Clients are often seeking advice from our earned value consultants about implementing a practical approach in response to government customer requirements to proactively manage level of effort (LOE) tasks. The DoD EVMS Interpretation Guide (EVMSIG), NASA guidance, and DOE guidance such as the Compliance Assessment Governance (CAG) document clearly state the requirements for contractors related to planning, maintaining, and managing LOE. DOE also specifies a limit to the percentage of LOE allowed within a control account to avoid skewing performance measurement of the discrete work effort. In addition, both the DCMA and DOE EVMS data quality test metric specifications include manual and automated tests with thresholds specific to LOE.

Common accepted best practices for LOE include:

• Reducing the amount of LOE to the lowest level possible to minimize the number of activities that need to be actively managed. Objective measures of performance are always preferred.
• When LOE activities are included in the schedule, they should not drive the date calculations of discrete activities in the integrated master schedule (IMS). They should also not appear on the critical path.
• LOE must be segregated from discrete work effort. In practice, this means a work package can only be assigned a single earned value method. The work package is one of three types. It is either 1) discrete effort with an assigned earned value technique such as the Milestone or Percent Complete technique, 2) apportioned effort, or 3) LOE. 
• It must be verified it is truly LOE, i.e., it is management or sustainment type of activity that has no identifiable end products or established relationship to other measurable effort. It is clearly not discrete effort or apportioned effort. Remember that with LOE, the passage of time is the only measurement criteria. At the end of the performance month, the budget value for that month is earned. For this reason, LOE is the least desirable earned value method. 
• The budget or estimate to complete the work effort is time phased and reflects the planned or forecast period of performance. The period of performance and resource requirements must be substantiated. Determining the basis of estimate for the LOE activity can also help to verify the work is truly LOE.

So, what is the problem? 

Common situations H&A earned value consultants run into are contractors where:

• Managing the LOE is put on “auto pilot.” This might work for project management type of activities that span the duration of the project. It does not work so well when the LOE is associated with the occurrence of discrete work effort that is subject to change – i.e., the discrete work effort duration changes or the start date and/or the complete date changes. The result?
• LOE tasks may incur actual cost of work performed (ACWP) with no budgeted cost for work performed (BCWP);
• LOE tasks earn BCWP with no ACWP; or
• The estimate at completion (EAC) is greater than the ACWP with BCWP equal to the budget at completion (BAC).
  
  Any one of these conditions would trip the DCMA and DOE test metrics and should be avoided. These types of situations were illustrated in a previous blog, “Level of Effort Decision Tree” that discusses how to properly replan LOE. 

• Their EVM System Description doesn’t provide sufficient guidance to project personnel on what proactive management of LOE means. What are the rules for planning and maintaining LOE? How is LOE handled differently from discrete work packages?
  
  Some System Descriptions allow LOE replanning to occur within the “freeze period,” usually defined as the current reporting period and often plus one additional month. This is contrary to other best practice guidance about how to handle changes for open discrete effort work packages. For discrete effort work packages, changes within the freeze period are not allowed and the work package must be closed to replan the remaining work. What’s the process for handling that open LOE work package? What about retroactive changes when the LOE work occurs earlier or later than planned, or the duration is different than planned? Then what?
  
  When project personnel lack guidance, then arguments often ensue about what is the “correct” interpretation of the wording in governing documents or test metric specifications that are often inconsistent.

• Validation checks are not routinely performed. This includes validation checks to ensure that control account managers (CAMs) are selecting the appropriate earned value method for a work package following the EVM System Description guidance during the work definition and planning phase. It also includes routine monthly data checks to identify common data anomalies typically associated with LOE such as ACWP and no BCWP or BCWP with no ACWP. The goal is to fix problems in the current reporting month and avoid making any retroactive changes. You should be catching and fixing avoidable DCMA or DOE EVMS test metric “triggers” every reporting period.

Best Practice Tips

Here is a short list of best practice tips that H&A earned value consultants have helped clients to implement over the years to ensure LOE is properly planned and proactively managed. The approach is tailored for each client to reflect the type of work the company typically performs. This is documented in their EVM System Description, related procedures, and recurring training to ensure project personnel have clear, specific guidance they can follow.

• Consider using the Percent Complete earned value technique instead of LOE. A best practice is to identify quantifiable backup data (QBD) for a work package using the Percent Complete earned value technique. The QBD for the LOE type of work package could be the milestones identified for the discrete effort work package the LOE work package is supporting. This helps to ensure the work packages are reviewed and managed together.
• Could the Apportioned Effort method be used instead of LOE? Is it possible to establish a direct relationship between the discrete effort and supporting effort? For example, is historical data available to document that the support number of hours is a given percentage of the discrete effort labor hours? If so, then using the Apportioned Effort method is a much better alternative. When the discrete work package is statused, the apportioned effort work package would be automatically statused as well. 
• Consider shorter durations for the LOE when that LOE is supporting discrete effort. Should the first occurrence of the LOE trigger a data anomaly test metric, it can be proactively handled along with any future replanning. The remaining LOE would already be in one or more separate work packages so there won’t be any criticism for changing open work packages. Any adjustments can be made in the current reporting period avoiding any retroactive changes that would trigger other data metric tests. What is considered to be “short duration” should be defined in the EVM System Description. An example would be LOE work packages of 3 to 4 months in duration. Be sure to provide specific guidance to project personnel on how to process these types of current reporting period LOE replanning adjustments. The LOE work package breakpoints should be technically related. For example: “Phase I Support,” “Drawing Support,” and so forth instead of generic descriptions such as “April Support,” “May Support,” or “June Support.”
• Use rolling wave planning. This is by far one of the better solutions. This helps to ensure the discrete tasks and any supporting LOE tasks are planned together before the work is authorized to begin. Shorter durations for the LOE tasks are often used to align with the forward planning window.
• Incorporate LOE earned value method checks into your routine status and data analysis process. Identify any upcoming LOE activities (for example, the next 60 to 90 days), along with the CAM responsible for the work effort to verify they accurately reflect the current plan. It is always better to proactively replan future LOE when needed instead of defaulting to an “auto pilot” mode. The CAM should understand this is part of their responsibilities.

Does your EVM System Description or training materials need a refresh to include specific guidance for project personnel that documents the preferred approach for planning, maintaining, and managing LOE? H&A earned value consultants frequently help clients with EVM System Description content enhancements or creating specific procedures that reflect your unique business environment. Call us today at (714) 685-1730 to get started.

Tagged as: Earned Value Consulting, EVMS, Level of Effort, LOE