Formal Reprogramming: OTB or OTS Best Practice Tips

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Formal Reprogramming: OTB or OTS Best Practice Tips

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

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

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

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

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

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

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

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

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

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

Before Over Target Baseline
Figure 1 – Over Target Baseline Illustration

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

Contractual Obligations

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

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

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

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

Notes:

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

Best Practice Tips

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

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

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

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Introduction to the IPMDAR Data Deliverable – Tips for Producing the Outputs

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Contractors new to earned value management (EVM) often give us a call to help them respond to a government customer request for proposal (RFP) that includes the FAR or DFARS Notice of Earned Value Management System (EVMS) contract clause. Depending on the contract value threshold, the contractor will need to implement an EVMS that can at least produce the contract performance data submittals ($20M or greater) or complete a formal EVMS compliance review ($100M or greater) by a cognizant federal agency (CFA) such as the Defense Contract Management Agency (DCMA). Required data deliverables for a DoD or NASA customer reference the Integrated Program Management and Data Analysis Report (IPMDAR) Data Item Description (DID) as the means to submit monthly performance data. 

What is the objective for placing the IPMDAR on contract?

The government customer wants the monthly source schedule and cost data from the contractor for their own contract performance analysis in a standard format. They need to have reliable schedule and cost data for visibility into current contract performance as well as credible schedule and cost projections for the remaining work. Will the contractor complete the remaining work effort within the contractual schedule and cost targets? The government program manager needs this information for their own planning and budgeting as well as forecasting their funding requirements.

A standard format for collecting the data is important for the government customer so they can perform program portfolio analysis. The DoD established their EVM Central Repository (EVM-CR) to routinely collect contractor data submittals for program portfolio analysis. The data is organized using the MIL-STD-881 (the DoD Standard for Work Breakdown Structures or WBS), as a common basis to organize program data. The IMPDAR DID data submission requirements are defined in the File Format Specifications (FFS) and Data Exchange Instructions (DEI). The FFS and DEI specify the required set of data tables using JSON encoding for the IPMDAR cost and schedule data submissions while narrative text is submitted using Microsoft Word or PDF files so the customer can perform text searches. 

The government program manager can tailor the IPMDAR requirements as defined in the DoD IMPDAR Implementation and Tailoring Guide that complements the DID. For example, they can specify the level of data detail (control account or work package level), whether data can be delivered incrementally, variance analysis options, and requirements for the Performance Narrative Report content.

What is included in the IPMDAR deliverable?

There are three components as outlined below

IPMDAR Components

Notes:

  1. At a minimum, the IPMDAR requires data at the control account level with summary element of cost detail. The contract may specify work package level data.
  2. Inputs from a recent schedule risk assessment (SRA) should be included in the native schedule file submission when available. Depending on the schedule tool, the SRA data may need to be a separate file submission (Word or PDF). Results from the SRA along with other schedule analysis discussions (critical path, driving path, and schedule margin) are required to be included in the Detailed Analysis Report narrative. 
  3. The customer may request the results from a schedule data quality assessment and health metrics be included in the Detail Analysis Report narrative. 

What is required to produce the IPMDAR deliverables? 

For contractors new to EVM, one of their first objectives is to figure out what schedule and cost tools they need to be able to provide the required IPMDAR data and narrative analysis to their customer. H&A earned value consultants are sometimes asked to provide recommendations on commercial off the shelf (COTS) tools for this purpose. Much depends on what the contractor already has in place. 

Common schedule COTS tools such as MSP or Oracle Primavera P6 that have already been implemented will require an add-on to produce the SPD. Keep in mind that the IPMDAR does require SRA data and may require results from performing routine schedule data quality assessments. Some COTS add-ons to MSP or P6 are able to produce the typical schedule data quality metrics as well as produce the SPD. Other COTS scheduling tools such as Deltek Open Plan incorporate the SRA functionality, data quality metrics, and the ability to produce the SPD as part of the core product capabilities.

In most instances, contractors new to EVM do have an accounting/financial system in place to at least capture some level of contract or program/project budget and actual cost data. There may also be some capability to produce ETC data required for EAC financial analysis. The issue is organizing the complete set of time phased cost data (budget, earned value, actual cost, ETC) at the control account and work package level by summary element of cost that aligns with the schedule activity data. A contractor may be able to get by with Excel for a small project, however, it is time and cost prohibitive to create Excel macros to produce the CPD. Most COTS EVM cost tools are able to produce the CPD and have successfully completed the DoD EVM-CR data submission validation checks. This is a better alternative to building an in-house tool.

A data analysis tool such as Encore Analytics Empower is also a good option. Empower can import the time phased cost data from Excel or other COTS EVM tools and produce the CPD output. Empower can also import data from common COTS schedule tools. The benefit to using Empower is the ability to analyze the schedule and cost data in one place to verify alignment, produce interactive dashboards and a variety of analysis data views, and produce the IPMDAR Performance Narrative Executive Summary and Detailed Analysis Report.

Top Three Tips for Implementing Tools to Produce the IPMDAR Outputs

Here are a few tips from H&A’s earned value consultants on implementing tools to support the IPMDAR data submittals. Focus on getting the basics right.

  • Continuously verify the quality of the schedule and cost data. Routinely perform schedule data quality assessment and health checks to proactively resolve schedule construction, status, or data issues. Perform routine cost data validation checks such as earned value and no actual costs for a work package or the cumulative to date earned value exceeds the budget at completion (BAC). Correct all data anomalies before producing the deliverables.
  • Continuously verify the schedule and cost data are in alignment. Consistent schedule and cost data coding is critical to ensure integration and traceability. 
  • Anticipate the scope and level of data detail required. This can impact tool configuration, data structures, and data pulled from other business systems such accounting. For example, be prepared to provide the work package level of detail; actual costs will need to be available at this level. Another example is providing schedule risk assessment inputs; this is usually required at intervals specified in the CDRL.

H&A earned value consultants routinely help clients with constructing the schedule to support the IPMDAR data requirements, setting up the process to do routine data quality checks, integrating the schedule and cost data, and verifying the data before producing the performance reporting data submittals. Another common focus is producing clear and concise variance analysis narrative content. 

We can do the same for you. Call us today at (714) 685-1730 to get started.

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Comparing the Efficacy of Independent Estimate at Completion (IEAC) Methods Using Real Project Data

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Comparing the Efficacy of Independent Estimate at Completion (IEAC) Methods Using Real Project Data

“Data! Data! Data!” he cried impatiently. “I can’t make bricks without clay.”

-Sherlock Holmes, The Adventure of the Copper Beeches

There are many discussions about EACs and evaluating EACs including using Independent EAC (IEAC) formulae to compare with the contractor EACs. With good reason, we should wonder how accurate are those IEACs that we use so often and sometimes make decisions based on them. Are we misjudging contractor’s EACs based on formulae that are weak or inappropriate?

Humphreys & Associates has initiated a study to determine how accurate IEACs are, and we would like your help. The study will compare different IEAC formulae against the Program Manager (PM) most likely EAC at the 25, 50, and 75 percent complete point for completed projects. The objective is to assess how closely the IEACs and PM most likely EAC were able to predict the final cost outcome for the project.

How Accurate are IEAC Formulae?

Many formulae exist for using recorded data from an earned value management system (EVMS) to make independent estimates of the final cost at completion (EAC) for the element in question. The element might be a control account, a Work Breakdown Structure (WBS) element, or even an entire project.

What is not known is how accurate these methods are at forecasting the final actual cost for the project. This study hopes to determine that answer.

Real World IEAC Data

This study was initiated by collecting earned value data from 12 completed projects. We need projects that are completed because, on a completed project, the final actual outcome is known. We collected project data at the 25, 50, and 75 percent complete points. At each of these points, the IEAC formulae were applied to determine how closely they were able to predict the final actual cost outcome for the project. The quest is to learn how the various IEACs performed. Is any one of them more accurate than the others?

From this investigation, any indication of the relative efficacy of the formulae would be used to inform future use of the IEAC methods.

Our Method for Testing IEACs

In general, the IEAC approach is to use existing recognized formulae. We have chosen these IEACs as a starting point:

  • IEAC 1 = BAC/CPIe at the percent point reported. This formula can be stated in words as “the entire project is performed at the same efficiency as experience to date.”
  • IEAC 2 = ACWP + [BCWR/CPI (.5) + SPI (.5)]. This formula uses weighted SPI and CPI which theoretically allows for sensitivity to both cost and schedule historical performance. The weights used in this application are even at .50 and .50.
  • IEAC 3 = ACWP + [BCWR/CPI x SPI]. This formula uses the SPI and CPI multiplied together which theoretically allows for sensitivity to both cost and schedule performance to date.
  • IEAC 4 = ACWP + BCWR. This formula assumes the remaining work will be done as budgeted with no factoring.

One additional non-traditional IEAC will be used.

IEAC 5 = Use of IEAC 2 weighted SPI and CPI but decreasing the proportion applied to the SPI as the percent of project completion increases. In other words, the impact of schedule performance diminishes as the project becomes closer to completion.

We will also take the average of all the formulae to see how that works.

Initial Data Set

One aerospace contractor and one US Government agency have provided the required data for 12 completed projects with an interest in the outcome of the study. The source of the data and the specific projects will not be disclosed in the study.

These real-world projects did not have an exact 25%, 50%, or 75% dataset. The closest dataset to each of those completion percentages was used. One example dataset looks like this (color coding should be ignored):

Example Product Data

How can you help?

We need more project data to gather enough varying project outcomes to make the test realistic. We do not plan to keep the types of projects or products separate but will take all the data we can get and look at them all.

Please consider providing data for the study. We have created an Excel spreadsheet template to help gather project data in a common format for analysis. You can download this template here. Add as many tabs as needed for each project. Send your completed spreadsheet to humphreys@humphreys-assoc.com.

In a separate blog we will outline other help we need to complete the study and to analyze the results.

IEAC_Study_Project_Data_Template-Rev-06052023Download

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Tips for Producing an Earned Value Management System Description

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Tips for Producing an EVM System Description Blog Post Banner Image.

There are a variety of ways a contractor can produce the documentation that describes their Earned Value Management System (EVMS), how it is implemented, used, and maintained. This is typically referred to as the EVM System Description (SD), though other names may be used. For example, it could be titled the Integrated Project Management System Description or Project Controls System Description to align with corporate or contractual naming conventions. EVM practices may be just one part of their overall project management system.

Regardless of the title, a contractor with an EVMS contractual requirement must be able to provide the necessary documentation to their customer to demonstrate their system complies with the EIA-748 Standard for EVMS guidelines. This includes any additional implementation guidance associated with the government agency responsible for conducting EVMS certification or validation reviews.

What is the purpose of an EVM System Description?

There are two purposes for an EVM SD; one is internal, the other is for the external customer.

The primary user of the EVM SD is project personnel such as project managers, project controls, schedulers, and control account managers (CAMs) responsible for implementing the EVMS on their project. It is essential they have a clear understanding of the required corporate EVM process and procedures as well as how to meet the intent of the EIA-748 guidelines using the applicable schedule, cost, analysis, risk, and other project control toolsets.

The government customer uses the EVM SD to gain an understanding of the contractor’s EVMS. The EVM SD must adequately document how the contractor’s system meets the intent of the EIA-748 guidelines. It should include a map of the EVM SD content to the EIA-748 guidelines or similar government customer checklist. The purpose of a government agency’s compliance review is to conduct a comprehensive assessment of a contractor’s EVMS. This includes the EVM SD as well as related processes and procedures. They also assess how the contractor has implemented the EVMS to verify the EVMS is providing timely, reliable, and auditable information.

Once the Cognizant Federal Agency (CFA) has determined the contractor’s EVMS complies with the EIA-748 guidelines, they conduct routine surveillance to ensure the contractor’s system as documented in the EVM SD and implemented on projects continues to comply with the EIA-748 guidelines. The contractor’s EVM SD is also a typical artifact required for an Integrated Baseline Review (IBR).

What needs to be included in the EVM SD?

An EVM SD should explain the methodology the contractor uses to comply with the EIA-748 guidelines as well as any government agency specific requirements. For example, DCMA uses the DoD EVMS Interpretation Guide (EVMSIG) and their Earned Value Management System Center Business Practice (BP) documents such as the BP 2 EVM System Description Review attachment EVMS Cross Reference Checklist (CRC). The DOE Office of Project Management (PM) uses their EVMS Compliance Review Standard Operating Procedure (ECRSOP) and related appendices including their Compliance Assessment Governance (CAG) document and EVMS Compliance Reference Crosswalk (CRC).

The EVM SD should provide an executive overview, reference the corporate EVMS policy, and address all of the subsystems that make up the EVMS. H&A earned value consultants have reviewed countless system descriptions over the years; contractors take a variety of approaches to discuss their subsystems.

Some contractors align with the EIA-748 five process areas (Organizing; Planning, Scheduling, and Budgeting; Accounting; Analysis and Management Reports; and Revisions and Data Maintenance). Others include additional sections covering indirect costs, material management, and subcontractor management. The planning, scheduling, and budgeting process area is often broken down into two sections – one for planning and scheduling and the other to cover work authorization and budgeting (a total of nine process groups). For more discussion, see the blog on the Benefits of Using Nine Process Groups.

A DOE contractor may align with the DOE CAG 10 subprocesses; this is similar to the nine progress group approach plus a section on risk and opportunity management. Other contractors use the project life cycle approach (initiation, planning, execution, monitor and control, and close out) to organize their content.

We recommend including a section on self-governance or self-surveillance (see Benefits of an EVMS Self-Governance Process). As noted in this blog, contractors with an approved EVMS are expected to establish and execute an annual EVMS self-governance plan.

The government customer expects contractors to map their EVM SD content to the applicable government agency EVMS compliance checklist. This is typically an appendix to the EVM SD. In most instances, this is the DCMA BP 2 EVMS Cross Reference Checklist or the DOE ECRSOP EVMS Compliance Reference Crosswalk. These checklists include attributes and/or questions that provide a more comprehensive guide to assess how a contractor meets the intent of the guidelines. The government customer also uses these checklists to identify and record the areas in the system documentation that meet the intent or note deficiencies the contractor needs to address.

The system description should include a concise description of what’s required, diagrams, illustrations, process flowcharts, as well as sample forms and reports with example data. In preparation for a compliance review, H&A earned value consultants often assist clients in creating an EVMS storyboard that visually depicts the entire system using the workflow diagrams along the inputs and outputs, and who is doing what using the applicable tool that demonstrates the system in operation.

Single or multiple documents?

A common question H&A earned value consultants are asked is whether the EVM SD should be a single document that includes the complete set of flowcharts, forms, and reports or a summary document with supporting procedures. Typically, the supporting procedures include the process flowcharts and sometimes the applicable artifacts (forms and reports). There are pros and cons to each approach.

Single Document Approach
Pros Cons
  • Provides an integrated view of the entire EVMS process.
  • Provides a complete discussion of a topic without having to reference multiple documents. Requirement discussion and process flowcharts with responsibility swim lanes along with example inputs/outputs provides a complete picture.
  • Configuration control is easier to manage, only need to make changes in one place.
  • Easier to search for a topic in a single document.
  • Easier to map the contents of a single document to the DCMA or DOE CRC.
  • Easier to create and maintain cross reference links between sections within a single document (See or See Also references).
  • For a company new to EVM, can appear to be an overwhelming task to produce a single, comprehensive document.
  • Can be a lengthy document.
  • More difficult to partition the content to different process owners to complete their section and to combine the content.
Summary Document with Supporting Procedures Approach
Pros Cons
  • Shorter summary document provides a general overview as a quick introduction to the EVMS. Can appear less daunting. Can be used as a strategy to introduce EVM concepts and incorporate into standard business practices.
  • Modular approach to creating and maintaining content. Can be easier to create the initial content.
  • Useful for targeted training using the individual procedures for a process area. For example, training focused on the steps required for developing the WBS and WBS dictionary with expected outputs.
  • Someone must review multiple documents to gain a complete understanding of the EVMS.
  • Fragmented and potentially siloed view of the system.
  • Potentially larger volume of content (over a single document), content is often repeated for context.
  • Configuration control. More difficult to maintain content to ensure consistency in multiple documents as well as maintain cross references between documents.
  • More difficult to map content in multiple documents to the DCMA or DOE CRC.

Regardless of which approach you take, keep in mind that the government customer will be approving the complete set of EVM SD documents (one or multiple documents). Any document referenced in the EVM SD is also subject to review. When you make changes to your EVM SD, the government customer will need to review and approve those changes to ensure continuing compliance with the EIA-748 guidelines. This is a formal process; changes must be processed through the contracting officer. 

Need help with your EVM System Description?

Whether you need to update your existing EVM SD or create one, H&A earned value consultants can help you to organize the content and artifacts in alignment with your business requirements. They also work with you to ensure your EVMS satisfies the EIA-748 guideline requirements as well as government agency specific requirements. H&A often assists with designing an EVMS and ensuring the project control software tools are configured to support the EVMS as well as verifying the quality of the data. For clients new to EVM, H&A offers a template that provides the basis to develop an EVM SD. This template is intended to assist clients with designing and implementing an EVMS that meets EIA-748 guideline requirements as well as the more rigorous requirements of specific government customers.

Call us today at (714) 685-1730 to get started.

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Using Earned Value Management (EVM) Performance Metrics for Evaluating EACs

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A previous blog, Maintaining a Credible Estimate at Completion (EAC), discussed why producing a realistic EAC is essential to managing the remaining work on a contract. Internal management and the customer need visibility into the most likely total cost for the contract at completion to ensure it is within the negotiated contract cost and funding limits.

As noted in the earlier blog, one common technique to test the realism of the EAC is to compare the cumulative to date Cost Performance Index (CPI) to the To Complete Performance Index (TCPI).

Example of Using the Metrics for Evaluating Data

One example of documented guidance to industry for evaluating the realism of the EAC is the DOE Office of Project Management (PM) Compliance Assessment Governance (CAG) 2.0, and the related DOE EVMS Metric Specifications they use to assess the quality of schedule and cost data. This blog highlights the use of this guidance and how any contractor can incorporate similar best practices to verify EACs at a given WBS element, control account, or project level are realistic.

To refresh, the CPI is the efficiency at which work has been performed so far for a WBS element, control account, or at the total project level. The formula for the cumulative to date CPI is as follows.

Best practice tip: To ensure a valid CPI calculation, verify the BCWP and ACWP are recorded in the same month for the same work performed.

The TCPI provides the same information, however, it is forward looking. While the CPI is the work efficiency so far, the TCPI is the efficiency required to complete the remaining work to achieve the EAC. The formula for the TCPI is as follows.

TCPI Formula

Best practice tip: To ensure a valid TCPI, verify the BCWP and ACWP are recorded in the same month for the same work performed, and the BAC and EAC are for the same work scope. In other words, the scope of work assumptions are the same for the budget and remaining cost. This is why anticipated changes should not be included in the EAC.

The DOE uses the CPI in two of their assessment metrics and the TCPI in one, however, these are critical metrics partly because they are the only ones used to assess two different data evaluations: 1) commingling level of effort (LOE) and discrete work, and 2) EAC realism.

Commingling LOE and Discrete Work

The first use of CPI (no TCPI in this metric) falls under the Budgeting and Work Authorization subprocess. The primary purpose is to evaluate the effect of commingling LOE and discrete work scope has on control account metrics. The basic premise for this metric is that if the CPI for the LOE scope is significantly different than that for the discrete, the mixture of LOE in that control account is likely skewing overall performance reporting.

Here is the formulation DOE uses.

C.09.01:  Control Account CPI delta between Discrete and LOE >= ±0.1

X = Number of incomplete control accounts (WBS elements) in the EVMS cost tool, where

  1. The LOE portion of the budget is between 15% and 80% of the total budget, and
  2. The difference between the CPI for the discrete work and the LOE work is >= ±0.1.
Y = Number of incomplete control accounts (WBS elements) in the EVMS cost tool.
Threshold = 0%

Best practice tip: Run this metric quarterly on your control accounts that commingle LOE and discrete work packages. When there is a significant discrepancy between the performance of the LOE versus discrete work effort, consider isolating the LOE effort from the discrete effort at the earliest opportunity. An example could be the next rolling wave planning window or as part of an internal replanning action. Alternatively, it may be necessary to perform the calculations at the work package level to assess the performance of just the discrete effort when it is impractical to isolate by other means.

Process and procedure tip: Ensure the LOE work packages within a control account are kept to minimum (typically less than 15%), during the baseline development phase. This helps to prevent discrete work effort performance measurement distortion during the execution phase. A useful best practice H&A earned value consultants have helped contractors to implement during the budget baseline development process is to perform an analysis of the earned value methods used within a control account and the associated work package budgets. This helps to verify any LOE work packages are less than the 15% threshold for the control account. In some instances, it may be logical to segregate the LOE work effort into a separate control account. The objective is to identify and resolve the issue before the performance measurement baseline (PMB) is set.

EAC Realism

One DOE metric uses the TCPI and this involves a comparison to the CPI. This falls in the Analysis and Management Reporting subprocess. This DOE EVMS Metric Specification states: “This metric confirms that estimates of costs at completion are accurate and detailed.” As noted above, the metric compares the cost performance efficiency so far to the cost efficiency needed to achieve the EAC and is specific to the EAC a control account manager (CAM) would review for their scope of work. Depending on the level actual costs are collected, this analysis may need to be performed at the work package level instead of the control account level.  

Here is the formulation DOE uses assuming actual costs are collected at the work package level.

F.05.06:  Work Package CPI – EAC TCPI > ±0.1
X = Number of incomplete (>10% complete) work packages where CPI –TCPI > ±0.1.
Y = Number of incomplete (>10% complete) work packages in the EVMS cost tool.
Threshold = 5%

There is no requirement that the forecast of future costs has a linear relationship with past performance. While there may be legitimate reasons why future cost performance will fluctuate from the past, outside reviewers who receive EVM data will look for a trend or preponderance of data that would indicate the EACs are not realistic. When a significant number of active work packages are outside the ±0.1 CPI-TCPI threshold, it is an indication that the EACs are not being maintained or are driven by factors other than project performance.

Best practice tip: Run this metric every month for each active work package prior to month-end close. For those work packages outside the ±0.1 threshold, review the EAC to ensure it is an intentional forecast of costs given the current conditions.

Process and procedure tip: One of the training courses H&A earned value consultants often conduct is a Variance Analysis Reporting (VAR) workshop. This workshop is designed to help CAMs become more proficient with using the EVM metrics to assess the performance to date for their work effort, identify the root cause of significant variances, and document their findings as well as recommended corrective actions. This analysis includes verifying their estimate to complete (ETC) is a reasonable assessment of what is required to complete the remaining authorized work and their EACs are credible.

 

Additional References

Further discussion on using the CPI and TCPI to assess the EAC realism at the project level can be found in the DOE CAG, Analysis and Management reporting subprocess, Estimates at Completion. This section provides a good overview of comparing the cumulative to date CPI to the TCPI as well as comparing an EAC to calculated independent EACs (IEACs) for further analysis to assess the EAC credibility. 

Interested in learning more about using EVM metrics as a means to verify EACs at the detail or project level are realistic? H&A earned value consultants can help you incorporate best practices into your processes and procedures as well as conduct targeted training to improve your ETC and EAC process. Call us today at (714) 685-1730.

Using Earned Value Management (EVM) Performance Metrics for Evaluating EACs Read Post »

Benefits of an EVMS Self-Governance Process

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Contractors with a cognizant federal agency (CFA) approved or certified Earned Value Management System (EVMS) are expected to establish and execute an annual EVMS self-governance plan. Sometimes also called self-surveillance or self-assessment, the objective is the same. The contractor is responsible for establishing an internal process to ensure their EVMS, as implemented at the contract/project level, continues to:

  • Provide valid, reliable, and auditable information for visibility into technical, schedule, and cost progress with fact-based performance analysis. Project personnel have timely information about actual conditions, trends, and potential problems to implement effective corrective actions.
  • Maintain the integrity of the performance measurement baseline (PMB) for measuring completed work and to manage the remaining work.
  • Comply with the EIA-748 Standard for EVMS guidelines.

Equally important, the contractor is responsible for ensuring project personnel are:

  • Following the process and procedures described in their approved EVM System Description.
  • Establishing and maintaining quality schedule, cost, and risk/opportunity data.
  • Routinely using the EVMS (process, procedures, and tools) and EVM data to proactively manage their work effort.

Why is a self-governance process important?

With an established self-governance process and data-driven analytics, a contractor can objectively demonstrate to their customer that EVM and the use of EVM data is an integral part of their project management process. Establishing a culture of self-disclosure of issues and resolution ensures the EVMS is actively maintained, and project personnel understand the importance of their role in implementing the EVMS. Everyone must have confidence in the EVMS to provide timely, relevant, and actionable information to effectively manage and control projects.

An effective self-governance process provides the structure to routinely observe and assess how the EVMS is implemented on projects. This structured process documents what is assessed and how it is assessed using defined objective measures such as data quality metrics that can be analyzed over time to track the occurrence and resolution of issues.

What are the benefits of implementing a self-governance process?

There are a number of benefits to implementing a self-governance process for the contractor as well as the government customer.

The contractor’s management benefits from increased visibility into the “health” of the EVMS. Consistently verifying the system is implemented and used as intended instills confidence. They know they can depend on the EVMS to provide timely, reliable, and actionable information for visibility and control.

Routinely analyzing the results from the self-governance activities provides fact-based information a contractor can use to implement actions that improve the EVMS process and procedures, the means and methods project personnel use to implement the EVMS, or the training methods and content. With a structured and repeatable process in place, the contractor can:

  • Quickly identify and quantify process, people, or tool issues as well as the potential impact to meeting project objectives. Early identification of a problem often helps to mitigate the impact to the project.
  • Identify the root cause of the issue. Is it a recurring theme (a systemic issue) or a unique to a single project? This helps to determine the best way to resolve the issue.
  • Determine what actions are the most effective in mitigating the impact or resolving the root cause. Measuring and verifying outcomes helps to ensure the corrective action achieves the desired result.
  • Identify best in class practices that could be used on other projects. This is often overlooked as a positive outcome of the self-governance process that encourages continuous system improvements and innovation in project implementations.
  • Provide best practice guidance and support to encourage early correction or quick resolution of implementation issues. This helps to increase project personnel proficiency levels. Knowing structured fact-based self-governance assessments are conducted helps to reinforce the message that EVM practices are an integral part of managing projects.

It also builds confidence with the customer. Implementing a process of self-disclosure and corrective actions implemented demonstrates an on-going commitment to maintaining the EVMS. It also demonstrates the willingness to maintain open communications. The benefit of this approach is that it can help to:

  • Reduce the need for onsite government customer reviews or shorten the duration of a surveillance visit. When the contractor is providing regular information about their internal process to verify the health of their EVMS and internal corrective actions, it demonstrates the EVMS is being used as intended and remains compliant with the EIA-748 guidelines.
  • Minimize disruptions to project personnel. This is a direct result of reducing the need for customer reviews. Internal self-governance activities, system or tool improvements, or training can be scheduled to avoid impacting project personnel’s ability to accomplish project objectives.
  • Ensure long-term sustainability of the EVMS. An EVMS should be continually maintained to ensure process, procedures, and tools reflect current requirements. The goal should be to take advantage of opportunities to streamline procedures, improve the quality of the schedule and cost data, upgrade tools, and enable data integration/traceability to reduce the time and effort required to manage project work effort.

What are the characteristics of an effective self-governance process?

An effective self-governance process should be visible, structured, and endorsed by management. Key characteristics and features include:

  • Leadership engagement that encourages continuous improvement and a culture of compliance.
  • Encourages issue identification and tracking with timely closure and verifiable results.
  • A chartered authority structure with cross-organizational engagement that routinely interacts with leadership. This approach develops a broader base of internal expertise and experience.
  • A data-driven methodology to routinely assess system health using clearly defined and independently positioned oversight with a clear line to senior management.
  • Effective, consistent, and defined structured approach that is repeatable and sustainable.
  • Encourages improving project personnel skill levels using proven training  and mentoring techniques.
  • Transparency and means to collect feedback, both critical and praiseworthy.

Need help establishing a self-governance process? 

H&A earned value consultants often assist clients to create and implement a repeatable and sustainable self-governance process to verify their EVMS continues to support the EIA-748 guidelines as well as to assess how project personnel are implementing the EVMS. The objective is to establish a structured process to collect fact-based information useful for creating action plans to address identified deficiencies in the EVMS, how the EVMS is implemented, data quality, or the proficiency levels of project personnel. This structured process is also used to track action plans to closure and verify results.

An industry best practice is to include the EVMS self-governance or self-surveillance process in the EVM System Description along with other artifacts such as the EVMS self-governance charter. Contractors often use government customer surveillance artifacts such as DCMA or DOE automated or manual metrics as the basis to assess the quality of their schedule and cost data as part of their self-governance or self-surveillance process.

If you need help updating your EVM System Description to include a self-governance process, or need to create a self-governance plan, call us today at (714) 685-1730 to get started.

Benefits of an EVMS Self-Governance Process Read Post »

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