Part 2 – Weekly Earned Value: More trouble than it’s worth?

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Part 2 – Continues with the benefits and implementation of weekly Earned Value Management. Here is the link to Part 1

Part 2 - Weekly Earned ValueIn the past, accounting systems were not able to update actual on a weekly basis. The legacy systems could accrue actual every two weeks or at month end. Now, most labor timekeeping systems are linked to a cost system that updates daily. With this daily labor cost input capability in place, weekly Earned Value (EV) provides real time information on what has been spent for the work accomplished.  Newer software tools are more accommodating with regards to material and subcontractor cost accruals.

It is now easier to input estimated actual for invoices to accommodate the lag between an acquisition commitment and the actual billing for services or material.   On a single project with multiple subcontractors using different software, the weekly accounting of data can become complicated.  The prime contractor may end up manually inputting data from the subcontractors each week. The ideal situation is for all subcontractors to use the same software or data exchange format in order to have a seamless transition of data to the prime contractor. This ensures accurate and timely submittal of data on a weekly basis.

Weekly earned value takes some initial effort to establish. Management must be committed to a proactive stance. The biggest challenge is changing the culture of the program team. This requires a new paradigm of effective weekly management of the program and proper use of the available software tools. Earned Value Management (EVM) is an effective way of managing work whether done weekly or monthly and can be more efficient than month-end reporting.

The major hurdles in implementing weekly EV include:

  • Gaining user and management acceptance
  • Getting everyone, including subcontractors, integrated with compatible schedule, cost, contract and internal change tracking software
  • Processing schedule changes in a timely manner

Many companies already have many of the software tools to make the transition from a monthly basis to a weekly basis. Weekly earned value drives more effective automation which can potentially decrease overhead, a important factor over large or multiple projects. It provides quality, real time performance data for decision analysis and corrective actions.  Weekly EV also reduces the chances of being surprised with major cost or schedule variances by improving the overall early warning features of the system.   More time is available for management to respond to variances and develop corrective action plans. For many companies this is a business best practice and their customers are taking note.

Good business practices dictate that programs have schedule, cost, and change information available on an ongoing basis. Weekly EV insures this process. Implementing a weekly Earned Value Management System is proving to be well worth the time and effort.

For more information about implementing weekly earned value, contact Humphreys & Associates. We have many years of experience in efficient Earned Value Management processes

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Part 1 – Weekly Earned Value: Is It More Trouble Than it’s Worth?

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Part 1 - Weekly Earned ValueThe notion of implementing weekly Earned Value (EV) causes most Program Managers to cringe. Many companies, however, are now using weekly EV as an internal management process. The business driver for this decision is the benefits that contribute to the overall success of the program.

The discipline of performing weekly EV ensures a more thorough report to the customer at month-end.  Many areas of the Joint Strike Fighter (JSF) program are successfully using weekly Earned Value. The V-22, the F/A-18E/F, and the IRS PRIME programs have used weekly EV as a standard business practice.

 Why does weekly EV have an appeal? Is weekly just as good as monthly? Do the benefits outweigh the initial costs of implementation?  Analyzing weekly EV data is far superior to looking at a performance report on a monthly basis.  This can best be described as a “proactive” approach to program management rather than a “reactive” mode.  There are new processes and cultural impediments involved when implementing weekly EV, but the benefits outweigh the costs.

 In order for weekly EV to be successful: 

  • Planning must be sufficiently detailed to objectively provide status on a weekly basis;
  • The budget must be time phased on a weekly basis
  • Accruals of labor and material costs must be done every week.

These three processes, combined with trained and proactive personnel, form the ground work for successful weekly Earned Value Management (EVM).  Weekly EV will provide continuous visibility of program performance with real time status.

A successful Earned Value Management System (EVMS) begins with a well-designed schedule.  Without an accurate and valid schedule in place, the EVMS is virtually useless. The schedule must be time phased and resource loaded consistent with the work to be accomplished.  A proper scheduling tool that can be integrated with the appropriate cost software is essential.

The EVMS scheduling tool must have:

  • The ability to record and display status
  • Convert the status to a percent complete
  • Show milestone completions
  • Accurately compare that status to costs on a weekly basis

 The program’s organizations must be trained in providing schedule status on a weekly basis.

For companies without this existing infrastructure, acquiring a new scheduling will incur some initial costs.  Many companies have an adequate scheduling tool deployed, have the schedule status updated weekly and weekly performance assessments.   High-risk programs, such as R&D efforts, have work scheduled weekly to maintain tight control over schedule and cost. This makes integration of the schedule into a weekly EVMS nearly painless.

This is the first of a two parts on “Earned Value – Is it Worth It? presented by Humphreys & Associates, Inc. 

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EIA 748-C Released: EVMS

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Are you aware that a revision to Electronics Industry Association (EIA) standard 748 Earned Value Management Systems, has been released? The new revision is EIA 748-C. Officials have been discussing the changes at recent industry conferences.

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:

Includes a new section about Budget Element Hierarchy. This section describes the components of Contract Target Price from the highest level to the lowest level of cost elements. It includes the same information that is taught in every basic earned value management seminar.

Emphasizes Risk and Opportunity management. Wording has been inserted in numerous sections of the standard (such as comprehensive planning, schedule, management reserve) to emphasize the consideration of risks and opportunities.

Includes Rate and Usage variance formulas in the standard. Labor rate and efficiency variance formulas are now specifically defined in Section 3.8.2. Similarly, material price and usage variance formulas are now specifically defined in Section 3.8.5.

Clarifies Control Account definition. Revisions to the standard note that the Work Breakdown Structure (WBS) is extended to the level at which control accounts are established and includes additional clarification regarding multiple control accounts existing within a lowest level WBS element.

Clarifies material progress points: Receipt, Stock, Issue. The revised standard states that the acceptable points for claiming earned value are when material is received, when it is entered into inventory, or when it is issued from inventory.

Clarifies OTB/OTS text. The revised standard corrects the terminology to use
“Contract Budget Baseline” instead of the Performance Measurement Baseline regarding Over Target Baselines (OTB), removes language about partial OTBs, and recommends reviewing the contract for implementation requirements prior to executing OTBs or Over Target Schedules (OTS).

Adds a list of suggested references. All NDIA guides related to Earned Value Management Systems are included as suggested references but not requirements.

Includes numerous minor clarifications.

  • Clarifies that multiple terms are used interchangeably for “scope”
  • Adds acronyms into the definitions in Section 2.6
  • Clarifies that Estimates at Completion (EACs) are summarized through the WBS and OBS
  • Clarifies that the performance measurement baseline must include all authorized changes, including current period changes
  • Clarifies that the System Description is not required to be a stand-alone document
  • Clarifies that there is no mandated Rolling Wave cycle
  • Emphasizes that planning packages must not start in the current period

In summary, EIA 748-C simply clarifies the text of the standard and does not change any of the implementation, reporting, surveillance, or enforcement aspects of Earned Value Management Systems.

Feel free to contact Humphreys & Associates for more information about the EIA 748 revisions or for expertise in implementation of EVMS contractual requirements. 

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Earned Value Management – A Simple Explanation

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Earned Value Management – A Simple ExplanationEarned value management or EVM in short is a strategy used by top management personnel to keep track of costs and schedules. Designed in the 1960’s by the US Department of Defense, the system was initially used to screen and acquire defense contracts. The criteria for cost and schedule control systems have been recently revamped, bringing it to 32 criteria to be considered in the latest earned value management system by EIA-748 standards.

Earned value management systems can be applied in projects of every cost and size although it is more commonly used for complex projects with tight schedules and huge budgets. The EVM system has been refined and developed over the years and today, it is used by big organizations such as NASA and the Project Management Institute and Acquisition Management in the UK. Its usage is also widespread in private sectors across different fields and industries. There are many advantages of using the EVM system.

Firstly, EVM provides accurate performance tracking. Under this system, primary and derived data are used to keep track of project performance. Using actual figures, the system generates trends that can be used by project managers to compare what was achieved against what was originally planned. The data set obtained will assist the project manager in deciding whether or not the project is on track. Also, he can use the data to accurately forecast problems such as scheduling delays, budgeting and whether the projected profits are met.

Secondly, EVM helps project and control account managers gauge the progress of a project accurately by comparing the planned against actual work accomplished. Project risk and its appropriate response can be identified earlier and proactive actions can be taken to reducenegative impact. If an overrun is forecast, the problem can be presented to stakeholders at an earlier time.

Lastly, the implementation of EVM system reduce risks. Risk reduction facilitates a more effective communication with stakeholders, especially when additional funding is required.

In short, the EVM system is an effective tool in a project manager’s arsenal. When used correctly, the system can accurately track the performance of a project and reduce project risks.

For a more in-depth explanation of the basics of Earned Value Management, see our EVMS Education Center or call our corporate office to obtain a copy of our EVM  pocket booklet pictured above on how to do Project Management with EVM.

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Rolling Wave Planning for Earned Value Management Systems

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If someone were to ask you: “Can you please give me a detailed explanation of what you will be doing on this date three years from now?” you would probably look at that person as though he or she were crazy.  It would probably be difficult to provide a detailed schedule of events for a date one week from now – although that might be more likely since you know a lot more about what might be taking place next week than what might be happening three years out.

In the early days of earned value management, contractors were expected to detail plan the entire length of a program to establish a “good performance measurement baseline.”  For a year-long development program this expectation might be okay, but for a 10 to 12 year shipbuilding program it might be unreasonable and probably a monumental waste of time.  The program will no doubt change several times before its completion – maybe several times in the first year alone.  With industry’s “help” the government soon realized requiring detail plans on lengthy programs was not always possible – or even meaningful – especially when program requirements are often fluid.

The government and industry agreed that contractors could provide an overall (general, straight-line, “average”, etc.) plan for accomplishing a program very much like what is already done in preparing a proposal, and then provide more details on an incremental basis as more became known about the work to be performed.  The government is not keen on having contractors do detail planning whenever they felt the urge, so they sought to put reasonable rigor into the incremental planning process.  All the work that existed beyond the detail planned work was considered by the government to be general “planning packages”, although contractors were still permitted to detail plan as much of the future work as they wanted.

The government also expected the contractors to identify the planning increments and frequency of planning to ensure there was not a time when the detail planned work was completed and there was no more future work detail planned.  The expectation soon became that contractors were to expand a detail plan from those planning packages into detail planned work packages with enough frequency to ensure there was always a minimum number of months of detail plans in place when the next detail planning event took place.   It also became evident that more months of detail (often called a “planning horizon”) could be provided on production or manufacturing type work vs. for development type effort.

As this “straight-line” plan was converted into detailed work package plans, the straight line became more curved (such as bell curve or skewed bell curves), with more “waves” rolling in as it became time to detail plan.  This type of planning became known as “rolling wave planning”.  Some companies call their process “incremental”, “accordion”, or “inchworm” planning process – the name does not matter, so long as the application of the process results in a minimum amount of detail planned work packages always being in place on a program.

A production program might have, for example, a 9 month planning horizon with a quarterly frequency.  In this scenario, the program starts with 9 months of detail planning in place.  Three months later, the Control Account Manager (CAM) is to look at the next 9 months (6 already detail planned and 3 new months) to make sure the existing detail planning is still good and to plan out in detail those new tasks that should be starting in the new three months of the planning horizon.

A development program however, is likely to use a different planning horizon.  Because of program volatility, it often has a shorter horizon and a higher frequency, such as 4 months of detail planning in place, with a one or two month frequency.

An example for a production program is illustrated below.  The program manager determines production can do detail planning for nine months and then every quarter review the next nine months for:

  • New work scheduled to commence in the next three months of the planning horizon and
  • Five of the six months already detail planned in the prior incremental assessment (depending on the company’s “freeze period”) – WP No. 3 and beyond can be re-plannedRolling Wave Planning

3 Months later: Rolling Wave Planning

Rolling Wave Planning for long term projects is a common area where control account project managers need help.  Humphreys & Associates earned value management experts can provide the guidance you need for your unique production or development project.  Contact us for more information.

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Earned Value Management Systems (EVMS) – Residual Material Accountability – Part 4

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Last Updated May 22, 2025

Another EIA-748 Guideline (Revision D Guideline 21, Revision E Guideline 16) requirement for EVM Systems related to material management is residual material accountability (see related blogs Part 1, Part 2, and Part 3). A project with EVMS contractual requirements must maintain records to show full accountability for material purchased for the contract, including the residual inventory.

What does this mean?  The answer:  Regardless of the size of the contract, the EVMS Guidelines (D Guideline 21, E Guidelines 14 and 16) require contractors to maintain accurate records of the materials purchased for a contract, as well as records of performance measurement as the materials are used.  A contractor must show how the material bought for a contract is not only incorporated into the final product, but also how any excess materials are disposed to offset some of the costs to the customer.

How does a contractor do this?  The easier part of material traceability is keeping track of the material that ends up in the final products.  The “as-built” bill of materials (BOM) lists what and how many material items were included in the delivered items.  The more difficult part of traceability is tracking:

  1. The material that did not get into the final product (excess material)
  2. How many units of any one material item it took to deliver one unit of the final product (material attrition)

There are a number of bills of material (BOMs) that a contractor creates as part of the maturity of a contract or project.  While they may have different names, they generally fall in these categories:

  1. As Estimated.  A complexity-based “similar-to” BOM to get an approximate cost.
  2. As Designed.  A BOM created as part of the engineering/development phase.
  3. As Planned.  The original baseline BOM at contract award for the negotiated configuration(s).
  4. As Modified.  As requirements and/or configurations change, so does the BOM.
  5. As Built.  The final BOM that details how the product/configuration was actually built.

With the first two categories, material for the build is not yet purchased (not committed), but sets the stage for the subsequent categories.  The “as planned” BOM is the one that is in place at contract award and is used to begin making material purchases.  As changes occur, the BOM changes, and some of the materials already purchased for the contract become obsolete or “designed out” of the product.

These materials become what is known as residual or excess materials that are still actual costs on the books for the contract.  Subject to the customer’s contractual dispositioning instructions, the contractor will:

  • Deliver the material to the customer.
  • Seek other purchasers for the material.
  • Scrap the material for the best price that can be obtained.

Whatever amount the contractor gets is to be used to offset the actual costs charged to the customer. Excess materials can also result from other project occurrences, such as:

  • Minimum Buys.  For example, the project needs 8 material items, but the vendor only sells packs of 12.
  • Material Attrition.  Breakage experienced during the assembly or manufacturing process.  Note there are two types of attrition:
    • Lower than expected attrition – results in higher than expected amounts of material left over
    • Higher than expected attrition – more units required to build the product results in higher unit cost and possibly additional excess materials

Since materials purchased for a project belong to the customer, it is the contractor’s responsibility to accurately account for what is being spent to build the product.  This is done by reporting accurate costs for each unit produced, offset by the amount of excess materials disposed of to the best advantage (highest cost recovery possible) for the customer.

Do you need an independent review of your Earned Value Management (EVM) System Description to ensure you are providing the necessary material accountability guidance to your project teams?  H&A subject matter experts (SMEs) have years of experience in production environments to assess your current material accountability approach. They can provide recommendations that best fit your business environment and business systems.

Contact us to discuss your current and future EVM project needs.

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