EIA 748-D Released – Change Notes

By Humphreys & Associates / April 9, 2019 / EIA-748D, EVMS Guidelines

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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Planning and Managing EVM by Elements of Cost (EOC) – Over-Application of EOCs – Part 2

By Humphreys & Associates / April 1, 2019 / CAR, Corrective Action Requests, earned value training, EIA-748-C, Elements of Cost, EOC, EVM Standard 748, EVM Training

CAR, Corrective Action Requests, earned value training, EIA-748-C, Elements of Cost, EOC, EVM Standard 748, EVM Training

<< Review Part 1

In part one of our series on Elements of Cost (EOC), we explained what EOCs are and gave an analogy of how EOCs would relate to building a patio. We also reviewed how EOCs can be “over thought” and emphasized the importance of properly applying indirect cost rates. This post is going to be focused on the Over-Application of EOCs.

Over-Application of EOCs

During some government reviews, the teams issued Corrective Action Requests (CARs) citing multiple examples of ACWP occurring on “zero-budgeted” Work Packages within Control Accounts. On the surface, this sounds pretty serious, but there were several “over-applications” in play here.

First, the review was being performed at (and in some cases below) the Work Package (WP) level, when the intent of the Guidelines has always been for variance analysis to be performed at the Control Account (CA) Level;
Second, the CAR assumption was that a charge against an Element Of Cost (EOC) equals a charge against a “zero-budgeted WP”.

For the first point we’ll look at Guideline 22 in the EVM Standard 748:

GL 22. At least on a monthly basis, generate the following information at the Control Account and other levels as necessary for management control using actual cost data from, or reconcilable with, the accounting system:

1) Comparison of the amount of planned budget and the amount of budget earned for work accomplished. This comparison provides the schedule variance.

2) Comparison of the amount of the budget earned and the actual direct costs for the same work. This comparison provides the cost variance.

Even the government’s sub-question e. under GL 22 reiterates this requirement:

e. Are the following elements for measuring performance available at the levels selected for control and analysis (at a minimum at the control account level):

1) Budgeted Cost for Work Scheduled (BCWS)?

2) Budgeted Cost for Work Performed (BCWP)?

3) Actual Cost of Work Performed (ACWP)?

While the intent of the words “and other levels” and “at a minimum” was to ensure that contractors did not only perform analysis at some higher, summary level, the government’s choice of those sub-question words also opens up the application of the analysis at lower levels. Be that as it may, the over-application still exists where it should not. Variance Analysis is supposed to be at the CA level and rolled up to higher levels for analysis. The bottom line for each of the CARs written is that BCWS, BCWP, and ACWP existed at the Control Account level, and the EOC visibility was available for variance analysis explanations at the lower levels in the contractors’ systems.

For the second point, let’s look at all the EVM Standard 748 Guidelines, specifically Guideline 16.

There is no Guideline that specifically requires BCWP to be claimed the exact same way BCWS was planned; however, it is intuitive that this has to be true in order for cumulative values for BCWP and BCWS to equal BAC so that the work can be considered complete. [While the government’s sub-question b. under Guideline 22 expects BCWP to be calculated “consistent with the way the work is planned”, GL 22 itself (above) is silent on that inferred expectation.] The Guideline 16 and its sub-question b. also require consistency of the direct costs:

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

Are elements of direct cost (labor, material, subcontractor, and other direct costs) accumulated within control accounts in a manner consistent with budgets using recognized acceptable costing techniques and controlled by the general books of account?

In the examples noted for the CAR referenced above, the work package task was a specific Element Of Cost (EOC) and was planned and completed in the same period, but no ACWP was accumulated for that specific EOC because the work was accomplished using another resource that fell into another EOC category. When the team looked at that EOC containing the ACWP, they interpreted the finding as a “zero-budgeted Work Package” with ACWP against it. [They also cited the original Work Package itself for having BCWP with no ACWP for the element of cost that was planned and earned.]

Humphreys & Associates is available for consulting and information on this topic. Give us a call!

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Planning and Managing EVM by Elements of Cost (EOC) Example: Building a Backyard Patio – Part 1

By Humphreys & Associates / March 1, 2019 / Control Account, earned value management, earned value training, Elements of Cost, EVM, EVM Training, Planning Package, Work Package

Control Account, earned value management, earned value training, Elements of Cost, EVM, EVM Training, Planning Package, Work Package

What are “Elements of Cost”?

Labor, Materials, Subcontracts, Other Direct Costs, and their Indirect Costs (Overhead including General and Administrative —G&A) are the typical building blocks for any project: personal projects and projects we manage for the customers we support. These items are also what the Earned Value Management System (EVMS) Guidelines call elements of cost (or EOCs). So, when the Guidelines call for us to plan and manage by EOC, it really should not cause us any undue anxiety – it is just the natural way to manage any project.

Example: Outdoor Backyard Patio

Let’s use a simple home project example of building an outdoor backyard patio: What do you have to do to determine how much it will cost for this Backyard Patio Project (BPP if you like acronyms)? Generally, you look at such things as:

How much concrete; lumber for decking; nails, screws, bolts, washers, and other hardware, etc.; and weather-coating and paints/stains you will need (Material Element of Cost – EOC).
Work you cannot do by yourself: electricity for lights and power, and natural gas for the Barbecue/fireplace (Subcontract EOC).
Work you will do yourself (Labor EOC).
Costs unique to this project’s completion, such as: Home Owners Association permits, building code permits, local excavation application fee, etc. (Other Direct Cost EOC).
Costs incurred that do not necessarily go into the final product, such as: cleaning supplies, brooms, solvents, turpentine, weather tarpaulins, lighting and electricity, etc. (Indirect Costs/Overheads).

Unfortunately, when operating under the EVM requirement, often managers tend to overthink, and sometimes over apply the management of EOCs. Let’s look at the overthinking part first.

Overthinking EOCs

Guideline 9 of the EIA Standard 748 (Revision D) for EVM Systems requires:

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

Some might propose: “I’ll have one Work Package for the Control Account with all the EOCs in it, and I’ll be okay.” That might meet the intent of that first part of the guideline, but would probably fail the requirement that says “as needed for internal management and control of subcontractors.” For example, what EV technique would you use for a “work package” that had labor, material, and subcontract work in it? The labor occurs as the work is performed, the material might be earned at the point of receipt on the dock, and the subcontract might earn value with the receipt of an Integrated Program Management Data and Analysis Report (IPMDAR) dataset at the end of a month. Since the Control Account (CA) has one total dollar budget, the “identification of significant cost elements” has to occur at the Work Package (WP) and Planning Package (PP) level within the CA, which requires each WP and PP to be identified as one of the EOCs mentioned above.

For Instance

In our example, if we lumped concrete and lumber into one “Material WP” and we incurred a serious overrun in material, how would we identify what caused the overrun: the concrete pour or the lumber portion? These are different categories of material that would “earn value” (be accomplished) in different ways and at different times. In order to determine the “guilty party” in the overrun, we should also have separate WPs for the different significant material categories. Some might call these major, or high value, or critical material items, which should be tracked separately.

On the other hand, for the lower-value materials, it may not be significant enough to management to know that a variance might have been caused by a 1-cent washer or a pint of deck stain. Consequently, a grouping of these low-value material items may be all that is required for visibility. Conversely, Management might actually want to break out categories such as, separating the paints/stains, and weather-coating from the nuts, bolts, washers and other hardware, since they are different categories of low-value material that could also earn value differently.

Indirect Cost Rates Must be Applied Properly

For Indirect Costs, some contractors put the burden of planning and managing these overhead costs on the CAMs, while others apply the indirect rates at a summary level of the Work Breakdown Structure (WBS) or organizational structure. Regardless of how a particular contractor does it, the indirect cost rates must be applied properly to the various direct elements of cost:

Material handling charges applied to material items
Indirect Labor rates applied to the direct labor hours
Subcontract overhead applied to the subcontract direct costs
ODC overheads charged to the ODCs identified.

Applying and managing overheads at the CA level would entail hundreds of applications across the number of Control Accounts on a project, but applying these at a summary level would require only a handful of Overhead lines in reports. Doing so would significantly reduce the number of possible errors in application – which is why many contractors do not require CAMs to “manage” overheads in their Control Accounts. [Our BPP example does not have the above types of Indirect Costs that are related to specific Direct Costs, but it does have its own specific Overheads related to the labor to build the Patio.]

Humphreys & Associates is available for earned value training and consulting. Give us a call!

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Earned Value: Fun with Numbers or Real Management Data?

By Humphreys & Associates / February 1, 2019 / Actual Cost of Work Performed, Budget At Completion, Budgeted Cost for Work Performed, Budgeted Cost for Work Scheduled, Contract Budget Base/Contract Target Cost, Cost Variance, Earned Value Basics, Estimate At Completion, Estimate to complete, Estimated Completion Date, Forecasted Program Schedule Slip, Management Reserve, Program Overrun, Schedule Slip, Schedule Variance, Time-Now, Variance At Completion

Actual Cost of Work Performed, Budget At Completion, Budgeted Cost for Work Performed, Budgeted Cost for Work Scheduled, Contract Budget Base/Contract Target Cost, Cost Variance, Earned Value Basics, Estimate At Completion, Estimate to complete, Estimated Completion Date, Forecasted Program Schedule Slip, Management Reserve, Program Overrun, Schedule Slip, Schedule Variance, Time-Now, Variance At Completion

What Are Earned Value Basics?

We used a quick quiz with some helpful links to give you an opportunity to test your basic understanding of an EVM graph from a real EVMS Program. We go into detail about each concept displayed in the graph and our overall analysis of the project based shown in the graph.

Earned Value: Fun with Numbers or Real Management Data? Part 1

In Part 1 we reviewed where you could find more information about EVM Implementation and Basic Concepts of Earned Value on our site. We also included a review quiz.

EVM Implementations
EVM Graph Quiz Testing Basic Earned Value Terms

Earned Value: Fun with Numbers or Real Management Data – Answers (part 2)

In Part 2 we provided the answers to the EVM Quiz and provided detailed definitions and descriptions for each of the quiz terms.

EVM Quiz Answers
Management Reserve
Schedule Variance
Budget At Completion
Contract Budget Base/Contract Target Cost
Budgeted Cost for Work Scheduled
Schedule Slip
Variance At Completion
Estimate At Completion
Actual Cost of Work Performed
Estimate To Complete
Cost Variance
Program Overrun
Time Now
Budgeted Cost for Work Performed
Forecasted Program Schedule Slip
Estimated Completion Date
Discussion of the displayed data

Earned Value: Fun with Numbers or Real Management Data? Read Post »

Project Controls/ Analyst Certification

By Humphreys & Associates / January 2, 2019 / EVM Certification, PC/Acert

EVM Certification, PC/Acert

Project Controls/Analyst Certification

This efficient and intensive certification program is designed for experienced earned value specialists looking to:

Distinguish themselves from their peers as a professional, certified Project Controls/Analyst.
Become a more valued asset to their current or future project and project management team in analyzing project control problems or challenges and determining appropriate actions to resolve them.

Effective and Comprehensive

Humphreys & Associates effective and comprehensive certification program is intended to further develop existing basic EVM skills into proficient and insightful analytical skills in various areas of project controls. It includes wide-ranging advanced EVM and project analysis coursework and concludes with a comprehensive exam requiring participants to demonstrate both analytic and technical Earned Value Management Systems proficiency.

Individuals that complete the Humphreys & Associates Project Controls/Analyst Certification program will have solid evidence of their ability to provide valuable analytical support to a project team in EVM as well as other critical areas of project management in an EVM environment. They will also satisfy job requirements as professionals in Project Controls/Analysis in the most challenging of project control environments.

Coursework

The coursework spans the guideline process areas in the EIA-748 Standard for Earned Value Management Systems which includes:

Organization
Planning, Scheduling, and Budgeting
Accounting Considerations
Analysis and Management Reports
Revisions and Data Maintenance

Expanding on these guideline requirements challenge individuals to understand, recognize, and analyze typical problems to be able to recommend possible solutions to management.

Important elements of the course include discussions of:

Establishing the initial technical scope, schedule, and cost structures for a project.
Risk and opportunity management analysis.
Performance, variance, estimate at completion (EAC), and estimated completion date (ECD) analysis.
Assessing the quality of the schedule and cost data.
Incorporating various types of scope, schedule, and budget baseline changes.
Common issues with customer reporting and how to resolve them.
Assessing compliance with EVM requirements.

The course stresses data integrity and traceability, highlighting Earned Value Management best practices to provide insights and to illustrate current methods and approaches. This results in improved project controls analysis and leads to better overall management and informed decision-making.

Included Course Materials

Humphreys & Associates Project Controls/ Analyst Certification uses extensive case studies and exercises that bring the EVM concepts to life and help to refine analytic expertise. Each participant will receive:

A binder with all course materials
The H&A Project Management Using Earned Value textbook
The pocket-sized H&A Guide to Project Management Using Earned Value

Benefits for Certified Project Controls/Analysts

H&A issues an education certificate as evidence of completing a course. We also issue a certification as evidence of passing an examination for meeting industry standards. We offer a custom “certified” polo shirt to each individual that successfully passes the exam with a 70% grade or higher honoring their accomplishment. Certified Project Controls/Analysts will also receive our newsletters and blogs about the latest changes to EVM regulations primarily for DoD, DOE, and NASA to help them keep up to date on EVM requirements and industry best practices.

Contact us today to learn more about Humphreys & Associates Project Controls/ Analyst Certification program at (714) 685-1730.

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EVM Consulting | Corrective Action Response

By Humphreys & Associates / December 3, 2018 / CAP, CAR, Corrective Action Requests, CPR/IPMR, EVM Consulting, IBR, IMS, SSI

CAP, CAR, Corrective Action Requests, CPR/IPMR, EVM Consulting, IBR, IMS, SSI

How do I respond to a Corrective Action Request?

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

Corrective Action Response: Sources – Part 1 of 2

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

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

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

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