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Formal Reprogramming: OTB or OTS Best Practice Tips

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Formal Reprogramming: OTB or OTS Best Practice Tips

As a result of an Earned Value Management System (EVMS) compliance or surveillance review, the Defense Contract Management Agency (DCMA) or DOE Office of Project Management (PM-30) may issue a corrective action request (CAR) to a contractor. H&A earned value consultants frequently assist clients with developing and implementing corrective action plans (CAPs) to quickly resolve EVMS issues with a government customer.

A recent trend our earned value management consultants have observed is an uptick in the number of CARs being issued related to over target baselines (OTB) and/or over target schedules (OTS). On further analysis, a common root cause for the CAR was the contractors lacked approval from the contracting officer to implement the OTB and/or OTS even though they had approval from the government program manager (PM).

So why was a CAR issued?  It boils down to knowing the government agency’s contractual requirements and EVMS compliance requirements.

What is an OTB/OTS and when it is used?

During the life of a contract, significant performance or technical problems may develop that impact schedule and cost performance. The schedule to complete the remaining work may become unachievable. The available budget for the remaining work may become decidedly inadequate for effective control and insufficient to ensure valid performance measurement. When performance measurement against the baseline schedule and/or budgets becomes unrealistic, reprogramming for effective control may require a planned completion date beyond the contract completion date, an OTS condition, and/or a performance measurement baseline (PMB) that exceeds the recognized contract budget base (CBB), an OTB condition.

An OTB or OTS is a formal reprogramming process that requires customer notification and approval. The primary purpose of formal reprogramming is to establish an executable schedule and budget plan for the remaining work. It is limited to situations where it is needed to improve the quality of future schedule and cost performance measurement. Formal reprogramming may be isolated to a small set of WBS elements, or it may be required for a broad scope of work that impacts the majority of WBS elements.

Formal reprogramming should be a rare occurrence on a project and should be the last recourse – all other management corrective actions have already been taken. Typically, an OTB/OTS is only considered when:

  • The contract is at least 35% complete with percent complete defined as the budgeted cost for work performed (BCWP) divided by the budget at completion (BAC);
  • Has more than six months of substantial work to go;
  • Is less than 85 percent complete; and
  • The remaining management reserve (MR) is near or equal to zero.

A significant determining factor before considering to proceed with a formal reprogramming process is the result from conducting a comprehensive estimate at completion (CEAC) where there is an anticipated overrun of at least 15 percent for the remaining work.

When an OTB is approved, the total allocated budget (TAB) exceeds the CBB, this value referred to as the over target budget. Figure 1 illustrates this.

Before Over Target Baseline
Figure 1 – Over Target Baseline Illustration

When an OTS is approved, the same rationale and requirements for an OTB apply. The planned completion date for all remaining contract work is a date beyond the contract completion date. The purpose of the OTS is to continue to measure the schedule and cost performance against a realistic baseline. The process must include a PMB associated with the revised baseline schedule. Once implemented, the OTS facilitates continued performance measurement against a realistic timeline.

Contractual Obligations

An OTB does not change any contractual parameters or supersede contract values and schedules. An OTS does not relieve either party of any contractual obligations concerning schedule deliveries and attendant incentive loss or penalties. An OTB and/or OTS are implemented solely for planning, controlling, and measuring performance on already authorized work.

Should you encounter a situation where it appears your best option is to request an OTB and/or OTS, the DoD and DOE EVMS policy and compliance documents provide the necessary guidance for contractors. It is imperative that you follow agency specific guidance to prevent being issued a CAR or your OTB/OTS request being rejected.

DoD and DOE both clearly state prior customer notification and contracting officer approval is required to implement an OTB and/or OTS. These requirements are summarized the following table.

ReferenceDoD/DCMA1DOE
RegulatoryDFARS 252.234-7002 Earned Value Management System
“(h) When indicated by contract performance, the Contractor shall submit a request for approval to initiate an over-target baseline or over-target schedule to the Contracting Officer.”
Guide 413.3-10B Integrated Project Management Using the EV Management System
6.1.2 Contractual Requirements.
“…if the contractor concludes the PB TPC and CD-4 date no longer represents a realistic plan, and an over-target baseline (OTB) and/or over-target schedule (OTS) action is necessary. Contracting officer approval is required before implementing such restructuring actions…”
Attachment 1, Contractor Requirements Document
“Submit a request for an Over-Target Baseline (OTB) or Over-Target Schedule (OTS) to the Contracting Officer, when indicated by performance.”
EVMS Compliance2Earned Value Management System Interpretation Guide (EVMSIG)3
Guideline 31, Prevent Unauthorized Revisions, Intent of Guideline
“A thorough analysis of program status is necessary before the consideration of the implementation of an OTB or OTS. Requests for establishing an OTB or an OTS must be initiated by the contractor and approved by the customer contracting authority.		EVMS Compliance Review Standard Operating Procedure (ECRSOP), Appendix A, Compliance Assessment Governance (CAG)
Subprocess G. Change Control
G.6 Over Target Baseline/Over Target Schedule Authorization
“An OTB/OTS is performed with prior customer notification and approval.”
See Section G.6 for a complete discussion on the process.
Contractor EVM SD4DCMA Business Process 2  Attachment, EVMS Cross Reference Checklist (CRC), Guideline 31.
“b. Are procedures established for authorization of budget in excess of the Contract Budget Base (CBB) controlled with requests for establishing an OTB or an OTS initiated by the contractor, and approved by the customer contracting authority?”		DOE ESCRSOP Compliance Review Crosswalk (CRC), Subprocess Area and Attribute G.6
“Requests for establishing an OTB or an OTS are initiated by the contractor and approved by the customer contracting authority.”

Notes:

  1. When DoD is the Cognizant Federal Agency (CFA), DCMA is responsible for determining EVMS compliance and performing surveillance. DCMA also performs this function when requested for NASA.
  2. Along with the related Cross Reference Checklist or Compliance Review Crosswalk, these are the governing documents the government agency will use to conduct compliance and surveillance reviews.
  3. For additional guidance, also see the DoD EVM Implementation Guide (EVMIG) , Section 2.5 Other Post-Award Activities, 2.5.2.4 Over Target Baseline (OTB) and Over Target Schedule (OTS). The EVMIG provides more discussion on the process followed including the contractor, government PM, and the contracting authority responsibilities.
  4. Your EVM System Description (SD) should include a discussion on the process used to request an OTB/OTS. The EVM SD content should be mapped to the detailed DCMA EVMS guideline checklist or the DOE Compliance Review Crosswalk (subprocess areas and attributes) line items.

Best Practice Tips

The best way to avoid getting a CAR from a government agency related to any OTB or OTS action is to ensure you have done your homework.

  • Verify your EVM SD, related procedures, and training clearly defines how to handle this situation. These artifacts should align with your government customer’s EVMS policy and regulations as well as compliance review guides, procedures, and checklists. Be sure your EVM SD or procedures include the requirement to notify and gain approval from the government PM and contracting officer, as well as what to do when the customer does not approve the OTB or OTS. Also discuss how to handle approving and managing subcontractor OTB/OTS situations; the prime contractor is responsible for these actions. Your EVMS training should also cover how to handle OTB/OTS situations. Project personnel should be aware of contractual requirements as well as your EVMS requirements and be able to demonstrate they are following them.
  • Maintain open communication with the customer. This includes the government PM as well as the contracting officer and any other parties involved such as subcontractors. Requesting an OTB or OTS should not be a surprise to them. Verify a common agreement has been reached with the government PM and contracting officer that implementing an OTB or OTS is the best option to provide visibility and control for the remaining work effort.
  • Verify you have written authorization from the government PM and the contracting officer before you proceed with implementing an OTB or OTS. You will need this documentation for any government customer EVMS compliance or surveillance review. Your baseline change requests (BCRs) and work authorization documents should provide full traceability for all schedule and budget changes required for the formal reprogramming action.

Does your EVM SD or training materials need a refresh to include sufficient direction for project personnel to determine whether requesting an OTB or OTS makes sense or how to handle OTB/OTS situations? H&A earned value consultants frequently help clients with EVM SD content enhancements as well as creating specific procedures or work instructions to handle unique EVMS situations. We also offer a workshop on how to implement an OTB or OTS .  Call us today at (714) 685-1730 to get started.

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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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Confusing QBD Baseline Changes with QBD EAC Changes

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Historic Battleship Engine Room

Quantified Backup Data

Quantified Backup Data (aka QBD) has become a requirement for contractors who make use of the “Percent Complete” Earned Value Technique (EVT). This requirement is actually a good thing because it helps eliminate the guesswork previously cited as a flaw in the percent complete EVT. Unfortunately, it has become a good idea gone bad through over-implementation.

The primary problem: Confusing “QBD Baseline Changes” with “QBD EAC Changes.” Many contractors are unnecessarily bogging down their change control process with requests to “change the QBD” when all that is really changing is the detail behind some of the steps in the QBD.

The Cake Example

Let’s take a simple, practical example of baking a cake to illustrate the difference. What follows is an approach found online from one baking company. The example weights have been added by the author.

 

10 Basic Steps to Making Any Cake Step Weight (Percentage of Process)
1.     Select the recipe for the type of cake 2%
2.     Select and prepare (grease) the pans 2%
3.     Preheat the oven 2%
4.     Prepare the ingredients 30%
5.     Mix the ingredients 40%
6.     Put batter in pan and bake the cake 5%
7.     Remove the cake from the pan 2%
8.     Let the cake cool 2%
9.     Make the frosting 10%
10.  Frost the cake 5%

 

For the context of this blog, this bakery’s approach IS the Cake (baseline) QBD. Chocolate cake, pound cake, apple cake, one layer cake, multi-tiered cake, birthday cake, or wedding cake. It does not matter. This bakery approaches making any type of cake with this QBD. Some cakes, however, are more complex than other cakes – not all cakes are created equal.

Steps 1, 2, 3, 6, 7, and 8 are standard and would likely have the same “budget weight” in the Cake QBD, regardless of the type of cake. Steps 4, 5, 9, and 10, on the other hand, might be more involved for a complex cake. Remember: Complexity does not change the Cake (baseline) QBD!

Simple Cake vs Complex Cake

Let’s look at the Cake QBD to see how different types of cakes are handled by comparing a Simple Cake, Vanilla with Chocolate Frosting, to a Complex Cake, Apple Walnut German Chocolate.

Follow Steps 1, 2, and 3 (unchanged)

Step 4: Prepare the ingredients

Simple Cake: Gather eggs, milk, flour, cake batter mix.

Complex Cake: Gather eggs, milk, flour, sour cream, walnuts, apples, coconut, lemon juice, pre-cooked apples, chopped walnuts, shaved coconut.

Step 5: Mix the ingredients

Simple Cake: Blend together the eggs and milk. Then add in the flour and dry cake batter mix.

Complex Cake: Blend together the eggs and milk. When smooth, fold in sour cream. Then add in the flour and the cake batter mix. When thoroughly blended, add cooked apples, lemon juice, chopped walnuts, and shaved coconut. Blend until evenly mixed.

Follow Steps 6, 7, and 8 (unchanged)

Step 9: Make the frosting

Simple Cake:  Pre-made chocolate frosting mix.

Complex Cake:  German chocolate frosting mix, add coconut, add chopped walnuts, mix gently until additions are evenly spread throughout mix.

Step 10:  Frost the cake

Simple Cake:  Frost between layers, frost top layer, frost side of cake.

Complex Cake: Frost between layers, frost top layer, frost side of cake. Apply apple wedges on top of the frosted layer, sprinkle on more chopped walnuts, apply frosting flowers around bottom with frosting tool.

As you can see, the 10 Step Cake QBD did not change throughout this process. What did change was the set of ingredients and some of the added lower level steps within the QBD Steps 4, 5, 9, and 10. This might add some cost (EAC) for the added ingredients, and for the additional labor of precooking, chopping, and shaving. However, in the overall context of the Cake Baking process, the steps (QBDs) and the associated weighting of each QBD remained the same. In this bakery, all that changes would be the forecast cost (EAC) for the complex cake over the simple one – i.e., no baseline change request (BCR) is needed to change the QBD!

QBD vs EAC

In this simple example, the QBD is Baking a Cake. It is not “Baking an Apple Walnut German Chocolate Cake.” If this were the QBD, then this bakery would have hundreds of QBDs, depending on the different types and complexities of cakes the bakery could possibly make. For example, would you want a separate QBD for a birthday cake to say “Happy Birthday Johnny”? No, that would be a cost (EAC) for the Frosting QBD Step. The QBD EACs affected would be Step 9, Make the frosting, and Step 10, Frost the cake. Rather than hundreds of QBDs, this bakery has ONE! The cost (EAC) of a cake varies based on the complexity and content of the cake.

This QBD approach applies to any number of other processes. Here are a couple of others:

Flowchart Showing the difference and similarities of the scientific and engineering methods.

Above: Basic idealized steps of the scientific method (left) and engineering design process (right).

*From sciencebuddies.org

 

In this case, the complexity of the problem being addressed might impact the amount of research required or the experiments or brainstorming solutions needed. This could dictate the number of times the yellow box to the right (the re-do box) is required. However, the approach is exactly the same until the process achieves the “Results Align with Hypothesis” (for the scientific method) or the “Solution Meets Requirements” (for the engineering design method), and the results are communicated.

The House Example

Another practical hands-on example could be the steps in building a house:

  1. Grading and site preparation
  2. Foundation construction
  3. Framing
  4. Installation of windows and doors
  5. Roofing
  6. Siding
  7. Electrical Rough-In
  8. Plumbing Rough-In
  9. HVAC Rough-In
  10. Insulation
  11. Drywall
  12. Trim
  13. Painting
  14. Finish electrical
  15. Bathroom and kitchen counters and cabinets
  16. Finish plumbing
  17. Carpet and flooring
  18. Finish HVAC
  19. Hookup to water main, or well drilling
  20. Hookup to sewer or installation of a septic system
  21. Punch list

As with baking a cake, for this builder, the size of the house will make a difference in how much the house will cost, but the QBD approach to building each house is the same. Some of the lower level activities below each QBD step might be more involved. For example, Step 2, Foundation construction might be more involved if the house is to have a basement. Other steps might be more or less involved. Step 17, Carpet and flooring might stop at the concrete slab because the buyers want to have their own custom flooring and carpeting put in later. None of these examples change the 21 QBDs this contractor follows when building a house. The lower level activities will simply cost more or less than other models (the EAC – not the baseline QBD), but the overall weighting of the QBDs for “Building a House” would be the same.

The Scope Has Not Changed

The same approach can be used for engineering drawings, conducting inspection testing, developing a drug for FDA approval, a scientific approach to a health problem, or any other process that follows a standardized approach toward its end product. The key is segregating the EAC aspect from the baseline QBD aspect of the process. Don’t get mired in constantly trying to “change the QBD” when it is not needed.

If the basic steps do not change, the QBD is not changing! More or less granularity in the lower level details beneath each QBD step is handled in EAC space and will be reflected in the cost of the task. You do not need to change the budget. Why? Because the scope has not changed.

Repeat with emphasis. THE SCOPE HAS NOT CHANGED – you are still:

  • Doing an engineering drawing,
  • Resolving a scientific or engineering design problem,
  • Building a house, or even just
  • Baking a cake.

Let’s keep QBDs simple for the CAMs – and keep the change control process uncluttered.

 

Humphreys & Associates can help with your QBD planning and implementation. Contact us at (714) 685-1730 or email us.

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Formal Reprogramming – What Happened?

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Graph of an Increasing Budget

A long time ago, in a galaxy far, far away….an Over Target Baseline (OTB) – by design – was a rare occurrence (and the OTS concept did not even exist as part of Formal Reprogramming). Formal Reprogramming was a very difficult and cumbersome process that most contractors (and the government) really did not like to consider. The government, in its 1969 Joint Implementation Guide, said:

“Reprogramming should not be done more frequently than annually and preferably no more frequently than once during the life of the contract.”

The Office of the Under Secretary of Defense (OUSD) Acquisition, Analytics and Policy (AAP) – formerly PARCA – , in their latest OTB/OTS guide, states that Formal Reprogramming now has expanded to include an Over Target Schedule (OTS).  However, in that guide, it is stated in Paragraph 1.3.8:

“Ideally, formal reprogramming should be done no more than one time during the life of a contract. However, there may be instances where another formal reprogramming is warranted… When formal reprogramming is accomplished in accordance with the procedures in this guide, with a realistic cost and schedule estimate established for the remaining work, it should not be necessary to undergo formal reprogramming again.”

Today, though, whenever contractors incur a significant cost or schedule variance, instead of resolving the variance cause, the first words seem to be: “Let’s do an OTB or OTS.”  The lure of “getting rid of cost and schedule variances” seems too good to pass up.  Unfortunately, an OTB/OTS implementation has never been an instantaneous process. With AAP’s 12 step OTB/OTS process, it is obvious that the contractor will not be able to start today and incorporate the OTB/OTS in the next Integrated Program Management Data and Analysis Report (IPMDAR) dataset. In fact, AAP’s OTB/ OTS guide states in paragraph 3.8:

“It may be difficult to ascertain the length of time it will take to implement a new baseline based on the scope of the effort. It is not uncommon for the entire process to take up to six months which would be too long of a period without basic cost reporting.”

The last line of the above cited paragraph was referencing the reporting requirements to the customer when an OTB/OTS is being implemented.

The IPMDAR Implementation and Tailoring Guide (5/21/2020) even recognizes the issues with timeliness of implementing an OTB/OTS:

2.3.2.5.5  Formal Reprogramming Timeliness. Formal reprogramming can require more than one month to implement. During formal reprogramming, reporting shall continue, at a minimum, to include ACWP, and the latest reported cumulative BCWS and BCWP will be maintained until the OTB/OTS is implemented. 

So why does it take so long to implement the OTB/OTS?  Can the contractor just adjust the bottom line variances and move on?  Actually no, nothing is really that simple.  This is one of the reasons that implementing an OTB and OTS should not be taken lightly.   The AAP OTB/OTS Guide addresses adjustments this way:

“3.5.6.2 Adjusting Variances: A key consideration in implementing an OTB is to determine what to do with the variances against the pre-OTB baseline. There are essentially five basic options. This is a far more detailed effort than these simple descriptions imply, as these adjustments have to be made at the detail level (control account or work package).”

When considering the number of control accounts and work packages involved in a major contract, a Formal Reprogramming can become a rather daunting task.  The contractor also has to report the effects of the Formal Reprogramming in the IPMDAR Reprogramming Adjustments columns. These adjustment columns appear on both Format 1 and Format 2 of the IPMDAR database, which means the contractor must undertake the assessment for both the contract’s WBS and the OBS – for each WBS element and for each OBS element reported.  This can be further complicated if the OTB/OTS exercise were flowed down to subcontractors for a given program.  The AAP OTB/ OTS Guide, paragraph 3.8 also states:

“The customer should be cognizant of the prime contractor’s coordination complexities and issues with its subcontractors. The time to implementation may be extended due to accounting calendar month overlaps, compressed reiterations of contractor ETC updates, internal reviews, subcontractor MR strategy negotiations, senior management approvals, etc., all while statusing the normal existing performance within a reporting cycle.”

In the early days, when implementing an OTB with variance adjustments, the company and the customer agreed on a month-end date to make the data adjustments.  Then the contractor ran two CPRs or IPMRs (now the IPMDAR): (1) the first report as though no OTB had been implemented [to determine the amount of adjustments to cost variance (CV) and schedule variance (SV) at all the reporting levels] and, (2) the second report [after the OTB implementation had been completed – no matter how long it took] showing the Column 12 adjustments plus whatever BAC changes were being implemented.

Under the current OTB/OTS Guide, it appears as though this process is being done all at once. As stated in the AAP OTB/ OTS Guide paragraph 3.8 above, this implementation could take up to 6 months to complete, so lagging the second report until the OTB/OTS implementation is completed seems logical. The last sentence in paragraph 3.8 also stipulates that regardless of how long implementation takes, the contractor and customer will agree on interim reporting that will be required, further stating that:

“In all cases, at least ACWP should continue to be reported.”

Perhaps this agreement with the customer should also specify the content of the first IPMDAR following OTB/OTS implementation.

All things taken into account, the process of requesting and getting approval for an OTB or OTS can be a long and difficult process, especially if, at the end of it all, the contractor’s request is denied.  Even if it were approved and the contractor implements and works to the newly recognized baseline, immediately doing another one is not a pleasant thought – and remember, it was not intended to be pleasant. Reprogramming was always supposed to be a last resort action, when reporting to the current baseline was totally unrealistic.

Now, what about those cases where a contract has one or two elements reporting against totally unrealistic budget (or schedule) baselines?  The AAP OTB/ OTS Guide does cover a partial OTB, but reiterates that this is still an OTB because the Total Allocated Budget (TAB) will exceed the Contract Budget Base (CBB).  In the early days, however, the government allowed what was called Internal Operating Budgets (IOBs) for lower level elements (control accounts, or specific WBS elements, etc.) that were having problems resulting in an unrealistic baseline for the work remaining. The 1987 Joint Implementation Guide, paragraph 3-3. I (5) described IOBs as follows:

“(5) Internal Operating Budgets. Nothing in the criteria prevents the contractor from establishing an internal operating budget which is less than or more than the total allocated budget. However, there must be controls and procedures to ensure that the performance measurement baseline is not distorted.

(a) Operating budgets are sometimes used to establish internal targets for rework or added in-scope effort which is not significant enough to warrant formal reprogramming. Such budgets do not become a substitute for the [control] account budgets in the performance measurement baseline, but should be visible to all levels of management as appropriate. Control account managers should be able to evaluate performance in terms of both operating budgets and [control] account budgets to meet the requirements of internal management and reporting to the Government.

(b) Establishment and use of operating budgets should be done with caution.  Working against one plan and reporting progress against another is undesirable and the operating budget should not differ significantly from the [control] account budget in the performance measurement baseline. Operating budgets are intended to provide targets for specific elements of work where otherwise the targets would be unrealistic. They are not intended to serve as a completely separate work measurement plan for the contract as a whole.”

Current literature no longer specifically addresses Internal Operating Budgets (IOBs), but with the recent trend of contractors jumping to the OTB/OTS conclusion, it might be a better alternative to have individual instances of unrealistic budgets (or schedules) that do not otherwise push the total program to the need for a complete OTB and/or OTS implementation.

These could be good discussion topics for future AAP and DCMA meetings with industry representatives, to determine if there are ways to streamline the process, or at least reduce the amount of requests to implement Formal Reprogramming.  Variances are, after all, performance measurement indicators that should not just be routinely and artificially eliminated.

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Control Account Manager’s Log – A Valuable Tool

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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.

Control Account Manager (CAM) log

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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Keeping Track of Budgets, Changes, and IPMR Data

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project IPMR DataFor 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.

Keeping Track of Budgets, Changes, and IPMR Data

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.

Keeping Track of Budgets 2 blog

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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