately represents the project’s technical plans and requirements.

To find out more about this topic or if you have questions, feel free to contact Humphreys & Associates.

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Is it OTB/OTS Time or Just Address the Variances?

By Humphreys & Associates / August 1, 2014 / EVM, EVM Analysis

EVM, EVM Analysis

No project manager and project team ever wants to go through an Over Target Baseline (OTB) or Over Target Schedule (OTS). The idea of formally reprogramming the remaining work and adjusting variances at the lowest level can be daunting and extremely time consuming. As painful as an OTB/OTS is, a project manager must first determine if the reprogramming is necessary. Several factors should be considered before an OTB/OTS is declared and implemented.

NOTE: This paper addresses a Formal reprogramming as including both an OTB and an OTS. If the Contract Performance Report is the CDRL Requirement, an OTS is not a part of a Formal Reprogramming. It is a separate action.

Performance Data

Projected successful execution of the remaining effort is the leading indicator of whether an OTB/OTS is needed. Significant projected cost overruns or the inability to meet scheduled milestones play a major role in determining the need for an OTB/OTS as these indicators can provide a clear determination that the baseline is no longer achievable.

Leading indicators also include significant differences between the Estimate to Complete (ETC) and the Budgeted Cost of Work Remaining (BCWR). This is also demonstrated by major differences between the Cost Performance Index (CPI) and the To Complete Performance Index (TCPI). These differences are evidence that the projected cost performance required to meet the Estimate at Completion is not achievable, and may also indicate that the estimated completion costs do not include all risk considerations. Excessive use of Management Reserve (MR) early in the project could also be an indicator.

Schedule indicators include increased concurrency amongst remaining tasks, high amounts of negative float, and significant slips in the critical path, questionable activity durations and inadequate schedule margin for remaining work scope. Any of these conditions may indicate that an OTB/OTS is necessary.

Quantified Factors

Various significant indicators in both cost and schedule can provide a clear picture that an OTB/OTS is warranted. The term “significant” can be seen as extremely subjective and vary from project to project. For further evidence, other more quantified indicators can be used to supplement what has already been discussed.

Industry guidelines (such as the Over Target Baseline and Over Target Schedule Guide by the Performance Assessments and Root Cause Analyses (PARCA) Office) suggest the contract should be more than 20% complete before considering an OTB/OTS. However, the same guidance also recommends against an OTB/OTS if the forecasted remaining duration is less than 18 months. Other indicators include comparing the Estimate to Complete with the remaining work to determine projected growth by using the following equation:

Projected Future Cost Overrun (%) = ([(EACPMB-ACWP) / (BACPMB-BCWP) – 1)] X 100

If the Projected Future Cost Overrun percentage were greater than 15%, then an OTB/OTS might be considered. Certainly the dollar magnitude must be considered as well.

Conclusion

There is no exact way to determine if an OTB/OTS is needed, and the project personnel must adequately assess all factors to make the determination. Going through an OTB/OTS is very time consuming, and the decision regarding that implementation should not be taken lightly.

After all factors are adequately analyzed, the project manager may ultimately deem it unnecessary and just manage to the variances being reported. This may be more cost effective and practical than initiating a formal reprogramming action.

If you have any questions about this article contact Humphrey’s & Associates. Comments welcome.

We offer a workshop on this topic: EVMS and Project Management Training Over Target Baseline (OTB) and Over Target Schedule (OTS) Implementation.

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