EVMS

Revitalizing Earned Value Management Systems (EVMS)

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Revitalizing Earned Value Management Systems (EVMS)

Quick Summary

  • Regulatory changes and updated standards are creating an opportunity to revitalize EVM Systems. The FAR overhaul, revised agency thresholds, and the EIA-748-E streamlined requirements while reinforcing the continued need for an effective EVMS.
  • Organizations have an opportunity to refocus on value-driven EVM practices. Rather than treating EVMS as a check-the-box requirement, this is an opportunity to renovate bloated processes and remove non-value-added activities to establish a flexible “living” system that supports proactive project management and credible forecasting.
  • BI and AI tools can transform EVM data into a real-time decision-making advantage. When supported by reliable, integrated data, these tools can rapidly organize information, improve visibility, identify risks early, and help project teams respond faster to changing priorities as well as technical, schedule, and cost challenges.

With the recent changes in the government regulatory requirements, the publication of the EIA-748-E Standard for EVMS, and evolving Business Intelligence (BI) and AI tools, the components for revitalizing Earned Value Management Systems (EVMS) are falling into place. This is an opportunity to refocus on the original purpose of an EVMS and effective use of real-time EVM data to quickly address problems before they become critical.

As highlighted in a previous blog, “Earned Value Management (EVM): How Much is Enough?”, being merely “compliant” with the EIA-748 Guidelines should not be the goal. That strategy fails to take advantage of the benefits of an EVMS; it is also short-sighted. Too often an EVMS is perceived as a contractual check-the-box exercise or focused on detailed score keeping.

The goal should be about being efficiently expert at EVM; a commitment to become “best-in-class” as expert practitioners of EVM. Following this strategy, an organization’s EVMS is actively maintained and used to ensure it provides relevant, useful information needed to manage projects for success. EVM is a powerful project management methodology that integrates scope, schedule, and cost management to provide a clear picture of project performance, the forecast completion date, and estimate at completion. BI and AI tools are enhancing the ability to rapidly organize and analyze real-time EVM data for proactive management and clear transparent communication with the customer. This also aligns with the need for speed in delivering capabilities to the customer when trade offs between requirements, schedule, and cost must be made.

Trimming Contractual and Guideline Requirements

The regulatory environment has been evolving; government entities are either simplifying or changing the requirements for an EVMS. As a reminder, the Capital Programming Guide Supplement to the Office of Management and Budget (OMB) Circular A-11 Planning, Budgeting, and Acquisition of Capital Assets establishes the government major acquisition requirements for an EVMS. This Guide states contractors must use an EVMS that meets the EIA-748 guideline requirements to monitor contract performance. All agency EVMS regulations point to the A-11.

A summary of recent changes follows.

Revolutionary Federal Acquisition Regulation (FAR) Overhaul that began in May 2025 focused on removing most non-statutory rules and rewriting requirements in plain language. Subpart 34.2 – Earned Value Management System was trimmed to the basic EVMS and Integrated Baseline Review (IBR) requirements. The Pre-Award IBR and Notice of EVMS Post-Award IBR clauses were removed; it now just states an IBR is required. Subpart 52.234-4 – Contract Clause for EVMS text was streamlined. Key takeaways: Reaffirmed the value of an EVMS and IBRs. What is unchanged: An EVMS is required for major acquisitions for development contracts, requirements flow down to subcontractors, and IBRs are required.

Defense Federal Acquisition Regulation Supplement (DFARS) Class Deviations (2026-O0011 February 2026), in response to the FAR Overhaul. Subpart 234.2 Earned Value Management System, 234.201 Policy raised the contract value threshold from ≥ $20M to ≥ $50M for EVMS reporting and incorporated the 2015 Class Deviation Memo increasing the contract value threshold for compliance reviews to ≥ $100M. There are also new related Class Deviation Clauses: 252.234-7001 is now 252.234-7998 Notice of EVMS; 252.234-7002 is now 252.234-7999 EVMS.

NASA FAR Supplement 1834.201 Policy Class Deviation (June 2025) as well as their solicitation clause (1852.234-1) and contract clause (1852.234-2) align with the DoD contract value threshold changes and revised clauses.

National Nuclear Security Administration (NNSA). Although NNSA is part of the DOE, as of September 2025 they are the Cognizant Federal Agency (CFA) for NNSA projects. They purposely simplified their compliance and surveillance process to be able to rapidly respond to threats. Contractors self-assess their EVMS. NNSA uses an EIA-748 Guideline checklist, reviews data artifacts, and conducts interviews for evidence of compliance. Certification reviews are required when the Total Project Cost is > $300M and are subject to surveillance reviews.

EIA-748-E Standard for EVMS approved and published in February 2026. This long overdue update reduced the number of guidelines to 27 and reflects current business system capabilities. The previous set of 32 guidelines were revised or merged, two were added, and four were deleted to improve clarity.

With the publication of the EIA-748-E, industry guides as well as government agency compliance and surveillance review materials have been or are in the process of being updated. The NDIA IPMD Intent Guide for EIA-748-E will be available on the NDIA IPMD web site once it completes the membership review and approval process. The DoD Earned Value Management System Interpretation Guide (EVMSIG) is also being updated to reflect the EIA-748-E. Once the EVMSIG is published the DCMA EVMS Group will be updating their Business Practices, appendices, and EVMS Compliance Metrics (DECM). DCMA has already trimmed their DECMs to a set of 60 standard, 10 conditional, and 72 low priority tests.

Impact of BI and AI Enabled Tools and Apps

BI and AI tools speed up the process to pull data from different sources for defined use cases and to organize it for analysis. The time lag to view current data can be eliminated with the right business system interfaces and tools. These tools can quickly produce a variety of dashboards or data views with the ability to drill down into the data as well as to sort and filter as needed for root cause analysis. AI agents designed for specific use cases can also speed up the process to organize and present data for real-time decision making. These dashboards and views can be tailored for specific users such as project managers, control account managers (CAMs), functional managers, schedulers, finance, material or subcontract management, and others.

Taking advantage of BI and AI does require a defined enterprise strategy to successfully leverage these powerful tools. Data is the backbone of any AI model – data is needed to “teach” AI how to spot patterns and make predictions. This includes the vast volume of an organization’s transaction records, analytics, and proprietary information across multiple systems.

The problem? Organizations often lack a consistent, verified version of data (the single source of truth) – there is uncertainty about what data should be used to analyze and “feed” their AI models. Internal proprietary data must not be exposed to the outside world. The single source of truth must exist in a governed and curated environment; it must be organized and integrated with a defined data model to be able to analyze real-time streams of data while avoiding multiple versions of the truth.

The challenge is that many organizations are still doing their enterprise planning, including estimating, budgeting and many other functions, in spreadsheets. It is not accessible to others or captured in a common database. Employees end up debating discrepancies between spreadsheets rather than analyzing the data in question.

Once the system that contains the official single source of truth has been determined and how data is organized and integrated, there are a variety of commercial off the shelf (COTS) tools available for the next step. Employees (the power users) familiar with BI and AI tools can quickly turn ideas into apps in a matter of hours or days that help them and their team to get things done. They can quickly build business environment specific dashboards, analyze real-time data pulled from various data sets, and produce outputs designed for different users or use cases.

Putting All the Pieces Together

What are the three primary takeaways?

The requirement to provide a fact-based assessment of project progress and forecast isn’t going away. The FAR overhaul didn’t do away with EVMS or the related fundamental requirements. It does, however, require organizations to be efficiently expert at EVM. A “living” EVMS (i.e., actively maintained and used) that can be scaled/tailored to management needs for each project is essential.

Changes to the requirements provides an opportunity to update “bloated” processes and procedures or that haven’t been updated to reflect new tools. Since the EVMS will need to be reviewed anyway to verify it supports the revised guidelines as well as updated agency requirements, there may be non-value added content or steps that can be eliminated.

BI and AI tools are useful for organizing real-time data into actionable information. Organizations taking advantage of these tools can rapidly respond to realized or emerging risks and changing scope or priorities in response to evolving threats. This creates a competitive advantage.

Returning to a Focus on Proactive Management

This is an opportunity to return to the original objective of an EVMS: timely and relevant information for proactive decision making to ensure project success and a happy customer. The effectiveness of an EVMS should be measured by the technical, schedule, and cost performance metrics. Product acceptance and in-process controls are examples of technical performance metrics. Schedule status and forecast, cumulative to date cost performance index (CPI), estimate at completion (EAC), and the to complete performance index (TCPI) are examples of schedule and cost performance metrics.

Too often the perceived approach to a “compliant” EVMS is to drive the data to an excessive level of detail along with restrictive rules and guidance that result in a system that is cumbersome and painful to use. It reinforces the perception that EVMS is too costly – something the customer doesn’t want to pay for because they don’t see the value.

The alternative? An organization that is efficiently expert at EVM where the customer has directly experienced the value of using real-time performance data to successfully manage their program. Non-value activities have been eliminated. An actively maintained and used EVMS is also resilient; project teams can quickly respond to evolving priorities and threats. Taking advantage of the power and agility of BI and AI tools/apps can help project teams to focus on what matters with real-time data and analytics.

Taking Advantage of the Opportunity to Revitalize EVM

Changing the view that EVMS is burdensome, costly, and of no value will take time. It depends upon organizations choosing to become efficiently expert at EVM.

Recent changes in requirements and the guidelines will require organizations to review the state of their EVM Systems. It creates an opportunity to eliminate non-value added activities. At the same time, powerful BI/AI tools enable real-time data analysis so project teams can be more proactive as well as renovate EVMS functions. The effectiveness of the EVMS is apparent because it provides real-time visibility into project performance with a credible forecast completion date and estimate at completion.

There is no need for excessive oversight by government customers that drives up the cost of managing projects when the customer has confidence the organization’s EVMS provides the visibility they need – and that earned value based project management is a valuable tool.

Next Steps

Consider having an independent third party complete a thorough assessment of your EVMS process areas and documentation to identify where content can be trimmed and clarified or where non-value added steps can be removed – particularly if you are starting to integrate BI and/or AI tools into your EVMS and other business systems. Call us today to get started.

Revitalizing Earned Value Management Systems (EVMS) Read Post »

Maximizing the Value from Integrated Baseline Review (IBR) Investments 

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A previous blog, How Integrated Baseline Reviews (IBRs) Contribute to Project Success, provided an overview of the purpose and scope of IBRs as well as the benefits of conducting an IBR. This blog adds to the discussion on the benefits of conducting an IBR. It reflects observations gathered from our earned value consultants while assisting clients to prepare for IBR events. 

As a reminder, IBRs provide the opportunity to verify the:

  • Contractor and the customer have a common understanding of the scope of work, technical requirements, and accomplishment criteria. 
  • Contractor has established an executable performance measurement baseline (PMB) for the entire contractual scope of work that accurately reflects how they plan to accomplish the work within the contractual period of performance, negotiated contract cost, and funding profile. 
  • Required resources have been identified and assigned to the project to accomplish the project’s objectives. For example, the staffing plan accurately reflects the sequence of work as well as resource availability and demand.  
  • Technical, schedule, and cost risks/opportunities have been identified, assessed, and captured in a risk/opportunity register. Risk mitigation actions have been incorporated into the PMB to reduce known threats to an acceptable level. This is often the most valuable component of the IBR to ensure all parties have an understanding of the risks/opportunities, assumptions, and risk mitigation or opportunity capture plans. 

Factors that Contribute to a Successful IBR

Treating an IBR as just a contractual requirement limits its value to all parties. IBRs are essential to the successful execution of any project. IBRs require a focused mindset to clearly define as well as assess the measurable benefits gained for the time and effort invested in the IBR. From our observations, contractors that defined what they expected to gain from an IBR, whether the IBR was contractually required or not, made a measurable difference in the outcomes from the IBR. The effectiveness of an IBR is contingent upon management’s commitment to excellence in implementing their EVMS and their desire to ensure they have reliable and useful data for management visibility and control. And that begins with establishing an executable PMB. 

The following list of factors often influence the perceived value of an IBR and hence the approach a contractor takes to planning and conducting their IBRs. 

  • Recognizing the relative importance of the review.
  • Defining the value or measurable benefits they expect to gain from conducting the review.
  • Well defined risk/opportunity management process. 
  • Timely and sufficient review planning and preparation.
  • Joint or collaborative planning and preparation.
  • Well defined objectives as well as entrance and exit criteria. 
  • Tailoring the IBR approach to best accomplish the review objectives.
  • Communication and expectation management.

These factors were ultimately indicative of whether the IBRs were considered value-added (retrospective assessment by the participants) based on the level of understanding, investment in or attention to, or the degree of success in implementing these factors. Based on H&A earned value consultant’s observations, the single factor that tends to drive the IBR approach is clearly defining the value the contractor expects to gain beyond what is mandatory or contractually required. 

IBR Investment Value

The term “IBR investment value” is purposefully used here. The intent is to invite you to re-assess how IBRs are viewed apart from simply meeting government agency IBR requirements. “IBR investment value” is used to mean a qualitative assessment that encapsulates the value-add or measurable benefits teams often have difficulty defining as well as to help provide the impetus and guiding direction for conducting an IBR. It has both intrinsic and extrinsic properties. 

The intrinsic value of the IBR investment resides in those specific elements of information (as identified by the customer in the form of questions or concerns) that are either exchanged, clarified, or refined through the course of discussions between the customer and performing contractor teams. This intrinsic value can be measured by how well the exchanged information supports:

  • A complete, clear and mutual understanding of the work to be accomplished.
  • The resources needed to get the work done.
  • The detailed plan to perform the work.
  • What resources are available to support the plan.
  • What’s missing or unknown that is needed to complete the work correctly and on time.
  • What risks, issues, concerns, or opportunities are associated with contractor’s concept that need to be fully considered to make the plan work. 

The extrinsic value of the IBR Investment rests wholly in the quality of the exchanges (discussions), and the resulting actions generated from the discussions. This extrinsic IBR value addresses how appropriate, rich and comprehensive the information exchanges were, and answers to questions, such as:

  • Were the discussions responsive to a list of customer information requirements and concerns? 
  • Were the right discussions held? At the right level of detail?
  • Were the right people involved in each discussion? 
  • Did the discussions provide sufficient context? Were they comprehensive? Complete?
  • Did the discussions address associated risks, issues, opportunities or other concerns? Relationships to other discussions/elements?
  • Were all the customer’s questions or concerns answered to their satisfaction?
  • Were the discussions documented to support decisions? Alternatives? Changes? Studies?

The exchanges of essential information (intrinsic value) and the quality of those exchanges (extrinsic value) when combined directly translate to the investment value achieved from the IBR. It characterizes how well the information exchanged provides both teams with the necessary details to successfully define, schedule, budget, and manage the contracted effort relative to the investment into the IBR process. A realistic, risk adjusted PMB helps to prevent schedule delays and cost overruns during project execution that often impact a contractor’s profit margins and tarnishes their credibility with their customers. 

What are the characteristics of a value added IBR approach?  

A successful approach H&A earned value consultants have observed contractors implement is a structured process corporate management actively participates in to ensure they gain the most value from all IBR events. 

This is often an outgrowth from corporate initiatives to retain top project management talent and establishing an EVMS self-governance process. It is part of a corporate culture that is committed to excellence in project management and sustaining a best in class EVMS – becoming efficiently expert at EVM. 

What are some common characteristics of their IBR approach?

  • A chartered authority or corporate team responsible for assisting project personnel with IBR events in addition to EVMS implementation, self governance, and customer surveillance events. A good practice we have seen implemented is to establish rotating members on the IBR teams from different projects as a means to pollinate best practices across projects. It also provides an opportunity to mentor top talent on track to move up to higher management positions.  
  • A standard repeatable process with defined measurable outcomes that can be tailored to the unique project requirements or objectives. This includes maintaining a set of materials for the internal IBR team to effectively plan and execute an IBR as well as to close out any action items. Examples include training materials to prepare project personnel, process description with team member roles and responsibility assignments, data call list, role based interview question forms with assessment criteria, data quality assessment materials and tools, list of data traces to be performed, schedule risk assessment tools, risk/opportunity evaluation criteria, defined assessment criteria (technical, schedule, cost, resources), in-briefing and out-briefing templates, and template to capture action items to track to closure. The corporate team is often responsible for actively maintaining the content for the IBR teams and conducting training. 
  • They place an emphasis on two components that directly impact the quality of the schedule and cost data.  This includes:
    • Well-documented data driven basis of estimates (BOEs) that can be substantiated using historical or bench-marked data with the goal of reducing expert judgement cost estimates to the lowest level possible as a risk reduction strategy.  
    • The quality of the risk/opportunity management plan and the content in the risk/opportunity register. This content directly affects the ability of all parties to gain a better understanding of the risks/opportunities and best options to mitigate a risk or capture an opportunity. A well constructed schedule is required to be able to perform schedule risk assessments (SRAs). SRAs help to identify where duration risk exists in the schedule and to determine a level of confidence in meeting major project milestones as well as the project completion date.  
  • They perform internal IBRs as a standard practice on all projects regardless of contractual requirements. This is particularly important when subcontractors are performing a substantial percentage of the work effort. The corporate team often assists Project Managers with conducting a joint IBR with major subcontractors.  

Need help establishing a corporate IBR process?

H&A earned value consultants often help clients to establish a corporate EVM council or center of excellence with defined responsibilities to ensure project personnel effectively implement their EVMS, integrate risk/opportunity management into the EVMS, as well as define and implement a standard repeatable process for IBRs and self-governance. Clients often need assistance establishing a repeatable process for conducting schedule risk assessments, an essential component of the IBR process. A defined process that clearly articulates the expected measurable outcomes from conducting IBRs is one way to ensure all parties gain the most value from the event with the end objective of ensuring a realistic and executable PMB has been established.  

Call us today to get started.  

Maximizing the Value from Integrated Baseline Review (IBR) Investments  Read Post »

Merging Earned Value Management System Descriptions

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Are there best practices that apply when a company with an approved/certified Earned Value Management System (EVMS) acquires another company that also has an approved/certified EVMS in place? What happens with the EVM System Descriptions as well as related processes and procedures? What about the various project control tools being used? How do you level set the project control proficiency levels of personnel using the EVMS? Schedule and cost level of detail and data architecture also come into play. For example, project performance data is often used at the corporate level for financial analysis, portfolio analysis, and external reporting and may require data to be organized in a specific manner. Is the EVMS providing reliable status, forecast completion date (FCD), and estimate at completion (EAC) information to management? 

What are your options?

H&A earned value consultants have observed different approaches and often assist companies with determining their strategy. Assuming you are the acquiring company, you could:

  1. Require the acquired company to use your EVMS. 
  2. Let them continue using their EVMS for an agreed upon timeframe or indefinitely.
  3. Take the best of both and establish a new and improved EVMS.  

Each option has its pros and cons. There are also other implications for at least the acquired company. DCMA will need to conduct an Integrated Baseline Review (IBR) and/or a compliance review if the acquired company’s EVMS assessment is no longer applicable. If you make significant modifications to your EVM System Description, DCMA will need to review the revised System Description to determine whether it still complies with the EIA-748 Standard for EVMS guideline requirements.

Things to Consider

  • What do you want to achieve?

    If the goal is to establish a common EVM System Description across the corporation, the strategy will need to reflect that. Define the business objectives that clearly articulate the benefits of using a standardized approach that can help to create and implement the plan to achieve your goal. In this example, that could narrow your path forward to either option 1 or 3 depending on the state of your EVMS.

  • What is the state of your current EVM design and System Description?

    Do you already have a best in class corporate level system in place? If yes, option 1 is a good fit. The strategy would be to create a plan to transition the acquired company to your EVMS. A single EVMS is easier to maintain and to train people on how to use it effectively. Commonality makes it easier to move personnel between projects.

    Perhaps your company is fine with different EVM Systems at a business unit level. For example, perhaps the business units have a different customer base (DoD versus DOE), and the requirements are different. In this case, it may make sense to go with option 2. We recommend being prepared to do an in-depth assessment of the acquired company’s EVMS to become familiar with it, gain an understanding of how project personnel use it, and evaluate the quality of the schedule and cost data. It is imperative that you have a good understanding of the strengths and weaknesses of the acquired company’s EVMS. You may find best in class practices that you could incorporate into your EVMS. On the other hand, you may discover issues you need to address with a corrective action plan. Some of them may be as simple as providing desktop instructions for the schedulers or control account managers (CAMs). The more difficult are actions taken to change the culture such as resistance to providing visibility into the data.

    Option 3 may be good path in situations where you know there are components in your EVMS that need to be streamlined or enhanced. It provides an opportunity to fix known issues with your EVM design or System Description. It could also be an opportunity to replace a mix of software tools or home-grown tools with a standard set of commercial off the shelf (COTS) schedule, cost, and analysis as well as risk tools. Integration with a standard Agile tool may also come into play. In this case, your strategy may be to create a working group from both companies to create a best in class corporate EVMS. 

  • Structure of the EVM System Description.

    There may be “layers” to it that makes it easier to accommodate unique business unit environments. For example, perhaps you have established a corporate level System Description that states what the company does to comply with the EIA-748 guidelines when an EVMS is contractually required or what is required to satisfy internal management needs for project/portfolio analysis (no external customer management system or reporting requirements). The corporate level system should define specific rules all business units are expected to follow. The business units define how they comply with the corporate requirements (their specific process). A good approach is to also allow project managers to define project directives to specify project unique requirements as long as they comply with the corporate and business unit requirements.

    In this example, option 1 is a good fit. The strategy would be to help the acquired company to establish revised EVM processes that align with the corporate requirements similar to other business units in the corporation.

Other Considerations

Your strategy and tactical plan must address identified risks and opportunities. A common challenge is resistance to change. A potential risk mitigation approach could be to bring in the acquired company’s personnel as part of a joint corporate management team with the goal to create a single best in class EVMS. It is essential to establish ownership in the new or revised process. An example from one H&A client illustrates the importance of taking ownership in the EVMS as part of a successful transition.

“We didn’t force what we had on them, nor did we give in. We have a corporate EVM System Description. When we acquired the company, we brought them in to do a revision of the System Description, as the decision was made that we will operate as one company. They are now using that System Description and are using the same EVM cost tool. We are working other initiatives to harmonize other systems. It was surprisingly not contentious. We incorporated their leads into the organization with minimal disruption. We also have corporate training, which they supported and some of their legacy folks are leading that. The company as a whole changed, rather than forcing our way on them. Not many major differences between us, but inclusion of the folks from the acquired company as well as business groups was key. Frankly, one of our legacy divisions was harder to work with than anyone from the company we acquired.” – EVMS Director, A&D Contractor

While this is an example of where things went well, your risk mitigation approach should be prepared for situations where the teams do not agree upon the documented process, tools, or training that could result in an impasse. Knowledge of the current internal environment and personnel mix can help to determine the best mitigation strategy. A strong leadership team must be in place to ensure teams are working to achieve common objectives and to amicably resolve differences with a target completion date.

The tactical plan must also include a robust training plan that covers the revised EVMS process, procedures, and any new tools. This is critical to ensure project personnel gain a good understanding of what changed, who is responsible for what, workflow, requirements such as data coding or level of data detail, and how to use the tools effectively. Role based training is often useful to ensure project control personnel, schedulers, CAMs, and others are following the documented procedures specific to their day-to-day tasks. Desktop instructions are also useful to ensure project personnel are using the software tools effectively in alignment with the documented process and procedures.

What to do if you find yourself in this situation?

It often helps to start with a gap analysis of your or the acquired company’s EVM design and System Description as well as assess how project personnel implement the system and the quality of the data. H&A earned value consultants often conduct an EVMS gap analysis to provide a fact-based and independent analysis of the EVMS, project personnel proficiency levels, and quality of the schedule and cost data. Once you are able to identify and quantify the strengths and weaknesses of the system, you are in a better position to determine your best strategy that aligns with your corporate business objectives and goals.

Over the years, H&A earned value consultants have observed first-hand what strategies and tactics for designing and implementing a best in class EVMS ensures success in a variety of business environments. We can also help you avoid common pitfalls that can derail the best laid plans – it is often the case a client didn’t realize there were hidden risks, or they had made incorrect assumptions.

We can help you determine the right strategy for your situation. Call us today at (714) 685-1730 to get started.

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Management Reserve Best Practice Tips

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A recurring theme H&A earned value consultants find themselves discussing with clients is emphasizing that management reserve (MR) is a very precious budget set aside that must be protected and used appropriately. Unfortunately, MR is often used inappropriately, and quickly depleted in the early stages of a project.

What happens when MR is consumed for other uses than what it was intended? There is no budget available for appropriate uses of MR such as for emerging work, rework, redesign, or make/buy adjustments within the scope of the contract when it is needed in the latter stages of a project. When that happens, a project manager is forced to create a “home” for actual costs for these activities. This results in other inadvisable actions such as:

  • Zero budget work packages which are also known as estimate to complete (ETC) only work packages.
  • De earning the budgeted cost for work performed (BCWP) and opening completed work packages to accept charges.
  • Culling budgets from future unopened work packages, and if they exist, planning packages, summary level planning packages (SLPP), and undistributed budget (UB).

These actions will call into question the integrity of the EVMS and EVM data. The customer conducting EVMS surveillance will also be quick to point out this deficiency in the EVMS implementation and raise the issue to ensure it has management’s attention to correct. The inappropriate use of MR has created a cascade of problems that could have been avoided. In some instances, project personnel were simply not following the rules for the use of MR found in the contractor’s EVM System Description. That’s an easier problem to resolve than other root causes.

The Role of Risk and Opportunity Management in Establishing MR

What H&A earned value consultants often uncover as the root cause of inappropriate uses of MR was that a robust risk and opportunity (R&O) management process would have made a difference in establishing a quantified set aside for MR to handle realized risks. Proactively identifying and managing risks improves project performance. The expectation of specific risks occurring leads to risk handling plans that lower the likelihood and impact of risks. It also provides an informed basis to establish an adequate amount of MR that reflects identified and assessed risks.

The risk assessment provides additional information that assists a project manager’s decision making process to validate a request to use MR is appropriate and has the backup data needed to justify the use of MR and the amount of MR allocated. This detail is necessary for the baseline change request (BCR) approval process as well as the Integrated Program Management Report (IPMR) Format 5 or Integrated Program Management Data and Analysis Report (IPMDAR) Performance Narrative Report (PNR). A project manager is required to identify the changes to MR during the reporting period and provide a brief explanation of the change. This explanation has the potential to pique the interest of the customer to gain a better understanding of why MR was used and the potential impact to the integrity of the EVM data.

Note: MR may increase or decrease for a variety of reasons. The primary use of MR is to handle realized risks within a control account that is within the statement of work (SOW) for the contract. All MR debits or credits should be tracked in a log for full traceability for the entire life of the project. Remember that MR can never be a negative value.

Acceptable Uses of MR

As highlighted in an H&A article titled “The Effective Use of Management Reserve,” examples of the appropriate uses of MR include:

  • Newly identified work is authorized and assigned to a control account manager (CAM). It may be that once the work begins, one or more tasks that were missed in the original planning process now need to be scheduled and resource loaded. Newly identified work could also be the result of internal replanning that required a change in approach or resource requirements.

    An example of this could be a project manager issued a work authorization to a CAM to conduct three tests to meet the requirements in the contract SOW. In the middle of the first test, it becomes clear to the CAM and project manager that a fourth test will be necessary. The project manager and CAM should be aware of this potential risk and be prepared to implement their risk handling strategy as a result of the R&O management process. The CAM can quickly prepare a BCR that the project manager can immediately approve to allocate MR budget to complete the fourth test. 
  • It is necessary to redo a task. This may include unanticipated redesign, remake, or retest. Hopefully, the project’s risk register identified the potential risks associated with the original tasks and management was prepared for the realized risk. 
  • Make/buy adjustments.  This could result in an MR debit or credit. 
  • Statement of work transfers from one organization to another. This could result in an MR debit or credit. 

Inadvisable Uses of MR Commonly Allowed

Although it is often allowed in a contractor’s EVM System Description, it is inadvisable to use MR for direct and indirect rate changes in the future. Note: MR should never be used to make any rate adjustments (or any other adjustments) to historical budgeted cost for work scheduled (BCWS) or BCWP data.

A rate change is not a change to the SOW for a CAM. It is merely a change to the cost of that work. Cost variances that occur because of direct and/or indirect rate changes can easily be explained in a Variance Analysis Report (VAR). Ironically, this use of MR is typically treated as a one-way street. Contractors apply MR when the direct and/or indirect rates are going up in the future but do not return to MR when the rates are projected to go down.

When a contractor’s EVM System Description allows MR to be used for future direct and/or indirect rate changes, ideally, the likely rate changes are identified as a risk and quantified when the initial MR is established for a project. This requirement should be noted in the EVM System Description. That way the set aside for MR includes budget for corporate rate adjustments that are outside of the control of the project manager or CAM. 

Another example of a commonly allowed but inadvisable use of MR is to “true up” a purchase order that is in excess of the original budget at completion (BAC) for material, equipment, or purchased services. For example, a project manager issues a work authorization to a CAM that includes purchasing material, equipment, or services from a supplier. The CAM then reaches an agreement with a supplier with scope, schedule, and budget. If that agreement is greater or less than the BAC, MR should not be applied, nor should budget be returned to MR to make the BAC match the PO value. Assuming the scope does not change, then MR should not be used to wipe out a cost variance whether positive or negative. The cost variance can be easily explained and the EAC can be increased or decreased. This is another example where contractors are treating this as a one-way street; they apply MR when it goes up, but do not return to MR when it goes down. A contractor would not “true up” for internal work overruns/underruns so why “true-up” for material or services provided by a supplier? 

Best Practice Tips

The following is a short list of best practices H&A earned value consultants often recommend clients implement for managing MR.

  • The EVM System Description should clearly spell out what are appropriate and inappropriate uses of MR. It should also provide guidance to eliminate instances of the “one way street” debit from MR. If needed, provide supplemental procedures, decision trees, or other work instructions to help project personnel follow EVM best practices and preserve MR for handling realized risks which typically occur in latter stages of a project.
  • Ensure that the R&O management process is integrated with the EVMS and provides the necessary risk identification and assessment information for the project manager to establish a realistic MR set aside based on quantifiable information. Where applicable, ensure likely rate changes are captured as a potential risk to the project and considered when the initial MR for the project is established if they intend to use MR for rate changes in the future.
  • Conduct recurring training to reinforce the purpose for MR and the appropriate use of MR. A recommended approach is to discuss a variety of use cases with project personnel so they know how to handle various situations that may occur on a project. 

Have you noticed “creative” uses of MR that are contrary to EVM best practices? Hopefully, you identified those situations as part of your EVMS self-governance process and were able to quickly implement corrective actions before your customer pointed out the issue to you. H&A earned value consultants often assist clients with producing procedures or work instructions that clearly spell out how to use MR appropriately. We also offer a range of EVMS training to reinforce EVM best practices including the appropriate use of MR. Call us today to get started.

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Level of Effort (LOE) Best Practice Tips

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Level of Effort (LOE) Best Practice Tips

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

Common accepted best practices for LOE include:

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

So, what is the problem? 

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

  • Managing the LOE is put on “auto pilot.” This might work for project management type of activities that span the duration of the project. It does not work so well when the LOE is associated with the occurrence of discrete work effort that is subject to change – i.e., the discrete work effort duration changes or the start date and/or the complete date changes. The result?
  • LOE tasks may incur actual cost of work performed (ACWP) with no budgeted cost for work performed (BCWP);
  • LOE tasks earn BCWP with no ACWP; or
  • The estimate at completion (EAC) is greater than the ACWP with BCWP equal to the budget at completion (BAC).

    Any one of these conditions would trip the DCMA and DOE test metrics and should be avoided. These types of situations were illustrated in a previous blog, “Level of Effort Decision Tree” that discusses how to properly replan LOE. 
  • Their EVM System Description doesn’t provide sufficient guidance to project personnel on what proactive management of LOE means. What are the rules for planning and maintaining LOE? How is LOE handled differently from discrete work packages?

    Some System Descriptions allow LOE replanning to occur within the “freeze period,” usually defined as the current reporting period and often plus one additional month. This is contrary to other best practice guidance about how to handle changes for open discrete effort work packages. For discrete effort work packages, changes within the freeze period are not allowed and the work package must be closed to replan the remaining work. What’s the process for handling that open LOE work package? What about retroactive changes when the LOE work occurs earlier or later than planned, or the duration is different than planned? Then what?

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

Best Practice Tips

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

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

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

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