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.
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.
Earned Value Management Systems are a critical component in the project management landscape. At its core, an Earned Value Management System (EVMS) offers a systematic approach to integrating scope, schedule, and cost. Implementing an EVMS enables project managers to measure project performance and progress in an objective manner that increases management visibility and control.
Key Principles and Terminology
To grasp the fundamentals of Earned Value Management, one must become familiar with its primary principles and associated terminology. Some of these key terms include Planned Value (PV), Earned Value (EV), and Actual Cost (AC), which form the basis for evaluating project performance and predicting future outcomes. Understanding these concepts is essential for anyone seeking to implement an EVMS.
The Role of EVM in Project Management
Effective project management hinges on the ability to forecast potential issues and measure ongoing performance against the project plan. An EVMS provides a structured framework for this purpose, allowing managers to identify variances in cost and schedule before they become critical. By integrating scope, schedule, and cost, an EVMS serves as a compass for project managers, guiding them through the complexities of project execution.
The Benefits of Implementing an EVMS
Implementing an EVMS reaps several benefits, including enhanced visibility into the health of a project and the ability to make data-driven decisions. An EVMS enables stakeholders to objectively assess project performance against the baseline, ensure alignment with strategic objectives, and encourage accountability among team members. Moreover, with an EVMS in place, organizations are better equipped to meet contractual requirements, especially for government contracts which oftentimes mandate the use of such systems.
By grasping the basic principles of EVM and the role it plays in project management, professionals can start their journey toward effective project control and successfully implementing an EVMS. With a comprehensive understanding of the basics, they can build a solid foundation for further exploration of the practices and principles that will lead to mastery of Earned Value Management.
Section 2: Steps to Obtain a Professional EVM Certification
Eligibility Criteria for a Professional EVM Certification
Before embarking on the journey to obtain a Professional EVM Certification, it is important to clarify the prerequisites. Typically, these may include a certain level of experience in project management, understanding basic accounting principles, and familiarity with the EIA-748 Standard for EVMS Guidelines. Professionals who wish to get a professional certification should review the specific eligibility requirements as dictated by the certifying body to ensure they qualify to undergo the certification process.
Detailed Step-by-Step Guide to the Professional Certification Process
Research and Select a Certifying Organization: Begin by identifying an organization that offers an EVM Certification.
Undergo Formal EVM Training: Enroll in and complete a formal training program that covers the core components of Earned Value Management. This step is pivotal, as it lays the groundwork for the practical application and understanding of EVM. Humphreys & Associates provides online EVM Training for employees of contractors that do business with the DOD, DOE, NASA, and other U.S. government agencies such as the FAA.
Study the Standards and Guidelines: Gain a comprehensive understanding of industry standards, such as the EIA-748 Guidelines. Knowledge of these standards is fundamental, as they will inform the set-up and management of an EVMS.
Prepare for the Examination: Most certifications will require passing an exam to demonstrate your proficiency. This will involve rigorous study and attending review courses to prepare.
Apply for the Certification Exam: Submit your application along with any necessary documentation and fees to the chosen certifying body. Ensure all prerequisites have been met before applying.
Take the Certification Exam: Schedule and sit for the certification exam. This will typically cover a range of topics, from the basic principles of EVM to more advanced concepts.
Receive Certification: Upon successful completion of the exam, you will receive your EVM Certification, which endorses your knowledge and understanding of EVM.
Essential Documentation and Preparation Tips
To ensure a smooth certification process, maintain an organized file of all coursework, training certificates, and professional references. Consider using study guides, practice exams, and other preparatory materials to fully equip yourself for the certification exam.
How to Maintain and Renew EVM Certification
An EVM Certification is not a one-time event but requires ongoing professional development to maintain. Stay abreast of any Continuing Education Units (CEUs) or Professional Development Units (PDUs) required to keep your certification active. Engage with the community of practice, attend EVMS workshops, and continue learning to stay current in Earned Value Management best practices.
Section 3: EVM Consulting and Expert Guidance
The Need for Expert Consultancy in the Professional EVM Certification Process
As professionals navigate the path towards EVM certification, expert consultancy can play a pivotal role. These consultants have extensive experience with EVM principles and the process for implementing an EIA-748 compliant EVMS. They can offer personalized guidance, which is often critical to ensuring a smooth and successful journey to compliance with EIA-748 Standard for EVMS.
How to Choose the Right EVM Consultant
When selecting an EVM consultant, consider the following criteria to ensure you make an informed decision:
Experience and Credentials: Look for consultants with a proven record of accomplishment in EVMS implementations and a robust portfolio of successful client engagements. Certified consultants, particularly those with additional qualifications in project management, bring a wealth of knowledge.
Industry Reputation: Investigate the consultant’s standing within the industry through testimonials, case studies, and peer recommendations. A reputable consultant will have positive feedback and be recognized as an authority in the field.
Approach to Training and Consulting: Evaluate the consultant’s methodology. The right consultant should offer a tailored approach, adapting their expertise to your organization’s specific needs and challenges.
Compatibility with Organizational Culture: Ensure the consultant’s style and communication align with your organization’s culture. A collaborative and adaptable consultant can integrate more seamlessly into your team.
Maintenance and Support: It is not just about successfully completing a Cognizant Federal Agency (CFA) EVMS Compliance Review, it is also about sustaining the EVMS and how project personnel implement it on their project. Check whether the consultant offers support and guidance to ensure ongoing compliance and effectiveness.
The Role of Consultants in Ensuring Compliance and Efficient System Implementation
An EVM consultant’s role extends beyond just advice on CFA compliance reviews—it involves hands-on assistance in setting up an EVMS that complies with industry standards, training staff to understand and use the system effectively, and preparing the organization for the rigorous CFA compliance review process. Furthermore, consultants can help identify any gaps in current practices and tailor the EVMS to best fit the organization’s unique environment.
By providing insights into best practices, drawing from a wide range of experiences with different clients, and offering objective assessments of current systems, consultants can ensure that an organization’s EVMS is both compliant and optimized for performance.
Earned Value Consulting provides valuable expertise that can streamline the CFA compliance process, facilitate the successful adoption of EVM, and ensure long-term compliance. By leveraging the knowledge and experience of a seasoned EVM consultant, organizations can overcome obstacles more efficiently and optimize their project management practices for greater success. Thus, engaging the right consultant is a strategic investment that can lead to significant dividends in project execution and management.
Section 4: EVM Training Course List
To enhance your skills in this area, H&A offers a comprehensive list of EVM Training Courses tailored to meet the needs of various stakeholders, from project managers to government contractors. Whether you’re preparing for a customer Integrated Baseline Review (IBR), seeking to improve your EVM proficiency, or aiming to pass professional certification exams, these courses offer valuable insights and practical experience. Delivered in an online format, these courses provide the flexibility to learn at your own pace while ensuring a deep understanding of EVM principles and their application in real-world scenarios.
CAM Discussion: The CAM Discussion serves as an essential component of the preparation process for a customer Integrated Baseline Review (IBR), compliance review, or surveillance review. This simulation offers a practical experience of a CAM documentation review and interview session, illustrating how a proficient CAM conducts an interview with a government customer. Additionally, it provides a useful recap emphasizing key technical points along with suggestions for follow-up action items.
CAM Essentials_DOD: CAM Essentials provides comprehensive training to improve EVM proficiency and understanding of the basics. This online training bundle features the EVMS Virtual Learning Lab (DOD), Scheduling Virtual Learning Lab, and CAM Discussion courses, all available separately.
CAM Essentials_DOE: CAM Essentials offers comprehensive tools for improving EVM skills and understanding the fundamentals. This online training bundle includes the EVMS Virtual Learning Lab (DOE), Scheduling Virtual Learning Lab, and CAM Discussion courses, each available separately.
CAM Essentials_NASA: CAM Essentials provides comprehensive training to improve EVM proficiency and understanding of the basics. The online training bundle includes the EVMS Virtual Learning Lab (NASA), Scheduling Virtual Learning Lab, and CAM Discussion courses, which are also available individually.
CPR/IPMR/CFSR Completion and Reconciliation: The Integrated Program Management Report (IPMR) and Contract Funds Status Report (CFSR) are crucial communication tools between contractors and their customers. This online course provides valuable insights into the proper completion of these reports and their reconciliation.
EVMS Certification and Preparation Quiz: This online course comprises 120 questions in four separate quizzes, covering the nine EVMS process groups, the Integrated Program Manager Report (IPMR), earned value data analysis, Integrated Baseline Review (IBR), and compliance reviews. It serves as an excellent study and preparation resource for the AACE International Earned Value Professional (EVP) or the PMI Project Management Professional (PMP) certification exams.
EVMS DOD Virtual Learning Lab: The EVMS Virtual Learning Lab offers a comprehensive 21-hour instruction program. This online training delivers Humphreys & Associates’ acclaimed three-day EVMS workshop in an interactive, multimedia format. The video content includes all workshop coursework, quizzes, and case studies, allowing students to assess their understanding and receive prompt feedback through scored quizzes and exams.
EVMS DOE Virtual Learning Lab: The EVMS Virtual Learning Lab offers a comprehensive 21-hour online training program. This interactive multimedia format is based on Humphreys & Associates’ acclaimed three-day EVMS workshop, delivering all course content, quizzes, and case studies in a video format. Students can assess their understanding through scored quizzes and exams.
The course can be used for project personnel to enhance their EVM proficiency or for someone who wants to learn the basics of earned value management at their own pace.
EVMS NASA Virtual Learning Lab: An intensive 21-hour online training program that offers a complete presentation of Humphreys & Associates’ three-day EVMS workshop. The course has been adapted into an interactive multimedia format, including all quizzes and case studies from the original workshop. Students can test their knowledge and receive immediate feedback through scored quizzes and exams.
The course can be used for project personnel to enhance their EVM proficiency or for someone who wants to learn the basics of earned value management at their own pace.
IBR – Online Video: The Integrated Baseline Review (IBR) course is designed to provide a comprehensive understanding of the IBR process. It is a fast-paced presentation that is essential for ensuring a clear grasp of the technical requirements of a project and establishing accurate schedule and cost goals. This course offers a detailed explanation of the review process and can be tailored to provide training for specific needs and timings. The approximate duration of the course is 2 hours.
OTB/OTS Implementation – Online Video: Learn about Over Target Baseline (OTB) and Over Target Schedule (OTS) Implementations in this approximately 1 hour and 30-minute video.
A formal re-programming action, known as an OTB and/or an OTS, may occur during risky major acquisitions. Understanding the rationale for and the various methods used to implement an OTB/OTS, as well as correctly completing the IPMR formats in accordance with the Data Item Description (DID) instructions, is not a simple process. Our video provides clarity on this complex process.
The video includes completed IPMR Formats 1, 2, and 3, showcasing four OTB methods, along with before and after Baseline graphs for each method. It also contains examples and Baseline graphs for Over Target Schedule, Format 3.
Scheduling Virtual Learning Lab: The Scheduling Virtual Learning Lab offers an intensive 21 hours of instruction covering critical path fundamentals, schedule baseline, float, network logic development, risk assessment, changes, and scheduling in an EVMS environment. The content is based on the well-regarded three-day Project Scheduling Workshop by Humphreys & Associates, adapted to a video format and featuring quizzes and case studies for immediate knowledge testing and feedback.
The course is designed for project personnel looking to enhance their project scheduling skills and for individuals who want to learn the fundamentals of project scheduling at their own pace.
A student who completes the Scheduling course will earn 21 Professional Development Units (PDUs) or 2.1 Continuing Education Units (CEUs).
Evaluating the Effectiveness of Your EVM Training
To ensure that the EVM training investment yields the expected results, it is important to monitor and evaluate its effectiveness. This can be done through various means, such as feedback surveys, performance assessments, and observing improvements in project management practices post-training. Metrics like increased efficiency, reduced project variances, and improved forecasting accuracy can indicate the success of the training program.
Additionally, incorporating a continuous improvement process for training—where feedback is used to refine and enhance the training offerings—can help ensure that the organization continues to improve on your EVMS over time.
Properly tailored EVM training programs are not the only key to successful professional certifications and EVMS implementation—they empower organizations to achieve strategic objectives and enhance overall project management proficiency. With the right training program, professionals and teams can develop the expertise needed to leverage EVM capabilities fully, leading to improved project outcomes and sustained success.
The journey through the complexities of building an Earned Value Management System (EVMS) underscores its pivotal role in effective project management. By committing to understanding the basic principles of an EVMS and striving for formal certification, professionals elevate their ability to forecast, monitor, and steer complex projects toward success.
EVM training equips project teams with the tools and strategies necessary to implement and manage robust project control systems. This, in turn, fosters informed decision-making, enhanced accountability, and improved alignment between project objectives and outcomes. Professional certification recognizes proficiency that benefits the individual and the organization by establishing credibility and assurance in project management capabilities.
Having traversed this guide, the next steps involve consolidating your newfound knowledge and venturing into tailored training programs that suit your or your organization’s specific requirements. From here, it is essential to consistently apply, adapt, and refine the skills gained through training to real-world scenarios.
Encourage yourself and your peers to persist in your journey towards EVM mastery. Continued learning, networking with other EVM professionals, and staying abreast of evolving practices will ensure that your expertise remains current and beneficial. May this guide serve as both a foundation and steppingstone on your path to excelling in the discipline of Earned Value Management.
For information on Corporate or Quantity Discount pricing, please contact us at products@humphreys-assoc.com or call us at (714) 685-1730.
A recent topic for the NDIA Integrated Program Management Division (IPMD) Clearinghouse was how to handle reporting fee for undefinitized work effort in the Integrated Program Management Report (IPMR) or Integrated Program Management Data and Analysis Report (IPMDAR). Undefinitized work is formally referred to as Authorized Unpriced Work (AUW) or Undefinitized Contract Actions (UCAs).
As a reminder, AUW/UCA is a contract scope change the customer’s contracting officer has directed to be performed. However, the scope, schedule and budget have yet to be fully defined and negotiated. A contractor typically creates a rough order of magnitude schedule and cost estimate which is their basis to develop a schedule and budget for the AUW/UCA scope of work.
As a reminder, the Contract Budget Base (CBB) is equal to the Negotiated Contract Cost (NCC) for definitized work plus an estimated cost for all AUW or UCAs. When all AUW/UCA work has been negotiated, the CBB equals the NCC. The CBB and PMB exclude any fee or profit.
DoD Policy and Reporting References for Guidance
For this discussion, the following DoD EVMS or Data Item Description (DID) references provide general guidance on how to report AUW/UCA, Target Profit/Fee, Target Price, and Estimated Price values for performance reporting. These references do not use the term “undefinitized contract actions.” They do use terms such as “undefinitized work” or “undefinitized change orders (known as AUW).”
“A contract scope change which has been directed by the Government 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.”
IPMR DID DI-MGMT-81861A (September 2015). See Section 3.0. IPMR Format Content Requirements, 3.2.1. Contract Data, emphasis added.
“3.2.1.3. Estimated Cost of Authorized, Unpriced Work (AUW). Authorized, Unpriced Work is approved work scope that has not been definitized. The total dollar value (excluding fee or profit) of AUW shall be entered in Block 5.c.
3.2.1.3.1. The value of AUW is the value of the scope that was coordinated between the contractor and the Program Office, and authorized by the Procuring Contracting Officer (PCO).”
“3.2.1.4. Target Profit/Fee. Enter in Block 5.d the applicable fee that applies to the negotiated cost of the contract.
3.2.1.5. Target Price. Enter in Block 5.e the target price (negotiated contract cost plus profit/fee) applicable to the definitized contract effort.
3.2.1.6. Estimated Price. Based on the contractor’s most likely estimate of cost at completion for all authorized work, including the appropriate profit/fee, incentive, and cost sharing provisions, enter in Block 5.f the estimated final contract price (total estimated cost to the Government). This number shall be based on the contractor’s most likely management EAC in Block 6.c.1 and normally will change when the EAC is updated and/or when the contract is revised.”
IPMDAR DID DI-MGMT-81861C (August 2021) has similar language. See Section 2. Document Requirements. 2.3 Contract Performance Dataset (CPD). 2.3.1 Heading Information, emphasis added.
“2.3.1.2 Estimated Cost of AUW. Provide the total dollar value (excluding fee or profit) of the approved work scope associated with AUW. AUW is a contract scope change that is directed by the Government contracting officer, but has not yet been fully negotiated/definitized.
2.3.1.3 Target Fee. Provide the applicable fee that applies to the NCC.
2.3.1.4 Target Price. Provide the target price (NCC plus target fee) applicable to the definitized contract effort.
2.3.1.5 Estimated Price. Provide the estimated final contract price. The estimated price shall be based on the contractor’s Most Likely Estimate at Completion (EAC) for all authorized work, including: the appropriate fee, incentive, and cost sharing provisions.”
What is the issue?
This came up as a Clearinghouse topic because contractors wanted to make sure they are accurately interpreting their government customer’s guidance and they are consistent with industry best practices. The EVMSIG, IPMR DID, and IPMDAR DID all state that AUW “excludes fee or profit.”
There are also implications for reporting the Best Case, Worst Case, and Most Likely Management EAC in the IPMR or IPMDAR. You may have noticed in the DID text above that the Estimated Price is based on the contractor’s Most Likely EAC for all authorized work plus the appropriate fee. While the DID says “all authorized work,” because the final cost has yet to be negotiated for the AUW/UCA, this creates questions. What value should be entered for the Estimated Price? Should it include fee or not for AUW/UCA?
H&A earned value consultants have seen contractors take two different approaches. To simplify and illustrate the two approaches, the following discussion uses the IPMR Format 1. The IPMDAR has similar heading information. The following examples assume a cost plus fixed fee (CPFF) contract.
Option One
The most typical approach for projects is to enter the AUW/UCA amount in the IPMR Format 1 Block 5.c (Est. Cost of Auth. Unpriced Work) and include the same AUW/UCA amount in the Block 5.f (Estimated Price). The assumption is that when the AUW/UCA work effort is definitized, the contractor will negotiate the applicable fee with the customer during this process. A contractor should clearly state they intend to negotiate a fee for their AUW/UCA in their IPMR Format 5 or the IPMDAR Performance Narrative Report as well as in the transmittal letter accompanying the AUW/UCA estimate.
To illustrate how the heading data is entered in the IPMR Format 1 (Block 5.c and 5.f are equal), see Figure 1 below. This example assumes the entire contract is AUW/UCA to clearly illustrate the proper approach. Negotiated Cost (Block 5.b) is zero because the entire scope of work has not been negotiated. Target Profit/Fee (Block 5.d) is zero because AUW does not have profit/fee. Target Price (Block 5.e) is zero because the Negotiated Cost and Target Profit/Fee are zero. The Estimated Price, Most Likely Estimated Cost at Completion (Block 6.c (1)), and Contract Budget Base (Block 6.c (2)) are equal.
Figure 1: Example IPMR Format 1 where the AUW (5.c.) and Estimated Price (5.f.) are equal.
Example of a Format 5 narrative for this approach follows.
In the IPMR Format 1 Block 5.c the estimated cost of Authorized Unpriced Work (AUW) and Block 5.f Estimated Price, the amount of $30,563,565 reflects the proposed cost. The Most Likely Estimated Cost at Completion and Contract Budget Base (Block 6.c.(1) and (2)) reflect the same amount.
Note: Once the work scope is definitized, the fee amount for the scope of work will be determined and displayed in the appropriate Blocks (5.d, 5.e, and 5.f). The proposed fixed fee amount for the UCA was documented in our proposal.
Expected award date of the definitized contract has changed to December 2023.
We performed a comprehensive EAC (CEAC) in June 2023.
Option Two
Another approach is to include the fee for the AUW/UCA value based on a long standing relationship with the customer. An example is a four year CPFF contract where a contractor can expect the same calculated fee when they negotiate the AUW/UCA. For a contractor with a proven history with the customer, they could reference a known historical fee percentage for similar work effort to document the assumed fee percentage in their transmittal letter with the accompanying the AUW/UCA estimate.
See Figure 2 as an example of including fee. The AUW/UCA amount would be included in the IPMR Format 1 Block 5.c. However, the Estimated Price in Block 5.f would include the profit/fee amount for the AUW/UCA. Also, the Most Likely Estimated Cost at Completion (Block 6.c (1)), and Contract Budget Base (Block 6.c (2)) are equal to the Block 5.c since they do not include fee.
Figure 2: Example IPMR Format 1 where the AUW (5.c.) excludes fee and the Estimated Price (5.f) includes fee.
Note: including the profit/fee amount in the Estimated Price is clearly in violation of the EVMSIG and IPMR/IPMDAR DIDs. Why this approach was taken must be addressed with the customer prior to report submittals. This action of including the fee in Block 5.f must be fully disclosed in the IPMR Format 5 or the IPMDAR Performance Narrative Report. This is required to reconcile the heading numbers. Example of a Format 5 narrative for this option two approach follows.
In the IPMR Format 1 Block 5.c the estimated cost of Authorized Unpriced Work (AUW) in the amount of $30,563,565 reflects our proposed cost of $32,609,629 less our anticipated fee of $2,046,064 as documented in our proposal. Per the DID, Block 5.c. does not include fee or profit. The Most Likely Estimated Cost at Completion and Contract Budget Base (Block 6.c.(1) and (2)) is equal to Block 5.c. (AUW).
In the IPMR Format 1 Block 5.f, the Estimated Price includes an anticipated fee amount documented in our proposal which is consistent with our long term relationship. It is equal to our proposed cost ($30,563,565) plus fee ($2,046,064) for a total of $32,609,629.
Expected award date of the definitized contract has changed to December 2023.
We performed a comprehensive EAC (CEAC) in June 2023.
Best Practice Tips
You are likely to encounter a more complex situation than the one illustrated in Figures 1 and 2 where some work scope has been defined and fully negotiated and other work scope is AUW/UCAs. Regardless of which option was used to report AUW/UCA and fee amounts, clearly explain the basis for the numbers in the heading information to ensure the customer is able to reconcile the numbers (Block 5 heading values highlighted in the red boxes in Figures 1 and 2).
Based on our decades of experience with all types of contractors and a variety of government agencies, here are few recommendations for you.
Be sure your EVM System Description or related procedures explain how to handle AUW/UCA including how to report contract total values in the IPMR or IPMDAR for specific contract types.
Verify your EVM training courses include a section on handling AUW/UCA and the rules that apply. It often helps to remind project personnel of the basic budget flowdown reconciliation math and which budget components include or exclude fee.
Document how you intend to handle fee for the AUW/UCA in your proposal to ensure your customer clearly understands your intentions. Using the example of the option one approach discussed above, be sure to state your intentions to determine a fee amount once the work has been fully definitized and negotiated so the customer knows what to expect. Using the example of the option two approach above, reporting a fee for AUW/UCA amount before the work is fully negotiated is in violation of the EVMSIG and DIDs. Verify this approach is acceptable with your customer before you submit your reporting deliverables.
H&A earned value consultants often assist clients with EVMS and contracting situations where the government customer’s policy or other guidance can be subject to interpretation. Call us today at (714) 685-1730 if you need help determining the best course of action for your situation.
With the arrival of the Integrated Program Management Data and Analysis Report (IPMDAR) requirements for electronic cost and schedule dataset submittals, DoD contractors with EVMS or EVM reporting contractual requirements have a tighter time frame for submitting their month end data. A previous blog, Introduction to the IPMDAR Data Deliverable – Tips for Producing the Outputs summarizes these data reporting requirements. This includes the Contract Performance Dataset (CPD) for the time phased cost data and the Schedule Performance Dataset (SPD) along with a native file export out a schedule tool.
1.8.1 Monthly Submission Requirement. IPMDAR data shall be required at least monthly. The reporting frequency shall be specified in the Contract Data Requirements List (CDRL). All reports shall reflect data from the same accounting period and shall be provided at any time after the close of the contractor’s accounting period, but no later than sixteen (16) business days after the contractor’s accounting period end date.
On the surface, you might say requiring data delivery 16 business days after the contractor’s accounting period end date doesn’t sound unreasonable or even much different from the previous Integrated Program Management Report (IPMR) DID (DI-MGMT-81861A), and you would be right.
What is the issue?
Some people think that because the IPMDAR submittals are electronic datasets instead of report formats it is easier to generate and report that information. That is not necessarily true, and shortening the data turnaround time exacerbates the problem. The tighter time requirements also apply when there are EVM reporting subcontractors providing performance data to a prime contractor.
The third sentence of 1.8.1 above states: “All reports shall reflect data from the same accounting period…” This requirement is very challenging, especially when a subcontractor operates on a different month end accounting calendar; for example, a “5-4-4” versus the prime’s “4-4-5” calendar. Even when the prime and subcontractor are on the same month end calendar, for the prime to submit IPMDAR data in 16 business days, the subcontractor has less time to provide their data to the prime. It becomes even more challenging on very large programs that have several tiers of subcontractors.
Subcontractors cry “foul” because they don’t have enough time to get all the performance data ready in the reduced time. Prime contractors cry “foul” because they are held accountable for data that may or may not come from one or more tiers of subcontractors in time for them to conduct basic data analysis and deliver month end data for the IPMDAR. The government customer still insists all the data must be for the same accounting month end date, even though that may not be well defined. Customers also do not want the subcontractor data delayed by a month just to get the subcontractor data “caught up” – i.e., “comparing apples to oranges.”
1.8.1.1 Incremental Delivery. Reports may be provided incrementally, including preliminary data, with the number of days for delivery of each submittal tailored in the CDRL. Data delivered is not considered authoritative until the final submission and signature. The recommended incremental delivery process is the Schedule, followed by the CPD and the Executive Summary, Government review of submittals, Government directed Detailed Analysis, Contractor Detailed Analysis delivery and all final data.
The IPMDAR Implementation and Tailoring Guide also provides a notional example of how an incremental delivery could be handled:
1. SPD – To be delivered with native file five (5) working days after the end of the contractor’s accounting period (may be labeled preliminary)
2. CPD – To be delivered with the Executive Summary ten (10) working days after the end of the contractor’s accounting period (may be labeled preliminary)
3. Contracting Office to select items for detailed analysis (variances) – to contractor thirteen (13) working days after the end of the contractor’s accounting period
4. Performance Narrative Analysis – to be delivered NLT sixteen (16) working days after the end of the contractor’s accounting period along with any other “final” versions of previously submitted files
Note: The notional incremental delivery plan above is not additive.
Doing the above might demonstrate to the government customer that the prime contractor is at least trying their best to make the prime/subcontract situation work – even though they would be using “estimated data” until the final versions come in from the subcontractors. Does this approach really make the timely delivery of the data easier to attain? The bottom line does not change. Per number 4 above, the prime still has to deliver all the data in “final versions” by the 16th business day following the close of their accounting calendar. The note at the bottom specifies the days indicated in each step are not “additive” – i.e., the contractor does not get 5+10+13+16 = 44 business days.
In some circumstances, incremental delivery might allow some subcontractors a bit more time to get the data to the prime contractor, but there would still have to be tighter delivery dates for the incremental deliveries, so the problem does not really go away.
What are your options?
This difficult situation arises because few contractors consider the implications of having to get all data by their accounting month end. Not all the subcontractor work elements are set up the same way. Contractors who have the EVM reporting requirement, who do or will have EVM reporting subcontractors, should address this basic difference as part of the contract negotiation process. One possible part of this negotiation could be to use the IPMDAR DID, paragraph 1.4, to help level the field for reporting purposes. This paragraph states:
1.4 Direct Reporting Contractor Role.
1.4.1 A Direct Reporting Contractor is any contractor required to provide the IPMDAR directly to the Government. This includes prime contractors, subcontractors, intra-government work agreements, and other agreements, based on the contract type, value, duration, nature of the work scope, and the criticality of the information. In this document, instances of “Contractor” are synonymous with “Direct Reporting Contractor.”
There is a footnote to this paragraph that states:
In the event that the Direct Reporting Contractor is a contractor other than the prime, the Direct Reporting Contractor will additionally report to the prime. Subcontractor data shall be provided to the prime in a manner that supports the contractor’s submission to the Government.
One solution is to negotiate to have each EVM reporting subcontractor deemed a “Direct Reporting Contractor” that submits their data directly to the government, including the customer, as well as to the prime contractor. The prime and subcontractors are each submitting their IPMDAR electronic deliverables to the DoD EVM Central Repository (EVM-CR).
Each level of contract, the prime through however many tiers of subcontractors there may be, will have the same 16 business days after their own accounting month end dates to provide all interested parties with the EVM data. The prime contractor still must at least get estimated subcontractor data to do their monthly assessment, making corrections in the next month after they have received the final version of the data from their subcontractors.
Should the government customer want analysis performed on subcontracted effort, the IPMDAR dataset submittals will be in the DoD EVM-CR. They can do that analysis independently of the prime contractor’s analysis that would be provided after the prime’s 16th business day.
This approach would put pressure on the prime because they will not have seen the subcontractor’s data prior to it being delivered to the government, but that could be addressed in the next reporting period’s “errata” variance analysis narrative. The government would also have the detailed data from the subcontractors when the subcontractor is providing a reduced set of data such as only total cost data to the prime. Should the government customer not want to do that level of analysis, the government customer may need a different contracting solution to avoid requiring EVM reporting down through various levels of contracts. This is often determined by the contract value and risk factors associated with the subcontractor.
This approach also requires the subcontractor to produce two deliverables. One for the prime contractor in an agreed upon format and one for the government customer following the IPMDAR DID electronic submittal requirements for the DoD EVM-CR. These reporting requirements should be negotiated with the subcontractor well in advance; the subcontractor needs to know their data deliverable and reporting requirements when they bid on the work effort for the prime.
This subcontractor data incorporation issue has been around for many years and can be very confusing. H&A earned value consultants can help you work through the various responses to this requirement in the best possible way for your situation. Call us today at (714) 685-1730 to get started.
In the complex landscape of project management, ensuring compliance with the EIA-748 Standard for Earned Value Management Systems (EVMS) Guidelines is a critical step for companies seeking to secure and successfully manage government contracts. Humphreys & Associates are leaders in earned value consulting, providing comprehensive strategies and solutions tailored to meet the rigorous requirements of the EVMS approval or certification process by a Cognizant Federal Agency (CFA). This article is the first part of a three-part series aimed at guiding organizations through the process of implementing a compliant EVMS and successfully completing a CFA EVMS compliance review.
Understanding the EVMS Approval or Certification Process
Achieving EVMS approval or certification by a CFA such as the Defense Contract Management Agency (DCMA) or the Department of Energy (DOE) is a structured process that requires careful planning and execution. The process begins with a thorough understanding of the EIA-748 Standard for EVMS Guidelines, which is the foundation for determining whether an EVMS is compliant. The EIA-748 Guidelines define the requirements to establish and maintain an effective EVMS. The approval or certification process involves several key steps, beginning with the initial application and concluding with the CFA formal determination a contractor’s EVMS complies with the Guidelines. Throughout this journey, organizations must demonstrate a thorough understanding of the Guideline requirements and how they are implemented within their project management framework as documented in their EVM System Description.
Steps to Achieve EVMS Certification
Preparation and Self-Assessment: Conducting an internal review of the current project management processes and comparing them against the EIA-748 Standard for EVMS Guideline requirements is an important first step to identify gaps in the system that will need to be addressed.
Training and Education: It is crucial for the team responsible for EVMS implementation to receive proper training to understand the Guideline requirements and how to apply them.
System Description Development: A comprehensive EVM System Description that explains how the organization’s processes meet the EIA-748 Guideline requirements must be developed.
Implementation: The EVMS must be implemented on a project, demonstrating the project team’s ability to use the EVMS and EVM data to manage the project, as well as the system’s functionality in a real-world scenario.
Mock Compliance Review: An internal review, often with the help of an independent third party, should be conducted to verify the EVMS complies with the Guideline requirements as well as to verify the quality of the project’s schedule and cost data to provide timely and actionable information for managing the project.
Formal Compliance Review: A CFA conducts a formal review of the EVMS. This includes reviewing the EVM System Description, performing a detailed examination of project schedule and cost data, conducting interviews with project personnel, and assessing how the EVMS has been implemented.
Importance of Complying with the EIA-748 Guidelines
Meeting the EIA-748 Guideline requirements is not just about compliance; it is about integrating a system that enhances the project management capabilities of an organization. A well-implemented EVMS facilitates better project control, provides early warning signs of performance issues, and supports informed decision-making. Compliance with the Guidelines is often a prerequisite for bidding on government contracts, making a formal EVMS approval or certification a strategic necessity for companies in the defense, aerospace, and construction industries, among others.
Key Requirements for an EIA-748 Compliant EVMS
The EIA-748 Standard for EVMS provides the basic guideline requirements for organizations to establish and implement a system that integrates project work scope with the schedule and cost components to enhance project planning and control. The Guidelines are organized into these process areas:
Organization: The organization guidelines focus on establishing the framework for decomposing a project’s scope of work to level where it is possible to identify management responsibility for the work scope, schedule, and cost components.
Planning, Scheduling, and Budgeting: The organization guidelines are the framework for the planning, scheduling, and budgeting process required to establish the performance measurement baseline, a common point of reference for measuring completed work and communicating the project’s current status.
Accounting Considerations: These guidelines focus on the recurring processes for determining progress and collecting the actual costs for work performed. The objective is to ensure alignment between the budget plan, performance claimed (earned value), and actual costs to continually assess and analyze project performance for potential corrective action.
Analysis and Management Reports: These guidelines facilitate the analysis and use of the performance data to proactively manage the project. An EVMS generates variance data that helps management to focus on areas that are not performing to plan for potential corrective action.
Revisions and Data Maintenance: The integrity of the performance measurement baseline must be maintained to manage the remaining work on a project. These guidelines focus on establishing a controlled process to document, authorize, track, and manage revisions to a project’s scope, schedule, and budget.
Frequency and Importance of Surveillance Reviews
Surveillance reviews are an important part of maintaining a compliant EVMS. Once the CFA has approved or certified a contractor’s EVMS, the contractor is responsible for implementing an annual self-surveillance or self-governance process to ensure the EVMS continues to be implemented on projects in an effective and consistent manner in compliance with the EIA-748 Guidelines. It also ensures the contractor’s EVMS process and procedures, training, and tools are actively maintained over time. The government customer also conducts surveillance for the life a contract, typically on an annual basis. This is a recurring evaluation of the contractor’s management control practices and samples of internal and external reported data. The focus is typically on major system activities, problem identification, and tracking any corrective actions to closure.
The successful implementation of an EVMS that complies with the EIA-748 Guideline requirements is a testament to an organization’s commitment to project excellence. It demonstrates a capability many government agencies require, making it an essential investment for businesses looking to expand their opportunities within this sector. The subsequent articles in this series will delve into the specifics of the EVMS implementation process and the intricacies of preparing for EVMS compliance and surveillance reviews.
This article has provided an overview of the EVMS approval or certification process by a CFA and the importance of complying with EIA-748 Standard for EVMS Guidelines.
Facing an Earned Value Management System (EVMS) compliance review can be an imposing prospect for any organization with EVMS contractual requirements. With strategic preparation and expert guidance from Humphreys & Associates, renowned for their leadership in earned value consulting, this necessity can be transformed into an opportunity for process improvement to ensure an effective and efficient EVMS can be implemented on any project. This comprehensive guide, the first in a three-part series, takes a closer look at the strategic approach necessary for preparing for a Cognizant Federal Agency (CFA) EVMS compliance review. CFAs include the Defense Contract Management Agency (DCMA) for DoD and NASA contracts and the Department of Energy (DOE). A CFA conducts a formal review to determine whether the contractor’s EVMS is compliant with the EIA-748 Standard for EVMS Guidelines. A formally approved or certified EVMS is an EVMS the CFA has determined to be compliant with the EIA-748 Guidelines.
Key Elements in Preparing for an EVMS Compliance Review
A successful EVMS compliance review is predicated on several fundamental elements. Being well-prepared in these areas can make the difference between a review that goes smoothly and one that uncovers issues that require corrective action.
Thorough Documentation: Proper documentation is the backbone of any review process. It’s essential to maintain an EVM System Description that explains how the system complies with the EIA-748 Guideline requirements as well as any agency specific EVMS requirements. This includes documented policies and procedures as well as process flowcharts illustrating system inputs and outputs with responsibility assignments.
Mock Reviews: Conducting internal mock reviews can serve as a rehearsal for the actual review. These practice runs help to uncover any weaknesses in the system and provide a chance to correct them beforehand. Mock reviews also help familiarize the team with the compliance review process, reducing anxiety and ensuring that everyone knows what to expect.
Continuous Training: Regular and comprehensive training ensures that project personnel are familiar with the EVMS processes, know how to use the EVM data, and understand the importance of their role in maintaining quality schedule and cost data. This training should be updated regularly to reflect any changes in EVMS requirements, software tools, or company procedures.
Data Integrity: The accuracy and completeness of project data are crucial. Regular validation checks should be conducted to ensure data in the EVMS are valid, reliable, and traceable. This includes verifying the project data aligns with the corporate financial records and that the system accurately reflects the project’s current status.
Stakeholder Engagement: Effective reviews require the cooperation and understanding of all stakeholders. Engaging them early in the review process helps ensure everyone is on the same page and that the roles and responsibilities are clearly defined. This engagement includes regular communication and involvement in the compliance review preparation process.
Assistance in the Review Preparation Process
Humphreys & Associates provides comprehensive services designed to support organizations throughout the compliance review preparation process. This includes:
Compliance Review Readiness Assessments: These assessments are crucial in determining the readiness of an organization’s system, personnel, and data quality for a compliance review. The assessment identifies areas of strength and those requiring improvement, enabling targeted action to enhance readiness.
Preparation Workshops: Workshops conducted by experienced consultants can train and prepare the team for the compliance. These sessions cover everything from the basics of EVM to the nuances of the review process, tailored to the specific needs of the organization.
Documentation Review: Prior to an compliance review, it’s beneficial to have an external review of the documentation that will be presented. This review can identify areas where additional information is needed and ensure that the documentation accurately reflects the EVMS and compliance with the EIA-748 Guidelines.
Support Services: During the review, having expert support available can alleviate the challenges that may arise. This includes on-the-spot advice and assistance in addressing the CFA’s questions and concerns. Should the CFA issue formal corrective action requests (CARs), Humphreys & Associates can assist with producing and implementing the corrective action plans (CAPs) to resolve the deficiencies as quickly as possible.
Common EVMS Review Findings and Remediation
There are several common findings that an EVMS compliance review might reveal that could potentially impact an organization’s ability to obtain a formal CFA EVMS compliance approval or certification. Being aware of these potential findings and understanding how to address them is key to success.
Inadequate Baseline Control: Maintaining a current and accurate performance measurement baseline is essential. When a government review team finds baseline control to be lacking, it’s often due to inadequate processes for incorporating changes into the baseline or failing to maintain traceability of the changes.
Insufficient Documentation: Documentation gaps can lead to findings of non-compliance. Government review teams need to see evidence that a complete set of processes are in place and that these processes are being followed. This includes having proper version control and evidence of management approvals.
Data Discrepancies: Differences between what’s reported in the project reports and the actual project data can indicate serious issues with data management systems. Ensuring that the EVMS software is properly configured, data validation checks are routinely performed, and that schedule and cost data align can prevent such discrepancies.
To address and prevent these common issues, Humphreys & Associates recommends a proactive stance, with robust change control processes, continuous enhancement of documented practices, and improvements to data management systems to ensure accuracy and traceability.
Preparing for an EVMS compliance review is a critical task that can significantly impact the management and success of government contracts. With the strategies provided here and the support of Humphreys & Associates, organizations can confidently navigate the EVMS compliance review process.
